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Chip R
02-16-2006, 01:04 PM
Could be.

http://news.yahoo.com/s/ap/20060216/ap_on_bi_ge/earns_xm_satellite

XM Radio's Loss Widens, Key Director Quits

By SETH SUTEL, AP Business Writer



NEW YORK - XM Satellite Radio Holdings Inc. posted a much wider loss in the fourth quarter on higher costs for marketing and acquiring subscribers. At the same time, a key director quit over disagreements about the company's direction, warning of a looming "crisis."

Its shares sank $2.16, or 8.6 percent, to $23.09 in morning trading on the Nasdaq Stock Market, after briefly trading as low as $22.94. Their previous 52-week low was $23.01.

XM, the larger of the country's two satellite radio operators, reported Thursday a loss of $270.4 million, or $1.22 per share, after dividends for preferred stockholders, for the October-December period. In the same period a year earlier, the loss was $190.4 million, or 93 cents per share.

Revenue more than doubled to $177.1 million from $83.1 million. Analysts surveyed by Thomson Financial expected a loss of 92 cents per share on revenue of $174.1 million.

The Washington, D.C.-based company also disclosed in a regulatory filing that Pierce Roberts Jr. has stepped down as a director, citing strategic differences with other board members over the company's direction.

Roberts, a former chief telecom investment banker with Bear Stearns, had served as a director for five years and sat on all of the board's major committees.

In a letter to board chairman Gary Parsons, Roberts said he was "troubled" by the company's current path. "Given current course and speed there is, in my view, a significant chance of a crisis on the horizon," Roberts wrote. "Even absent a crisis, I believe that XM will inevitably serve its shareholders poorly without major changes now."

The company said in a statement accompanying the letter that its management and other directors disagreed with Roberts over how to balance growth versus cash flow, believing that it was important for the long term to keep up its rapid growth rate.

XM and its smaller rival, Sirius Satellite Radio Inc., are locked in a vicious, expensive battle to line up listeners and programming for their pay radio services, which currently cost about $13 a month and require a special receiver. Both offer dozens of channels of talk and news as well as commercial-free music.

Both have also racked up significant financial losses as they build their businesses, signing big-ticket contracts for programming with shock jock Howard Stern, Major League Baseball, talk show host Oprah Winfrey and others.

For the full year, XM posted a loss, after preferred dividends, of $675.3 million, or $3.07 per share, compared with $651.2 million, or $3.30 per share, last year. Revenue rose to $558.3 million from $244.4 million.

XM said it had more than 5.9 million subscribers at the end of 2005, up 84 percent from a year earlier, and said its total had risen to more than 6 million in the first week of January. Sirius has said it has more than 3 million subscribers.

XM's CEO Hugh Panero said in a statement that the company expects to reach profitability from its operations by the end of this year, with subscription revenues reaching $860 million. He also said he expects to have 9 million subscribers by the end of the year.

KronoRed
02-16-2006, 01:17 PM
I see a merger in the future.

Chip R
02-16-2006, 01:24 PM
I see a merger in the future.

The Justice Dept. may have something to say about that.

Johnny Footstool
02-16-2006, 01:34 PM
I think XM will have to sell commercials at some point down the road.

KronoRed
02-16-2006, 01:42 PM
The Justice Dept. may have something to say about that.
They always ruin stuff ;)

Yachtzee
02-16-2006, 01:47 PM
I know that Direct TV now offers XM as its audio channels, whereas Dish Network has a deal with Sirius (I think). Wouldn't it be ironic if XM merged with Direct TV so that it had exclusive rights to the out of market TV broadcasts of NFL games, but the exclusive rights to MLB radio broadcasts?

I wonder how the rebate deal on the equipment has worked out for them. Satellite TV has an ongoing offer to give people free equipment to sign up. I wonder if offering the hardware for free will be beneficial in the long run.

KronoRed
02-16-2006, 01:53 PM
News Corp (owners of DirecTV) have a controlling interest in XM, so that's not much of a stretch.

beb30
02-16-2006, 02:14 PM
I always questioned how XM made its money. I mean with no commercials or advertising while signing multi million dollar deals with people to do radio shows, i have no clue how they could turn a profit.

oneupper
02-16-2006, 03:10 PM
I haven't gotten into XM's finances, but the key is probably in the split between subscriber acquisition costs (the cost to get new subscribers) and regular operating expenses.
Subscriber acquisition expenses to some point are "soft" expenses in that if they effectively bring in new subscribers, that added revenue will be worth it. (making them "investment-like").
If its the operating expenses, on the other hand, start getting prepared while we interrupt this program for a message from our sponsor...

