Sirius XM unite as sales still tumble
By Scott Moritz
Newly merged satellite radio shop Sirius XM says the combination will help trim costs and lead to a positive swing in cash flow in 2009 excluding satellite expenses.
The deal closes nearly a year and a half after it was announced and in that time the once hot-growing new medium has been sideswiped by a rapidly cooling economy and sluggish car sales. But new chief Mel Karmazin remains optimistic about the new chapter in pay radio.
“We have all the tools necessary to begin executing as a combined company with high aspirations for subscriber growth and greater financial performance in part from the significant synergies that we begin realizing literally today — on Day One. We are moving quickly to integrate the operations,” said Karmazin.
Among the areas analysts expect the broadcaster to cut costs is programming expenses. The financial strain could spell the end of massive contracts like the one Howard Stern commanded during the golden era of satellite radio.
The news comes as Sirius reported weak subscriber numbers for the second quarter, another sign that a pinch in consumer spending is squeezing satellite radio sales. Sirius was particularly hard hit on the car sales front. Slumping sales at Ford and Chrysler cut into new radio subscriber numbers. Sirius added 246,221 net new auto customers, well below the 325,000 some analysts were looking for.
The outlook for car sales isn’t exactly improving either, on Monday No.2 car maker Toyota cut its 2008 growth forecast due to high fuel costs and a slowing U.S. economy.
Sirius will give XM shareholders 4.6 shares of Sirius stock, for a deal worth about $2.76 billion. The company will be headquartered in New York and keep the XM facility in Washington, D.C.
We have 2 subscriptions for 1 reason, to entertain our kids on our relatively long work commutes and weekend trips. They kept XM’s channel and axed Sirius’s. This switch broadened the content on the kids channel (less kids stuff, more pop-like tunes), added interviews (come on, for a 3-4 year old?), and added commercials even though we already PAY(sponsor moments). Although some people will be fine with this, they will be losing our subscriptions as well as others for similar changes! With the other available media and our economic situation, we’ll be leaving the satellite revolution and heading for the Apple/IPod revolution! How sad!
I got Sirius in 2005 from a Radio Shack promotion and have loved it ever since. The variety, openness of format, freedom from commercials, and uniformity of high-fidelity cross-country reception is unrivalled in the terrestrial radio world and for me represented a great opening for excellently diverse, high quality radio. I’m more musically conscious and diverse for the years of listening experience and see terrestrial radio now as very narrow and shallow. However, sat radio is a luxury and some people are not as interested as I am in musical variety and wider experience in a commercial free format. And like any luxury it can be discarded in hard times. Also, in the long term this is a transitional medium which must later give way to the internet’s mobile-device and 3G+ expansion and it’s thousands and thousands of worldwide stations. (I’m already listening to internet radio while mobile through my cell or Bluetooth-tethered internet-connected notebook.) But I’ll be on sat and net radio forever. It’s just too good to give up.
I stopped commuting by car so I dont need it any more and dropped it. If I co a long distance, I’ll just play CD’s. My cable system at home pipes in 35 channels of digital music included in my basic service so I don’t need sat radio at home.
If the merged company starts doing a la carte pricing, if you subscribe to a full offering, you will be paying cable-like prices eventually. Rights fees for all the sports channels will increase and S/XM will just pass them on to the subscribers.
Umm they are not under a record company paycheck, Sirius and Xm have to PAY to license all music they play.
Web radio in my car? Ya, have you seen the costs for mobile internet? I only have Sirius for Howard Stern, I like the other stuff but it is nothing I can’t live without. Stern is da man! When he leaves then I will be done with Satellite radio all together.
I have been a subscriber to both XM and Sirius radio, and no longer subscribe due to the poor audio quality compared to terrestrial radio. HD streams are abounding now, and I see no reason to pay for inferior sound quality.
