Sure enough, XM was hit with a lawsuit yesterday from the RIAA over its handheld player/recorder, the Pioneer-based Inno (pictured). The RIAA doesn't like the fact that XMSR isn't willing to pay an additional licensing fee for giving subscribers the ability to easily record from XM broadcasts -- they want $150,000 in damages for every song recorded by an XM user.
Staci Kramer of Paidcontent.org notes that 'After some posturing, XM competitor Sirius (NASDAQ:SIRI) avoided similar action by agreeing earlier this year to pay license fees for its MP3/satellite combo.'
In addition, XM faces new class-action suits over subscriber acquisition costs.
Then, in today's Wall St. Journal, influential tech reviewer Walter Mossberg panned the Inno on its most important features:
We liked the device itself, and enjoyed listening to various satellite radio stations on the go. But we were deeply disappointed with its radio reception, which failed in too many places. And we really didn't like working with the Napster software when we synched the player with our PC. It was a hassle.
Our verdict: adding live satellite radio and the ability to record it onto a device is a good idea, and may appeal strongly to satellite radio lovers willing to pay $13 a month to subscribe. But, for people who just like music, the radio and recording features didn't seem like reason enough for us to want to buy the Inno over, say, an iPod -- especially given the downsides we encountered.
For XMSR investors, when it rains, it pours.
XMSR 1-yr chart: