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SIRIUS needs 2.4 million to break even on Stern

A

AllForADeuce

Guest
From www.Orbitcast.com

BoA analyst Jonathan Jacoby has done some recalcuations from his previous estimates, that now reporting that SIRIUS will need 2.4 million subscribers (up 900,000 from 1.5 million) to break-even with the signing of Howard Stern. Instead of $500M, he says that SIRIUS needs to make up $679M estimated to payout to Stern.

Here's where his math comes from: Take the $400M of cash payments + $279M of equity compensation. Jacoby says the latter figure includes the $218 million already given to Stern, along with “incremental equity” the analyst expects Stern to get by exceeding subscriber targets this year, too.

"To reach break-even on Stern, we estimate Sirius requires 2.4 million incremental subscriptions," Jacoby wrote in a recent report. “While it is somewhat complex to estimate the exact number of incremental subscribers that signed up only because of Stern, we estimate [500,000] incremental ‘Stern’ net adds in 2005.”

Also of note, according to Jacoby, recent checks indicate that the early 2006 Sirius retail surge is now starting to fall off despite the continuation of hardware price discounting.
 
> From www.Orbitcast.com
>
> BoA analyst Jonathan Jacoby has done some recalcuations from
> his previous estimates, that now reporting that SIRIUS will
> need 2.4 million subscribers (up 900,000 from 1.5 million)
> to break-even with the signing of Howard Stern. Instead of
> $500M, he says that SIRIUS needs to make up $679M estimated
> to payout to Stern.
>
> Here's where his math comes from: Take the $400M of cash
> payments + $279M of equity compensation. Jacoby says the
> latter figure includes the $218 million already given to
> Stern, along with “incremental equity” the analyst expects
> Stern to get by exceeding subscriber targets this year, too.
>
>
> "To reach break-even on Stern, we estimate Sirius requires
> 2.4 million incremental subscriptions," Jacoby wrote in a
> recent report. “While it is somewhat complex to estimate the
> exact number of incremental subscribers that signed up only
> because of Stern, we estimate [500,000] incremental ‘Stern’
> net adds in 2005.”
>
> Also of note, according to Jacoby, recent checks indicate
> that the early 2006 Sirius retail surge is now starting to
> fall off despite the continuation of hardware price
> discounting.
>
If Sirius doesn't get 2.4 million, can't they still break even from subscriptions and advertising revenue from Stern's show. I'm sure the longer Stern is there, more ad revenue will come in. It looks like they are only calculating subs, but that's not they're only revenue source.
 
> > From www.Orbitcast.com
> >
> > BoA analyst Jonathan Jacoby has done some recalcuations
> from
> > his previous estimates, that now reporting that SIRIUS
> will
> > need 2.4 million subscribers (up 900,000 from 1.5 million)
>
> > to break-even with the signing of Howard Stern. Instead of
>
> > $500M, he says that SIRIUS needs to make up $679M
> estimated
> > to payout to Stern.
> >
> > Here's where his math comes from: Take the $400M of cash
> > payments + $279M of equity compensation. Jacoby says the
> > latter figure includes the $218 million already given to
> > Stern, along with “incremental equity” the analyst expects
>
> > Stern to get by exceeding subscriber targets this year,
> too.
> >
> >
> > "To reach break-even on Stern, we estimate Sirius requires
>
> > 2.4 million incremental subscriptions," Jacoby wrote in a
> > recent report. “While it is somewhat complex to estimate
> the
> > exact number of incremental subscribers that signed up
> only
> > because of Stern, we estimate [500,000] incremental
> ‘Stern’
> > net adds in 2005.”
> >
> > Also of note, according to Jacoby, recent checks indicate
> > that the early 2006 Sirius retail surge is now starting to
>
> > fall off despite the continuation of hardware price
> > discounting.
> >
> If Sirius doesn't get 2.4 million, can't they still break
> even from subscriptions and advertising revenue from Stern's
> show. I'm sure the longer Stern is there, more ad revenue
> will come in. It looks like they are only calculating subs,
> but that's not they're only revenue source.
>


I beleive he is referring to the fact that they need that many to cover Stern himself. Yes, subs aren't their only ad revenue, but they have been reportedly not been getting the price first expected for Stern spots and ad revenue still isn't a guaranteed stream of cashflow. Plus he might also be calculating the fact that subs are a more guaranteed stream of revenue since they are still netting positive subs.
 
> I beleive he is referring to the fact that they need that
> many to cover Stern himself. Yes, subs aren't their only ad
> revenue, but they have been reportedly not been getting the
> price first expected for Stern spots and ad revenue still
> isn't a guaranteed stream of cashflow. Plus he might also
> be calculating the fact that subs are a more guaranteed
> stream of revenue since they are still netting positive
> subs.
>
I wouldn't make much of this calculation for several reasons, not the least of which is that it doesn't appear to account for revenue streams that haven't emerged yet (most notably the licensing of Sirius' content to other distributors e.g cell phone companies). The way I see it, Howard gives Sirius a huge competitive advantage over XM - even with Sirius starting from behind. Second, even with flat growth rates, Sirius will add 2.4 million subscribers in well under 3 years.
 
