Now that the two U.S. satellite radio broadcasters completed their merger July 29 to form Sirius XM Radio, the combined company will face a host of challenges in navigating the new digital landscape.

Over the long haul, the prospect of widespread broadband availability threatens to consign satellite carriers to technological redundancy, as it becomes easier for cell phones and other hand-held devices to stream music over the Internet.

And in the near term, new rivals continue to emerge, the most recent being Apple's iPhone and its App Store, which offers a slew of free downloadable music applications, including one from streaming music site Pandora that's already a big hit (Billboard, July 26). Sirius XM representatives didn't respond to requests for comment by press time.

For the moment, Sirius XM can expect to retain a strong position in the all-important automotive market. But here, too, challenges await.

According to data from Jupiter Research, the automobile remains the most popular place to listen to music, which gives Sirius XM a leg up over its new digital competitors, Jupiter analyst David Card says.

"If they can double down on cars, that could be one of their best bets," Card says.

Leading up to the merger, XM and Sirius had made great strides in adding their receivers as factor-installed options in many cars. But a slowing economy and spiking gas prices have led to a sharp downturn in U.S. sales of new cars. And one of the most significant new offerings to emerge from the combined company—an a la carte option for subscribers to choose only the stations they want—will require new receivers available for purchase only at retail, which could limit the number of new customers that option will attract.

Satellite carriers are still far ahead of Internet radio and the iPod in terms of their integration in car stereo systems. Web radio doesn't have any direct input into the car today, other than connecting an Internet-enabled mobile device like the iPhone to the car stereo—not exactly a common practice. Such radio outlets are also facing uncertainty of their own over exactly how much they have to pay for the music they transmit. If the recently increased performance royalty rates that they pay remain in effect, many would-be Sirius XM competitors in Internet radio claim that they'll be forced out of business.

Click here to find out how terrestrial radio, HD, Web radio and portable music devices stack up as competitors to Sirius XM.

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