Satellite radio bleeds cash

[Variance]

Satellite radio bleeds cash

Sirius, XM's combined losses total $1.53 billion in 2005

Bradford Wernle

Automotive News / February 20, 2006 - 6:00 am

Satellite radio companies are spending bundles of money to lure new subscribers, especially those who tune in the services while in their cars.

Those soaring marketing expenses worsened the horrendous fourth-quarter 2005 losses at both XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. The XM losses triggered the resignation last week of an XM board member, who warned of a pending crisis.

In his resignation letter, Pierce Roberts Jr. warned that there is "a significant chance of a crisis on the horizon" if the company does not change direction. Roberts had urged that the company slow its rapid growth in order to improve cash flow. "I have been troubled by the current direction of the company," he wrote in the letter, made public on Thursday, Feb. 16.

XM President Hugh Panero told analysts that weaker sales of General Motors vehicles in the fourth quarter slowed the rate of new subscriptions at XM. New subscriptions peaked during the second and third quarters, when GM incentives also were peaking, he said.

XM posted a $268.3 million loss on revenue of $177.1 million during the fourth quarter, compared with a $188.2 million loss on revenue of $83.1 million during the same quarter in 2004. XM's rival Sirius also lost money for the quarter: $311.4 million on revenue of $80 million compared with $261.9 million on revenue of $25.2 million during the same period in 2004.

For all of 2005, Sirius hemorrhaged $862 million while XM lost $667 million.

XM spent $89 for each new subscriber in the fourth quarter, compared with $64 from a year earlier.

Eileen Furukawa, analyst for Citigroup Investment Research in New York, predicted both networks would be spending less to add new subscribers in 2006. XM has about 6 million subscribers, while Sirius has 3.3 million.

XM has 60 percent of the market for satellite radios installed in new cars, compared with 40 percent for Sirius, Furukawa said.

XM has exclusive deals with GM and Toyota Motor Corp., among others, while Sirius has deals with Ford Motor Co. and DaimlerChrysler.

Link: http://autonews.com/apps/pbcs.dll/article?...efsect=BREAKING

[balthazar]

This is a situation that should remedy itself in short order. Both companies have been spending huge amounts to sign talent recently, which of course affects the bottom line, but the volume of subscribers has been increasing exponentially. No mention of the rate of signing subscribers, nor of the 'vs. this period last year' numbers. Another thorough job by the media.

[Drew Dowdell]

I really don't think their current business model will work in the longrun. $30 for an XM receiver and $12.00 a month. It's GOT to cost them more then $30 for an XM roady or whatever. They don't require contracts like the Cell companies do and there is no way to go "over" on your minute, text message, or any other source of revenue then a few premium channels.

But who really wants audio Playboy anyway?

[balthazar]

With Siruis, you can sign up for a monthly, yearly or 2-year plan. Naturally, they knock a bit off for longer sign-ups.

In a way I agree- paying for radio still sounds so foreign. I guess this is where we'd point to pay TV as an example tho....

[Drew Dowdell]

I've had XM for two years and love it. I don't even carry CDs in my car anymore.

[RJB]

Improve the radio stations already available to the public consumer and XM will go away. I am one of those people that can't see spending money on this. It seems like a waste to me. Or get an iPod like everyone else and download away, and you still won't need XM or Sirius.

[Dsuupr]

My wife and I drive through farm areas to get to work. There are no radio stations. We love our XM for this reason. One can only listen to the same CDs for so many times before you go crazy.

[Drew Dowdell]

Improve the radio stations already available to the public consumer and XM will go away. I am one of those people that can't see spending money on this. It seems like a waste to me. Or get an iPod like everyone else and download away, and you still won't need XM or Sirius.

Try XM for two months and you'll be hooked.

Plus, I kinda hate all the local radio stations here in Pittsburgh. I'm not really a top 40 kinda guy.

[Snate]

I've had XM since I got my Cobalt a year ago and I love it. Couldn't possibly go back to regular radio after it.

[z28luvr01]

I didn't renew XM after my three month trial was up in September, because I had started buying Christmas presents and was low on disposable cash. I wound up renewing December 1. Let's just say that this year, I'm not going as wild on Christmas presents

[Drew Dowdell]

Now, if I could just get Car Talk on XM, I'd never have to go back to the FM band again!

[z28luvr01]

PS: Right now I'm listening to the online XM player that comes free with your subscription.

[nferr]

Satellite radio is great. Rarely listen to CD's in the car anymore. Sound quality is excellent and so is the variety IMO.