Subsidiary bankruptcy

[TheBigA]

Just read a story that says, based on a study of the Sirius XM merger papers, XM is considered a subsidiary of Sirius. Thus, the theory is that Sirius would bankrupt its subsidiary to free itself of XM's debt. That would allow the parent company to remain intact, and protect the stockholders.

 

[RadioStarOne]

And so ends the sad story that was XM Satellite Radio. Uncle Mel's goal of eliminating XM Satellite Radio is accomplished. Slamdunk! Game Over!

 

[Walter Graff]

Unfortunately when a company is taken over its often the part of the new entity that disappears. Afraid to say that is in the cards for the XM name.

 

[Walking On]

Really no big loss, since XM as we knew it is already gone. I'm surprised the charade has went on as long as it has. Wasn't the real point of the merger to eliminate redundant costs and competition? Even though I was one of those on the losing side of the deal, it seems to me that money is still being wasted in that context. I know the merger wasn't presented in that context, but a merger wouldn't have made sense for anything other than that.

 

[Walter Graff]

"Wasn't the real point of the merger to eliminate redundant costs and competition? "

From Sirius' side teh underlying reason was to gain subs. Now Sirius has more than $2 billion in revenue from subs. XM had bad management for years and had a heck of a lot of equity problems and the day was due for them to collapse so Sirius acted before they lost too many subs due to Sirius' aggressive push with contracts, etc. And for Sirius the acquisition meant taking a heck of a lot of dept from XM. Over the last five years of XM, debt increased by almost 30% per year. The decline in equity value was worse than it looked to then stock holders because there was a positive injection of new equity capital each year. XM was heading to their own meltdown without Sirius. Look for Sirius to eliminate the redundancy that is XM as they have been doing. The old XM employees still in DC know it's coming.

 

[Walking On]

//and the day was due for them to collapse so Sirius acted before they lost too many subs due to Sirius' aggressive push with contracts, etc. //

Acted before losing XM subs? Does that mean that if XM failed the subs would be lost, or another suiter would get the subs?


//And for Sirius the acquisition meant taking a heck of a lot of dept from XM. Over the last five years of XM, debt increased by almost 30% per year. The decline in equity value was worse than it looked to then stock holders because there was a positive injection of new equity capital each year.//

For this not to also be "bad management" on Sirius' part, it must mean that the income from those subs has more value than the cost of the debt. If that is the case for Sirius, then it must have been the case for XM. (I happen to think it wasn't case for either, once they both started paying too much for "big name "talent" and "content". And I think that was a road that Sirius went down initially, out of necessity because they were the smaller dog in the hunt. XM then must have felt it needed to do the same. I don't think it takes a brain surgeon to figure out that Sirius offered and paid much more to those it got versus XM, when at the time XM offered a greater audience. The NASCAR deal specifically, Sirius paid an arguably absurd amount of money for that, basically to get XM subscribers to come over to Sirius...many of whom didn't)

XM was heading to their own meltdown without Sirius.//

So why not just wait for the meltdown, then then scoop up the stranded? (unless, of course your meltdown was eminent as well)

Look for Sirius to eliminate the redundancy that is XM as they have been doing. The old XM employees still in DC know it's coming.

Exactly.

 

[scanman1]

Unfortunately when a company is taken over its often the part of the new entity that disappears. Afraid to say that is in the cards for the XM name.

So if EchoStar buys up the former XM's infrastructure, do you think they will continue to run it as a satellite radio service competitor to Sirius, or use that infrastructure for some other type of service?

 

[TheBigA]

So if EchoStar buys up the former XM's infrastructure, do you think they will continue to run it as a satellite radio service competitor to Sirius, or use that infrastructure for some other type of service?

Wow...that's an interesting idea. Maybe I missed it, but I haven't read that anywhere as a possibility. But I bet the FCC would love it, and Mel would hate it.

 

[Walter Graff]

So if EchoStar buys up the former XM's infrastructure, do you think they will continue to run it as a satellite radio service competitor to Sirius, or use that infrastructure for some other type of service?

Echostar has their hands in a lot of cross platform delivery. Imagine a slingbox system via sat. Who knows, the possibilities are endless.

 

[Walter Graff]

Wow...that's an interesting idea. Maybe I missed it, but I haven't read that anywhere as a possibility. But I bet the FCC would love it, and Mel would hate it.

Competition keeps you on your toes. Ask a bar owner who is in an area alone and the first thing he tells you is he wishes there were other bars in the neighborhood. No one hates competition, they like it because it makes you have to think harder. It's the challenge of competition that drives most companies to exceed and be different. Ask Steve Jobs.

 

[Walter Graff]

//and the day was due for them to collapse so Sirius acted before they lost too many subs due to Sirius' aggressive push with contracts, etc. //
Acted before losing XM subs? Does that mean that if XM failed the subs would be lost, or another suiter would get the subs?