People should be less concerned about Satellite Radio’s competition with streaming Internet and other media sources. First of all, free streaming music is really only profitable with commercials. Most Internet streaming stations are very small and are not independently profitable. Secondly, Sirius XM already has their stations available to subscribers via Internet stream. If Internet streaming competitors become a legitimate threat, Sirius XM is extremely well-positioned & has great programming, including proprietary programming. It should also be noted that Sirius XM is just an application away from being on iPhones and other online mobile devices, as an Internet stream (it can already be done if you know what you’re doing). Now that the merger is done, I expect to eventually hear more information from Sirius XM regarding their plans to deal with these “new” media source competitors. There has already been past reports of XM talking with Apple, for instance…
I love satellite radio I can listen to the same station for several hundred miles, something I could never do before it’s great and I NEVER listen to talk radio where ever it was any way.
Stern is not amusing and neither is that Nascar white trash idiot Bubba the Love Sponge. Therefore there is no palpable reason to buy satellite radio over an iPod. No commercials, and no blathering idiots. Thus their business model is doomed to fail.
Much like anything in life, you never knew how much you need sat. radio until you have it. i-pods, on-demand video and internet radio are great- yet lack the basic fundamental- ‘ease of use’.
Every bit of content you get, you have to search for it by name.
Sat. radio has a ‘dummy’ feature. Turn it on, and like radios weve had for decades, tune to whatever content you want.
For forever, anything free (internet radio, broadcast radio, etc) will be worthless. Things like the NFL, MLB, Stern as well as college type radio are in short supply and large demand.
Thanks for the screwing Mel. Canceling my subs today and inviting others too also.
I find it strange that people are complaining about the cost of satellite radio. It is not a basic commodity, it IS in fact a luxury. I love the fact there are no commercials, you can pick exactly what type of music to listen to, there’s traffic & weather, plus many sports games. All these features combined are not a basic commodity… that is what AM & FM are for.
People pay for Cable TV, Satellite TV, MP3’s, etc. so why shouldn’t they be expected to pay similarly for satellite radio.
I love the service!
The party getting screwed here isn’t the investor, it’s the customer.
I pay for XM because I like the music variety, MLB, SEC football and a few other things. The a la carter pricing sounds just dandy until you start adding it up— music might be $6/month, then they’ll want $x/month for MLB, then more $ for college football, etc, etc. Before you know it, they’re going to want 2x the $13 I pay now to give comparable selection.
anyone paying attention should have got out of investing in ether of these companies….once the web convergence occurs (3-5 years) web/wireless radio stations will launch leaving these two companies out in the cold. As soon as you can have video/content streaming fully…very few will turn to sat radio where there experience will be limited.
Sat radio only had a minor window for success…and the merger is the 5 year death warning that the clock has begun.
It is really very simple – way too expensive. Even without commercials we are talking about a basic commodity and they want to price it like it is a luxury. I may CONSIDER “buying” when it costs less than $5 a month. I get calls to join and the current asking price – well over $10 per month – are you kidding me!?
ok mel–what’s the goddamn story–i wait 2 years for the merger to go through and now the stock is down 32% since Friday !!! nice way to manipulate the stock and screw the investor !!
Why so negative on growth? This is a new and emerging company who, becuase of its superior product will continue to grow as old fashioned radio continues on its death spiral.
I don’t think the blame is entirely on the economy and/or car sales. I have Sirius and there are only 2 or 3 reasons I have it: 1. Howard Stern, 2 and 3, the only couple of music channels that don’t repeat the same music all day. They need to be different, unique, independent and not be under any Record Company paychek.
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I have been a subscriber for many years to Sirius and this is mainly due to the Howard Stern show.
The concern I have is that the sound quality is rather poor and this in itself is enough to drive someone mad. I understand they have better units now so I may have to purchase a better model.
All in all, it is much better than terrestrial radio where your time is wasted listening to one car commercial after another.
Then again, you have people like [John, Sacramento, CA - who posten on here previously] and it is understandable why these commercials have taken over the air waves. Mainly due to the stupidity of people like John who are gullible and just plain dumb and their simple minds do not realize the commercials are on.