How long can XM sustain loses?

[BruceS8852]

This report http://baltimore.bizjournals.com/baltimore/stories/2006/02/13/daily30.html

states that XM radio lost $666.7 Million in 2005. How much more money can XM lose? The programming and hardware costs big $ and obviously the revenue coming in from the subscribers is not meeting the costs. How much can the investors of XM afford to lose? I was always afraid of getting a radio and subscription and see XM fold. I listen to the music stations on Radio@AOL. I am quite happy with the programming, but what will financial problems kill XM and/or Sirius?

Bruce

 

[Kent]

> states that XM radio lost $666.7 Million in 2005. How much
> more money can XM lose? The programming and hardware costs
> big $ and obviously the revenue coming in from the
> subscribers is not meeting the costs. How much can the
> investors of XM afford to lose? I was always afraid of
> getting a radio and subscription and see XM fold. I listen
> to the music stations on Radio@AOL. I am quite happy with
> the programming, but what will financial problems kill XM
> and/or Sirius?

Right now, XM is using equity financing to take care of most of that loss. In other words, they're paying most of that debt off with stock. They're basically printing their own currency. I don't know how long they can do it as it's dependent on their stock share value, but they will be around so long as they can continue to do so. As for the concern about getting the equipment and a subscription only to see XM fold, I felt the same way. I waited until the prices got low enough to justify such a purchase. Considering you can now get XM radios for less than $50, I don't see it as being a major investment. It's really no different than the risk of buying a radio to hear your favorite station. What guarantee do you have that it won't change formats?

 

[DowntownHazleton]

> This report
http://baltimo> re.bizjournals.com/baltimore/stories/2006/02/13/daily30.html
>
>
> states that XM radio lost $666.7 Million in 2005. How much
> more money can XM lose? The programming and hardware costs
> big $ and obviously the revenue coming in from the
> subscribers is not meeting the costs. How much can the
> investors of XM afford to lose? I was always afraid of
> getting a radio and subscription and see XM fold. I listen
> to the music stations on Radio@AOL. I am quite happy with
> the programming, but what will financial problems kill XM
> and/or Sirius?
>
> Bruce
>
It is not at all unusual for new companies to lose money, and in some cases wheelbarrows full of it at start-up. Citadel bled red ink for all the years that Larry Wilson operated it, it never made a dime, but it just bought up ABC.
The investors of XM escecially the big money initial investors knew it would take awhile to get things in place and for XM to being making money. Now that the technology and radios are there, XM will not go away. It might be bought by another company, or operated differently, but it is highly unlikely that satellite radio will suddenly cease to exist. You have companies like CC & ABC who have some vested interests in satellite. The major American car manufacturers have interests in satellite. It's here to stay. The Sony home video recorder cost over 2 grand and weighed as much as a Buick when it came out in the 60's, now you get them for $49 at Wal-Mart. Maybe in a couple years, XM might have a new name or owner, but I think you're safe in owning an XM Radio.

 

[livingfruitvirus]

XM's goal is to reach positive cashflow this year. Let's see if they do it.


> Right now, XM is using equity financing to take care of most
> of that loss. In other words, they're paying most of that
> debt off with stock. They're basically printing their own
> currency. I don't know how long they can do it as it's
> dependent on their stock share value, but they will be
> around so long as they can continue to do so. As for the
> concern about getting the equipment and a subscription only
> to see XM fold, I felt the same way. I waited until the
> prices got low enough to justify such a purchase.
> Considering you can now get XM radios for less than $50, I
> don't see it as being a major investment. It's really no
> different than the risk of buying a radio to hear your
> favorite station. What guarantee do you have that it won't
> change formats?
>

 

[CTListener]

> > This report
> http://baltimo>
> re.bizjournals.com/baltimore/stories/2006/02/13/daily30.html
>
> >
> >
> > states that XM radio lost $666.7 Million in 2005. How
> much
> > more money can XM lose? The programming and hardware
> costs
> > big $ and obviously the revenue coming in from the
> > subscribers is not meeting the costs. How much can the
> > investors of XM afford to lose? I was always afraid of
> > getting a radio and subscription and see XM fold. I
> listen
> > to the music stations on Radio@AOL. I am quite happy with
>
> > the programming, but what will financial problems kill XM
> > and/or Sirius?
> >
> > Bruce
> >
> It is not at all unusual for new companies to lose money,
> and in some cases wheelbarrows full of it at start-up.
> Citadel bled red ink for all the years that Larry Wilson
> operated it, it never made a dime, but it just bought up
> ABC.
> The investors of XM escecially the big money initial
> investors knew it would take awhile to get things in place
> and for XM to being making money. Now that the technology
> and radios are there, XM will not go away. It might be
> bought by another company, or operated differently, but it
> is highly unlikely that satellite radio will suddenly cease
> to exist. You have companies like CC & ABC who have some
> vested interests in satellite. The major American car
> manufacturers have interests in satellite.

Isn't XM trying (and failing) to ditch Clear Channel? I thought an unfavorable arbitrator's ruling is forcing XM to allow CC to sell ads on the mainstream music channels it apparently still programs and to add CC's WLW Cincinnati to the lineup, again with all advertising revenue going to CC, not XM. Oh, and doesn't CC have just as vested an interest in HD Radio now as it does in satellite? I thought HD was being positioned as a sat-radio killer.

Do you think it's realistic to expect GM to maintain its interest in XM as losses continue to mount? When do the shareholders start to tell GM "Get back into the car business and out of the radio business."? Can XM survive without GM?

I think the original poster poses some legitimate questions.