Pay-Radio Firm Attracts $250 Million in Investments

Six companies, including General Motors Corp., DirecTV Inc. and Clear Channel Communications, agreed to invest a total of $250 million in closely held XM Satellite Radio Inc., which plans to offer a new form of subscription radio service for initial use in cars.

Under the deal, GM will install XM-compatible digital radios in new cars and trucks beginning in model year 2002, becoming the first auto maker to endorse technology that will offer one of the first alternatives to free radio broadcasting.

GM and DirecTV, a unit of GM’s Hughes Electronics subsidiary, are each investing $50 million in XM, one of two companies licensed by the Federal Communications Commission to use satellite spectrum to offer the radio service.

Clear Channel, the nation’s largest radio operator, is investing $75 million, while three other investment firms are putting up the remaining $75 million.

Cable operators and satellite TV providers, including DirecTV, already offer commercial-free audio channels as part of pay-TV packages.

Washington-based XM and publicly traded CD Radio Inc. are expanding on the concept, each planning to offer a commercially supported package of 100 audio channels of music, news and information for less than $10 a month beginning late next year. XM plans to use Hughes satellites to beam its signals to the nation’s 200 million automobiles and trucks.

Users require special equipment and antenna, which will initially retail for $199 or more. After deals announced Tuesday, XM will be controlled by American Mobile Satellite Corp., a mobile-satellite communications company that is spending $173.6 million in stock to buy the portion of XM it doesn’t own from closely held WorldSpace Inc.

The six investors will initially take convertible debt that will eventually be worth 60% of the equity but a minority share of the voting stock in the company.