Sirius was growing fast and overtook many areas of what XM started. Just saying the better company (as in how it was run) took over the weaker. I'm not into politics so if anyone is going to start that "I hate Mel" thing, save it. I care less about Mel as a person. Sirius the company made some bold and smart business moves.

//And for Sirius the acquisition meant taking a heck of a lot of dept from XM. Over the last five years of XM, debt increased by almost 30% per year. The decline in equity value was worse than it looked to then stock holders because there was a positive injection of new equity capital each year.//

For this not to also be "bad management" on Sirius' part, it must mean that the income from those subs has more value than the cost of the debt. If that is the case for Sirius, then it must have been the case for XM. (I happen to think it wasn't case for either, once they both started paying too much for "big name "talent" and "content". And I think that was a road that Sirius went down initially, out of necessity because they were the smaller dog in the hunt. XM then must have felt it needed to do the same. I don't think it takes a brain surgeon to figure out that Sirius offered and paid much more to those it got versus XM, when at the time XM offered a greater audience. The NASCAR deal specifically, Sirius paid an arguably absurd amount of money for that, basically to get XM subscribers to come over to Sirius...many of whom didn't)

Big difference was that Sirius paid big money for results and delivered. Subs of Sirius were growing as XM was becoming stale. Example: XM paid $50 million to have Oprah on 1/2 hour a week. About as bad a move as you can make. One thing to hire a name, another to reap benefits form it. Just ask the LA soccer team that paid $20 million for the biggest name in soccer only to have him not to play and now tell them he's leaving. Ask them what that did for the franchise. On the street, Sirius was being picked by car buyers because they understood Sirius had more talent and better programming. Not my words. The words of one of my clients who is one of the largest auto groups in the US. SO if you are a XM fan, sorry but that is how it was in the end of XM's run. IT wasn't getting better

XM was heading to their own meltdown without Sirius.//

So why not just wait for the meltdown, then then scoop up the stranded? (unless, of course your meltdown was eminent as well)

Once I asked Jim Dolan of Cablevision how it was going. He said as long as we gain in subscribers, it's going good. Sirius needed an infusion of subs to help take it to the next level. XM was weak as a business so Sirius found the right time to say let us take you over. They accepted. The rest is history.

Look for Sirius to eliminate the redundancy that is XM as they have been doing. The old XM employees still in DC know it's coming.

Exactly.

Hey, if you had a restaurant with two kitchens, what would you do? Spend the money renting the extra space and pay extra personnel, or sell off the redundant space if you could, and get rid of the extra kitchen staff. Some people here wanted to punish Sirius for trimming the fat (letting go of the unneeded kitchen staff). In fact it's sort of sad that people look at the economy and see a company lay off 10,000 people in one day but don't realize in five years they hire another 20,000. The media makes the equation that simple, layoffs, layoffs, layoffs, but never tells you that that one day blood bath is offset by years of hiring. Sats by themselves have no value. Those that said a takeover of Sirius would mean breaking up the company know about as much about business as I know about Pluto. Sort of like saying you were going to buy McDonalds and break up the company. What would you do, sell the french friers to someone and the uniforms to someone else? You can break up a company when it has a division that makes donuts and another division that makes hammers. Then you can break up the different divisions. But you can't break up a company that has parts that are all needed for a whole. But at the same time, if you can find someone that might want to trade debt or cash for an extra system of sats, you'll take an offer. I can't see Sirius continue with the redundant system they now have. The technology is out there to broadcast to both bands right now. Sirius would be dumb to keep both. History tells me they haven't been dumb with much else so I'd imagine that while only a hand (not a handful) of people might want the XM ROCK and ROLL sats, if there was a possibility to get rid of them you would. There is one company that might make great use of the system that I can think of.

 

[Walking On]

Wow, what an amazing analysis. And I bet that they want a really big one that beats their prices or trumps their entertainment. A bar owner wants other bars in the neighborhood only because that would bring bar searching people there. If he/she didn't need that, they wouldn't want the competition. In other words, what they would love to have is a captive audience that would put up with watered down, overpriced drinks. Without that, they might have to live with less profit because they served good drinks and payed for good entertainment to bring in the audience there instead of one of the other bars.

Steve Jobs, unfortunately, is a freak. Big business needs more like him. Most great companies had someone like Jobs giving them life. Once great companies have someone unlike Jobs destroying them like a cancer.

