Written in the Stars

But could XM, with its untested technology hosting an unproven business plan with unavailable funds, get GM? Several times, over the course of months, talks between the companies nearly cratered. Panero decided to bring it all to a head.

He gathered the various parties in a Maryland hotel -- GM as well as DirecTV, Hughes, and executives from several large financial institutions, some 35 people in all -- and set a midnight, do-or-die deadline. Through "one part creativity and one part perseverance," as XM chairman Gary Parsons put it, XM pushed each side toward the finish line. By the morning of June 9, 1999, they had a deal: GM and the rest of the consortium purchased a $250 million stake in XM. GM's buy-in created an instant halo effect for satellite radio, and Honda quickly allied itself with XM. For Panero, the GM deal was a lifesaver: "There wouldn't be a satellite-radio industry today if we hadn't pulled that off," he says.

Sirius employed a similar strategy -- it too made a play for GM -- but XM convinced GM that it would reinvent itself to meld seamlessly with the carmaker. It promised that all of its business processes -- technology development, marketing, even billing and accounting -- would mesh with GM's systems. "We couldn't expect the giant of the auto industry to change everything so it could incorporate our product," says Parsons. Sirius would eventually land partnerships with BMW, Ford, and Chrysler -- and says it will rapidly expand distribution through automakers -- but its technical problems initially forced it to rely more heavily on big-box retailers.

With its new receivers ready to roll in two GM models, XM dug out of the dotcom wreckage and was the first to hit the airwaves, in November 2001. "Everybody forgets that our competitor was better financed, they were a year ahead of us, and they were supposedly going to be first to market," grins Panero. "We shot by them because they didn't execute on their plan."

Sirius, stilled mired in its Agere problems, did take some action in 2001. It axed the company's founder, David Margolese, and brought in Joseph Clayton, the former president of star-crossed Global Crossing North America, to be its new chief. Sirius finally hit the air in July 2002, but the damage was done. With nearly a one-year head start, XM is leading the race to sign subscribers by a three-to-one margin. First with technology and then with distribution, Sirius stumbled badly. It has yet to recover.

Counterattack: Content Is King

Analysts predict that programming will be the next battleground in the satellite-radio war. Here, too, each company is blazing a somewhat different strategy. Early on, Sirius put the music front and center, and its eclectic lineup of channels has won it high praise.

Now it's trying to boost its stations' profiles by giving shows to anyone who has any kind of following, from Eminem to Basketball Hall of Famer and Grateful Deadhead Bill Walton. It's unclear whether Karmazin will change the mix. At Viacom, he told The Wall Street Journal that broadcasting's creative side amounted to little more than "arts and crafts."

At XM, arts and crafts -- creating stars and must-hear channels -- is the focal point of everything it does. Lee Abrams, who's widely credited (sometimes blamed) for pioneering the album-oriented format that dominated FM radio in the late 1970s and 1980s, presides over XM's music programming from an office bedecked with framed gold records. He's determined to put the magic -- and the swagger -- back into broadcasting's soundscape. He has given XM's DJs a game plan that flips modern radio's programming conceit on its ear: "We're not going to tell you what to play. You're going to tell us."

The result has brought an ear-opening array of music to the XM band, where a flick of the dial might take you from 1960s crooner Glenn Campbell to heavy-metal thrashers Lamb of God. But Abrams is after more than variety. He wants every station to have a distinct personality, from the Top 40 channel, which is as culturally significant as a shopping-mall food court; to the rap station, where if you're not part of hip-hop nation, you won't understand it; to the country-music station, which is ground zero for red-state values. Abrams calls this "point-of-view programming." By presenting people with a vast suite of stations, each with its own discrete sensibility, Abrams is betting that every first-time listener will find at least a few stations to relate to -- and a reason to subscribe.

"Lee understands that radio does three things: It informs, it entertains, and it provides companionship," says Robert Unmacht of In3 Partners, a media-consulting firm.

In its music programming, he says, "Sirius believes that music is king, which is fine as far as it goes. But if you take a station that has personality and one that's all music, the personalities will win, because people want that companionship."

End Game: Diversify Your Deal Making