Eight months after they agreed to merge , XM Satellite Radio and Sirius Satellite Radio are still growing subscribers at a pretty nice clip, but retail demand — that is, ‘Jane Shopper’ buying a radio at Best Buy or Circuit City — has slowed. Sirius in the third quarter added only 69,000 net subscribers at retail, out of a total 525,000.

XM? They lost 17,000 retails subs, compared with 68,000 additions one year ago.

What’s going on? It’s hard to say. Perhaps it’s all the new cars that have satellite radios built in. Or the plethora of new digital music options like iPods or Zunes. Or maybe it’s the aging portable devices XM and Sirius offer. (XM’s Pioneer Inno was introduced about 18 months — that’s 100 geek years, you know.)

Even Mel Karmazin, Sirius’s chief executive, is stumped. Check out this exchange on the company’s quarterly conference call earlier today:

Q: Benjamin Swinburn, Morgan Stanley:

Mel, could you comment on how you think the OEM (car market) penetration growth impacts the retail market if at all? On one hand, I would think it’d drive second radio subscriptions as more people get it installed in their cars and like the product. On the other hand, you could argue that people who used to walk into Radio Shack and buy a radio are now getting them in their new cars, so it could have a negative impact on new subscriptions. Any commentary on research you’ve seen or what you think is happening in the business as you look at those levers?

A: Mel Karmazin:

I agree with everything you’ve just said… We have a very high customer satisfaction level. So you know, as people get exposed to Sirius in their car, it’s our belief that they’re going to want to have that product wherever else they listen to radio, whether or not in their second car, in their home or in wearable model. Obviously an awful lot of people now are able to get Sirius as a factory installed product in their car and obviously that’s where we compete with terrestrial radio, the most is in the car. That’s an important market for us. We are a little bit, you know, perplexed as to why the retail is as slow as it is.

Maybe it’s the merger itself. Back in February, when it was announced. analyst April Horace, now of Janco Partners, wondered if the deal would stifle new design ideas — you know, good old “my radio is cooler than yours” competition.

What do you think? Do you want a satellite radio, maybe as a gift for the holidays? If so, would you prefer a portable iPod-style model, or one built into your car?