 

[Walking On]

//Hey, if you had a restaurant with two kitchens, what would you do? Spend the money renting the extra space and pay extra personnel, or sell off the redundant space if you could, and get rid of the extra kitchen staff. Some people here wanted to punish Sirius for trimming the fat (letting go of the unneeded kitchen staff). In fact it's sort of sad that people look at the economy and see a company lay off 10,000 people in one day but don't realize in five years they hire another 20,000. The media makes the equation that simple, layoffs, layoffs, layoffs, but never tells you that that one day blood bath is offset by years of hiring. Sats by themselves have no value. Those that said a takeover of Sirius would mean breaking up the company know about as much about business as I know about Pluto. Sort of like saying you were going to buy McDonalds and break up the company. What would you do, sell the french friers to someone and the uniforms to someone else? You can break up a company when it has a division that makes donuts and another division that makes hammers. Then you can break up the different divisions. But you can't break up a company that has parts that are all needed for a whole. But at the same time, if you can find someone that might want to trade debt or cash for an extra system of sats, you'll take an offer. I can't see Sirius continue with the redundant system they now have. The technology is out there to broadcast to both bands right now. Sirius would be dumb to keep both. History tells me they haven't been dumb with much else so I'd imagine that while only a hand (not a handful) of people might want the XM ROCK and ROLL sats, if there was a possibility to get rid of them you would. There is one company that might make great use of the system that I can think of.

I was agreeing with you, at least about the redundancy. Curious though, what do you think the use of those redundant Sats will ultimately be?

Ask someone once in the steel, airline, defense, auto, construction, manufacturing, or hell, radio industries for that matter, if the blood baths were good for them. Also ask them if the later 2:1 hiring boom included them (and was it in this country)? Blood baths are, after all, oftentimes the beginning of the end for something as we know it.

 

[Walter Graff]

Wow, what an amazing analysis. And I bet that they want a really big one that beats their prices or trumps their entertainment. A bar owner wants other bars in the neighborhood only because that would bring bar searching people there. If he/she didn't need that, they wouldn't want the competition. In other words, what they would love to have is a captive audience that would put up with watered down, overpriced drinks. Without that, they might have to live with less profit because they served good drinks and payed for good entertainment to bring in the audience there instead of one of the other bars.

As a former bar owner I can tell you I want people to go to other bars. It makes them want to come to mine, not because mine is better as much as people like variety. I listen to sat, ipod, and terrestrial. I choose what I want depending on how I feel. No one is a loser. All win. I want them all. I'll pay for Sirius because they offer what teh others don't and make 150 plus driving a pleasure as you don't lose the station.

 

[Mike Sheridan]

Unfortunately when a company is taken over its often the part of the new entity that disappears. Afraid to say that is in the cards for the XM name.

So if EchoStar buys up the former XM's infrastructure, do you think they will continue to run it as a satellite radio service competitor to Sirius, or use that infrastructure for some other type of service?

I had a similar thought, at least I think it is. DirecTV takes XM and Echostar takes Sirius. Mel gets to go home, he's out!

 

[Walking On]

// I'll pay for Sirius because they offer what teh others don't

Hey, that's what I liked about XM!


and make 150 plus driving a pleasure as you don't lose the station.

Well, at least there's still that. And hey, at least for now, I don't even lose it under an overpass, next to a big truck, or when going thru a tunnel. ;D

Will Sirius at least start using the terrestrial repeaters? Is that technically feasable?

 

[Walter Graff]

Sirius already has repeaters in major cities. In NYC in my apartment I don't need an antenna.

http://www.dogstarradio.com/sirius_map.php

 

[Walking On]

Hey, thanks for the link, Walter. Looking at the maps of where I live, and places where I travel explains my issues. Maybe one day I can confirm some of those yellow ones...

 

[RadioFanBoy]

As of today (2/17) EchoStar (Dish Network) is shut out and Liberty Media (DirecTV) is in.

http://tech.yahoo.com/news/ap/20090217/ap_on_hi_te/sirius_liberty

Now things are getting interesting....

 

[JimmyJames]

Walter, you are absolutely incorrect. Your avid support for Sirius is getting in the way of business facts.

Fact of the matter is, Sirius needed this merger. Experts agree that XM was ahead in technology, superior in music programming and would have been profitable faster than Sirius.

While XM did perhaps overpay for some content, the truth of the matter is that Mel fired XM programmers that interacted with their audience and presented intelligent music programming clearly different than the FM overconsulted version of said formats.

X Country, Fred, Lucy, Beyond Jazz, XM Cafe, Soul Street, XMU, XM Chill, The Move, UPop, the Decades channels. All pleasing XM subscribers and all quality programming that turned controversial when the playlists were trimmed and inferior Sirius replacements were simulcast on the XM platform.

Your brilliant programming minds at Sirius are under the impression that Coldplay belongs on a "downtempo electronica" channel, that James Brown only recorded 5 songs at most, and that Mojo Nixon has to drop the F bomb every break on a "progressive country" channel.

That's really the type of mindset that encourages people to PAY for radio, a luxury expense in this economy. Good job Sirius and Mel. Ruining the company Lee Abrams and some of the best music directors and programmers in the business built in exchange for FM without the commercials and jocks who talk too much.

Walter, this was a HOSTILE takeover and Mel got his revenge by gutting an excellent product. And you wish to sit and applaud that?