Re: Wrong math, wrong figures.
> >
> Reality check. Old news. They have invested over the past
> few years to get off the ground and will be out of the red
> and into the black by next summer.
Not quite. A straight line projection shows XM could be profitable by 2008, and Sirius around 2009. This assumes the cost of acquistion of each customer stays the same. This assumption is dangerous since the low hanging fruit is taken, and it will require things like paying Howard stern a billion or two to get more interest. Further, we do not know the long range churn rate, although we know it is increasing.
> Every business takes it
> in the beginning to get going. Dont matter if your a
> satillite radio provider or a kiosk in a mall...you will be
> in the red before you see the black.
XM haas been operating with losses for a decade. Each time they pile them up, they dilute the equity of the existing shareholders by tossing out more stock. Not all businesses start with losses. I have started radio stations tha tmade money the first month.
> > It will be many years... 4 to 5... before either could
> > approach profitability. By then, we may have other
> broadband
> > services that are more attractive.
> >
> Whatelse can I say beyond you being wrong, because they
> expect to be making profit beginning about the summer of
> 2006. 2007 should be all profit for XM.
They lost $30,000,000 a month this year so far. They would need to add more than 4.5 million subscribers to cover this loss, or, in other words, double the subscriber base. They also need to stop counting the cars on deal lots as "installs."
> > For the moment, we have two very expensive services that
> > have fewer subscribers than the cume of New York's top 2
> or
> > 3 radio stations.
> >
> Expensive? Not at all. Im not rich, and I own both services.
The average American household has income of $42,000 a year. An expense of over $100 has to be considered heavily in the many homes that have even lower income. When you have kids, a mortgage, the power bill, food costs, etc., ther eis not always $100 sitting around.
> Definatley not expensive to the large amount of people in a
> market like SD where the average individual gross annual
> income is a gazillion times what these services cost!
The median income in SD is $43,000 and the per capita income is $19,00. Again, for most peopple, paying over $100 for something they may not perceive as 100% necessary is unlikely in most cases.
> The
> fact is the total amout of subscribers of both services is
> well over 8 million people which would make them as large as
> major top 5 markets. Larger than SD. If NYs top 2 or 3
> stations have a cume of 8 million, which I doubt, that is
> impressive.
The sum of the cume of NY's top 3 stations is greater than the number of subscribers of both services combined. That, in perspective, is 3 out of 13,500 terrestrial radio staitons in the US.
Oh, since most sattelite installs ar ein cars, remember that only about 30% of US radio listening is in the car. So, if the average person listens to radio about 20 hours a week, that means just 6.6 hours in the car. So the satellite radio listening would be the equivalent of not 8 million persons but 30% of that, or 2.4 million, about the population of Phoenix.
The fact is that a diary count will reveal just around a 0.3 share of listening for satellite in total in most markets. To even make the book, they need around 12,000,000 subscribers. And that is two years off.
>
> > Oh, holiday giving is a tiny boost for satellite. Most
> > satellite radios are preinstalled in new cars, not add
> ons.
> >
> Tiny boost? Not at all. GM alone is adding 1.5 million
> radios in 2006.
I said "holiday giving is just a tiny boost." Which is all it is.
> That is only one company, in one year. Ford
> expects to add 1 million sirius subscribers over the next 2
> years.
Not all will be activated, not all will stay activated after the trial period. Remeber, car manufacturers and dealers are incentivized to put the radio in. So, XM and Sirius give cash upfront and a part of each subscription to the dealer and the manufacturer. If you think they get the full subscription fee, you are wrong. They get a fraction of the first year, in fact.
GM will be lucky to sell those 1.5 million cars. GM has lost $3 billion so far this year. FOrd has only lost $1.5 billion.
> XM just inked a deal that will put millions of XM
> radios in their and Infinity autos over the next couple
> years.
Infiniti does not sell millions of cars. They do not even sell hundreds of thousands. The hot Infinity, the FX, has sold 60 thousand all year, and it does not come with a preinstall unless you pay $650 for it to be added. I know, I have one.
> Even Delphi has sold 2.6 million units to date. Throw
> in the Sprint deal, and some others on the way...it just
> gets uglier.
Gee, so they add 4,000,000 more subscribers in two years. They approach profitability. And they can only generate, maybe, a 0.5 total share of radio listening with this. Where is the danger for commercial radio?
The threats to commercial radio are not from XM and Sirius, whose technology may not even be vialble by the time they fianlly make any money. It comes from new forms of broadband.
>
> XM added 310,000 subscribers alone in the third quater, they
> currently have about 6 million subscribers. SIRIUS added
> about 210,000 bringing their total to about 2.5 million
> subscribers. Which actually makes SIRIUS satillite market
> alone the equal of San Diegos population. The two combine
> for 8.5 million subscribers which makes them the equivilant
> of #3 market in the US. Second to only NY and LA.
Not to quibble, but you ar emissing Chicago. And you have to discount the cars on lots, and no one knows the future churn. In any case, each listener counts about 0.3 of a regular radio listener.
> > Sure,it is real and appeals to a smaller segment of the
> > public. But it is not an imminent threat to the
> > profitability of terrestrial radio, and, in fact, may
> never
> > be.
> >
> Smaller segmet of the public? Millions of subscribers over
> the past few years isnt a small segment David.
It took XM 4 years to get to the current size... and at current growth, it will take them 2 to 3 years to achieve profitability if no cost increases happen and if there is not long term churn.
As a precentage of the US, this is a tiny number. As a percentage of a market, it is a tiny number. In LA, with just under 5% of US population, there are only about 280,000 receivers... less than the cume of the #32 radio station in the market.
> The current
> total of 8.5 million subscribers is not a small segment.
> Would you call Chicago a small market? AND This is somthing
> that is really just getting of the ground and gaining in
> popularity.
XM started marketing over 4 years ago. That is hardly "just getting started." They have lost over $1.5 billion dollars since then. $125 million this year, or about $20 for every subscriber they have.
> Yet they are already a top 3 market on their own
> with approxamitly 8.5 million subscribers. By next summer
> they will both combine to have over 10 Million Subscribers.
> By next years end there will be more satillite radio
> listeners then NY radio listeners.
Wrong. Satellite reaches, generally, only in one place. See my explanations above. Only 30% of US raido listening is in a car.
and the market size comparison is irrelevant. How much share can they et in each indvidual market? At present, not even enough to make the book.
>
> The future is here. High gross income citys with stale,
> recycled programming like San Diego have been marked for
> termination. Like I said, 5 years and your average San Diego
> radio listener will not even be able to identify JACK from
> 91X from AM. And it will be the companies and programmers
> that did it to themselves.
Satellite has less than 4% of the population subscribed. Radio has always had 5% non-users, and about 6% light users. This is where XM and Sirius are getting the listeners. It does not affect radio, and anyone who thinks this is the fture threat is going to be blindsided.
>