Needs more than that

I question those numbers. It sounds to me like they are assuming Sirius was at break-even when the deal went through for Stern. Which we know this is not the case. The debt was huge. Since the hire of Stern they stepped up on avertising, I'm sure they hired additional sales reps. and support personnel. Each new employee adds to insurance and management costs. in other words, the variable cost increased which increases pressure on operating margins. Therefore, the stock to dollar ratio must decrease, using real logic not speculator logic of "let it ride".

I wouldn't be surprised if they never get out of the debt. I hope I'm wrong but Sirius may find itself, in a couple of years, ripe for a takeover by a cell phone company looking to add streaming music and video as part of its service offerings.
 
I think Stern is the funniest thing going, but that SOB took too big a chunk out of the kitty. I DO NOT think he is worth THAT much. It's a business that has to turn a profit. I noticed what I thought to be extravegant spending early on based on Stern's own descriptions of their resources. Does the guy really need a 17 person news dept. to cover just him? Waste, waste, waste.

This company is so friggin' new, this kind of spending is irresponsible. By the way, those subscriptions can be DROPPED by people. The numbers don't just keep getting added.
 
Their stock has been down over a dollar since he's been on the air, plus he owns all the stock that has been invested to him. Scary.




www.Orbitcast.com
>
> BoA analyst Jonathan Jacoby has done some recalcuations from
> his previous estimates, that now reporting that SIRIUS will
> need 2.4 million subscribers (up 900,000 from 1.5 million)
> to break-even with the signing of Howard Stern. Instead of
> $500M, he says that SIRIUS needs to make up $679M estimated
> to payout to Stern.
>
> Here's where his math comes from: Take the $400M of cash
> payments + $279M of equity compensation. Jacoby says the
> latter figure includes the $218 million already given to
> Stern, along with “incremental equity” the analyst expects
> Stern to get by exceeding subscriber targets this year, too.
>
>
> "To reach break-even on Stern, we estimate Sirius requires
> 2.4 million incremental subscriptions," Jacoby wrote in a
> recent report. “While it is somewhat complex to estimate the
> exact number of incremental subscribers that signed up only
> because of Stern, we estimate [500,000] incremental ‘Stern’
> net adds in 2005.”
>
> Also of note, according to Jacoby, recent checks indicate
> that the early 2006 Sirius retail surge is now starting to
> fall off despite the continuation of hardware price
> discounting.
>
 
He also has full permission to sell off all the stock that he was vested. I can't wait to see the stock price when his name and 220 million dollars pops up on the transaction boards!

> Their stock has been down over a dollar since he's been on
> the air, plus he owns all the stock that has been invested
> to him. Scary.
>
>
>
>
> www.Orbitcast.com
> >
> > BoA analyst Jonathan Jacoby has done some recalcuations
> from
> > his previous estimates, that now reporting that SIRIUS
> will
> > need 2.4 million subscribers (up 900,000 from 1.5 million)
>
> > to break-even with the signing of Howard Stern. Instead of
>
> > $500M, he says that SIRIUS needs to make up $679M
> estimated
> > to payout to Stern.
> >
> > Here's where his math comes from: Take the $400M of cash
> > payments + $279M of equity compensation. Jacoby says the
> > latter figure includes the $218 million already given to
> > Stern, along with “incremental equity” the analyst expects
>
> > Stern to get by exceeding subscriber targets this year,
> too.
> >
> >
> > "To reach break-even on Stern, we estimate Sirius requires
>
> > 2.4 million incremental subscriptions," Jacoby wrote in a
> > recent report. “While it is somewhat complex to estimate
> the
> > exact number of incremental subscribers that signed up
> only
> > because of Stern, we estimate [500,000] incremental
> ‘Stern’
> > net adds in 2005.”
> >
> > Also of note, according to Jacoby, recent checks indicate
> > that the early 2006 Sirius retail surge is now starting to
>
> > fall off despite the continuation of hardware price
> > discounting.
> >
>
 
Re: Needs more than that

You’re kidding right?.....do you really think that this isn’t the future? Did Heineken and Vermont Teddy Bear magically come up with extra revenue to put on Sirius? Not so much, that came from AM and FM budgets.

And they said only the rich people will own CD’s….. I can’t stand Mel, but the man is a genius and as long as he’s alive with the young technologically advanced advisors he has, Sirius will be as common as HBO, and as far as cell companies; I would look for Sirius to buy one themselves and broadcast and download and keep all the money. These guys are innovators in the broadcast business, so I wouldn't be so optimistic about where they’re gonna be in a year…
 
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