Caveat Emperor
02-16-2006, 03:23 PM
I always questioned how XM made its money. I mean with no commercials or advertising while signing multi million dollar deals with people to do radio shows, i have no clue how they could turn a profit.

Take Oprah Winfrey -- she has a daily TV audiance of around 22 million people. If just 1 million of those people (less than 5%) of her audiance goes and buys XM to hear her channel, that's a subscriber revenue of $13 million in the first month they listen alone. In order to cover the entire cost of her $35 million dollars, they need those 1 million people to stay for only a few months.

That was the same bet Sirius made on Stern -- except they paid a ton more money and not a lot of new subscribers to stay on board long term in order to cover the cost.

Joseph
02-16-2006, 04:03 PM
All I've got to say is, it better not be in trouble.

RFS62
02-16-2006, 04:40 PM
All I've got to say is, it better not be in trouble.


No kidding. I've got it in two cars and the house. I'll kill if I lose the baseball channel.

WMR
02-16-2006, 04:45 PM
Sirius rocks. Contract XM.

reds1869
02-16-2006, 07:10 PM
Sirius rocks. Contract XM.

Blasphemy! No baseball fan should say such things.

Caveat Emperor
02-16-2006, 08:03 PM
Sirius rocks. Contract XM.

Hoo Hoo, I invented 2nd place! ;)

Red in Chicago
02-16-2006, 08:27 PM
Sirius rocks. Contract XM.


my thoughts exactly willymo...howard stern and sirius rule:thumbup: :beerme: :cool:

Yachtzee
02-16-2006, 10:41 PM
Stern is irrelevant. Baseball is King.

WMR
02-16-2006, 10:54 PM
XM is in full-on panic mode. Stern could not be further from "irrelevant." I read an article where they figured up how many subscriptions he had to generate in order to pay for his contract and he has already eclipsed that number.

Enter XM and Oprah. Oprah is doing a half hour -- A WEEK. Just like with the XM commercials showing Ellen Degeneres sitting in the XM studio with earphones on: THAT'S A LIE! She merely rebroadcasts her t.v. show; there is no original content coming from her! Talk about truth in advertising, or lack thereof!

There will be very little original content from Oprah and anyone that gets XM with the idea of listening to original Oprah content on a daily basis is going to be disappointed. XM wanted a name, and some press, and that's what they got, but how many women sitting at home watching Oprah will go out and get XM? That's the reason Stern fans converted to Sirius in droves: Stern is there every day.

I can hear all the Reds games on 700. Baseball is XM's only advantage over Sirius. My buddy sells them both and he says he prefers the Sirius musical programming content by far.

You can hate Stern if you want, but calling him irrelevant is misguided. He is, by an unbelievably wide margin, the only person in radio that can drive millions of subscriptions which is exactly why Sirius will eventually overtake XM in size as well as quality (which they've done already). Ask any person working at Best Buy or Circuit City how many units of each satellite company they sold this Xmas.

Why is XM grasping at straws with Oprah? They can see the writing on the wall.

Yachtzee
02-16-2006, 11:35 PM
XM is in full-on panic mode. Stern could not be further from "irrelevant." I read an article where they figured up how many subscriptions he had to generate in order to pay for his contract and he has already eclipsed that number.

Enter XM and Oprah. Oprah is doing a half hour -- A WEEK. Just like with the XM commercials showing Ellen Degeneres sitting in the XM studio with earphones on: THAT'S A LIE! She merely rebroadcasts her t.v. show; there is no original content coming from her! Talk about truth in advertising, or lack thereof!

There will be very little original content from Oprah and anyone that gets XM with the idea of listening to original Oprah content on a daily basis is going to be disappointed. XM wanted a name, and some press, and that's what they got, but how many women sitting at home watching Oprah will go out and get XM? That's the reason Stern fans converted to Sirius in droves: Stern is there every day.

I can hear all the Reds games on 700. Baseball is XM's only advantage over Sirius. My buddy sells them both and he says he prefers the Sirius musical programming content by far.

You can hate Stern if you want, but calling him irrelevant is misguided. He is, by an unbelievably wide margin, the only person in radio that can drive millions of subscriptions which is exactly why Sirius will eventually overtake XM in size as well as quality (which they've done already). Ask any person working at Best Buy or Circuit City how many units of each satellite company they sold this Xmas.

Why is XM grasping at straws with Oprah? They can see the writing on the wall.

WilyMo, I'm sure there are plenty of people for whom Stern is relevant. I personally stopped listening to Stern when I turned 25. His whole schtick just go old. I didn't pick XM because I liked Opie and Anthony better, either. Oprah? Ellen? I'm not interested. And when it comes to the music channels, I love the channels that XM has. Much better than what was available over broadcast radio in the Cleveland-Akron area. But I'm sure I would like the Sirius music channels too. To me, the choice came down to who has baseball and who doesn't. If Sirius had gotten the MLB deal, I would have gone with them. Sure, Sirius has the NFL, but I prefer to watch Football on the TV anyway.

RBA
02-16-2006, 11:42 PM
News Corp (owners of DirecTV) have a controlling interest in XM, so that's not much of a stretch.

That's not true.

Controlling interest
The company's May 2004 proxy statement notes that four directors are subject to director designation agreements with GM, American Honda, the chairman, and the CEO. Four additional directors are investors, and two are not affiliated with any significant stockholders.

At that time, GM owned 8.6% of the Class A common stock (a voting percentage of less than 1%) and Honda owned 13% (with a voting percentage of 3.6%).

Unless they unaminously agree otherwise, control of the company remains with the preferred shareholder and noteholders of the company, including Hughes Electronics, GM, Honda, and several private investment groups.

http://en.wikipedia.org/wiki/XM_Satellite_Radio

KronoRed
02-16-2006, 11:45 PM
I stand corrected, but the beginning of the Wiki reads like News has a controlling interest
"..and controlled by News Corporation's DirecTV"

RFS62
02-17-2006, 01:24 AM
WilyMo, I'm sure there are plenty of people for whom Stern is relevant. I personally stopped listening to Stern when I turned 25. His whole schtick just go old. I didn't pick XM because I liked Opie and Anthony better, either. Oprah? Ellen? I'm not interested. And when it comes to the music channels, I love the channels that XM has. Much better than what was available over broadcast radio in the Cleveland-Akron area. But I'm sure I would like the Sirius music channels too. To me, the choice came down to who has baseball and who doesn't. If Sirius had gotten the MLB deal, I would have gone with them. Sure, Sirius has the NFL, but I prefer to watch Football on the TV anyway.



My sentiments exactly. If Sirius had baseball, I'd be right there.

jmcclain19
02-17-2006, 05:28 AM
I wouldn't worry one bit about this news.

I read a business article about XM not too long ago, where they stated it takes somewhere in the neighborhood of $110-$120 for XM to get every new subscriber signed up.

At $12.99 a month, that means we're looking at 10-11 months for XM to just break even on subscriber costs.

Also, they are signed up with GM to install XM in new cars, yet after those new car buyers trial run with XM ends only 40-50 percent are re-upping. So that is more money in hardware that just eats into costs.

I see it much like cellphones a few years ago. It takes cellphone companies about the same about of money ($100+) to gain a new subscriber, that is why they want you to sign up for those 2 year contracts, so that way they are guaranteed at some point to make money off the deal. A few years ago there were tons of little fish in the sea, now it's pretty much just the monster telecommunications companies left.

Because of that money lag of making money off customers, look at XM's huge growth and then you can see why they are struggling. The rocket growth means that there is a money lag, and in a year or two the millions they've just recently signed up will start to turn the company a profit and things will be better.

Someone will pick up XM, and their millions of subscribers, let them bleed red for another year or two and then they will own a small mint. By then the customer base could be 10 million subscribers strong.

At $12.99 a month x 12 months a year - that's $156 per customer per year. Times that's a $156 mil just in subscriptions alone.

That's way too much money to be left on the table.

XM will be fine. So will Sirius. And don't forget XMs growth, as well as Sirius', has been off the charts. that could keep going on and word of mouth continues to spread.

Joseph
02-17-2006, 06:36 PM
Siruis reported higher than expected losses today as well. Something in the high 7% range.

Red Heeler
02-17-2006, 09:52 PM
That's not true.

Unless they unaminously agree otherwise, control of the company remains with the preferred shareholder and noteholders of the company, including Hughes Electronics, GM, Honda, and several private investment groups.

http://en.wikipedia.org/wiki/XM_Satellite_Radio

IIRC, Hughes Electronics was aquired by DirecTV and thus, Newscorp.

RBA
02-17-2006, 10:23 PM
IIRC, Hughes Electronics was aquired by DirecTV and thus, Newscorp.

You maybe right. Good catch. But I can't tell:

http://en.wikipedia.org/wiki/Hughes_Electronics

RBA
02-17-2006, 10:23 PM
Siruis reported higher than expected losses today as well. Something in the high 7% range.

Ouch!