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XM posts slower subscriber growth for 2Q


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#1 of 10 Monty B

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Posted July 06 2006 - 05:55 AM

By SETH SUTEL, AP Business Writer
2 hours, 25 minutes ago

NEW YORK - XM Satellite Radio Holdings Inc. reported slower growth in new subscribers for the second quarter Thursday, which the company attributed to problems with product availability and softness in retail sales.

Sirius Satellite Radio Inc., meanwhile, added far more subscribers than XM in the second quarter, beating analysts expectations and continuing to benefit from signing up the popular shock jock Howard Stern, who went on the air at the beginning of the year.

XM said it added 398,000 net subscribers in the second quarter, well below the 568,900 it added in the first quarter, leaving it with 6.89 million subscribers to date. Analysts had been looking for about 430,000 net additions, Oppenheimer analyst Thomas Eagan said.

Sirius said it added 600,460 subscribers, ending the quarter with 4.7 million. While that was down from the staggering 761,000 additions made in the first quarter, shortly after Stern joined Sirius, Eagan said the pace was still strong in the second quarter and reflected a continuation of "the Howard effect."

Analysts had been expecting 555,000 additions for Sirius, Eagan said. A Sirius spokesman declined to comment on the figures beyond a prepared statement.

XM's stock fell 13 cents to $14.36 in early trading on the Nasdaq Stock Market while Sirius' shares rose 12 cents, or 2.7 percent, to $4.60.

In May, XM cut its estimates for full-year subscriber growth, citing softness in retail sales of satellite radios and product availability problems. XM currently estimates having 8.5 million subscribers by the end of the year, down from its previous estimate of 9 million.

Sirius said in late May that it expects to meet its previously issued forecast of getting to more than 6.2 million subscribers by the end of 2006.

XM's stock is down nearly 50 percent since the beginning of the year on a variety of concerns, including the sudden departure of a director over strategic differences with the company; an investigation into the company's marketing practices and more recently the reduction of subscriber estimates. Sirius shares are also down, but not as much, about 31 percent, since the beginning of the year.

XM is locked in a fierce battle with Sirius to sign up programming talent and paying subscribers. Both services are available nationally, carry dozens of channels of talk and commercial-free music, and cost about $13 per month.

Eagan, the Oppenheimer analyst, said that despite several external difficulties for the two satellite radio stocks, long-term subscriber goals would likely be met as more cars are installed with the receivers at the factory. Sanford Bernstein analyst Craig Moffett told clients in a note that he also expects "rapid growth" in factory installation rates from 2007 to 2009.

#2 of 10 Ronald Epstein

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Posted July 06 2006 - 09:08 AM

Looks like both companies fell short of expectations.

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#3 of 10 dailW

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Posted July 06 2006 - 09:25 AM

sounds like someones in denial

#4 of 10 Brent T

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Posted July 06 2006 - 12:51 PM

Quote:
Originally Posted by Ronald Epstein
Looks like both companies fell short of expectations.
Huh ?


Analysts had been expecting 555,000 additions for Sirius, Eagan said.

Sirius said it added 600,460 subscribers, ending the quarter with 4.7 million.

#5 of 10 Chris

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Posted July 06 2006 - 03:25 PM

Just so we can be clear:

Quote:
Analysts had been expecting 555,000 additions for Sirius,
Quote:
Analysts had been looking for about 430,000 net additions (XM), Oppenheimer analyst Thomas Eagan said.

Analysts have already begun to actively predict that SIRIUS is growing at a 25% faster clip then XM at their base expectations. Sirius was "over" it's projection by 45,000. XM was UNDER it's projection by 40,000.

What this really means is that SIRI is growing at closer to a 50% faster clip then XM. This is an unbelievable swap in marketspace roles.

While XM holds a lead as far as overall subscribers, currently 6.89M to 4.7M, the growth pattern is strongly behind SIRI. But where SIRI is really cleaning up is it's renewal rates. If you look at the full report (MoneyWatch) SIRI's renewal rates are INCREDIBLE in comparison to XM. While XM still has an immense lead in the OEM car market, those new sales are basically just replacing subscribers who are leaving XM, with new adapters making up the difference.

Meanwhile, SIRI, who still trails in in place OEM installs counting to their value is having a significantly higher renewal rate which allows for new subscribers to count more to growth then to churn.

If you were an investor, this growth also brings additional value to SIRI's advertising revenue, which has been managed far more effectively then XM. SIRI is selling advertising at a much higher dollar value per slot then XM, which means that each gain in subscriber ship means a much more significant increase in the value of advertising in their networks.

Right now, from a management viewpoint, SIRI is a -better managed- company. This is not saying that they are a "better" company, I know Ron has a preference - a strong preference - for XM's playlist and other things. But SIRI has managed to make the most out of all of it's acquisition.

Let's really think about this:

During the NFL Season, SIRI cut a deal to make sure that they get product placement at every NFL stadium and player placement at team events.

XM has MLB. They don't get guaranteed placement at any stadium, nor do they get guaranteed references by MLB.

SIRI cut their deal with NASCAR, which they take over in 2007. XM has had NASCAR for a while, though they will lose it this year. SIRI has made sure that they are sending their staff to current races - all of them - to make a push to promote SIRI NASCAR, and SIRI has bought placement at most signature races in advance. XM did none of these things.

What SIRI really took advantage of was making sure when they signed a deal for content, they beat the drum like mad to make sure everyone knew it was an exclusive. They have a tendency to scream exclusives from the rooftop. Even their website booms "exclusives". And when SIRI sponsors an event, or something, they immediately whip out press releases and get attention. Stern has been on their network for almost six months, and SIRI has managed it so well that they keep Stern continuously in the news by getting him big name guests and working to generate national headlines. Wilmer what's-his-face taking Mandy Moore's virginity was a story that made the tabloids. And so on.

What SIRI has done is better craft an image of having a trendy "cool" quality to it.

XM should have done this. XM has a lot of very cool and trendy exclusives that it should be trumpeting. But even O&A in their radio show now routinely bag on how XM has poorly managed their guests, getting them D list talent to interview. And how XM has managed their show badly through a terrible campaign to keep anyone informed of what's going on.

XM got out to a big lead and since the has basically coasted.

Numbers like this make investors feel very good about SIRI, a company that overachieves on market expectations as well as SIRI's own expectations, and feel more and more shaky about XM's position.

SIRI has two "bumps" ahead of it, it's new status with the NFL network being an exclusive partner and now a home to several "exclusive" games which SIRI will also have exclusive coverage on will be official this fall. This will give them another promotional outlet to a big audience.

And when NASCAR flips, even XM believes that a certain number of subscribers will elect to leave XM to follow NASCAR. Maybe not a big number, but there will be some.

In a recent Advertising customer awareness evaluation, more people said they were aware of SIRI then XM. This is a major change, as XM has always dominated the customer awareness category.

I think the industry is best if both companies are in it and can compete. And don't beleive that either is "out of the woods". But righ tnow, if you're XM you have to look at these figures and really start to think about how you're going to "shake things up" to attract growth in your audience outside of the OEM sales. Because if they have two more quarters (this year) where SIRI significantly outpaces them, then their will be serious concern on the part of investors that XM needs "new vision" to right their ship.
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#6 of 10 Ronald Epstein

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Posted July 07 2006 - 04:15 AM

My apologies.

I glanced at the article and read this: well below the 568,900 it added in the first quarter instead of taking note of the second paragraph.

My mistake and I apologize.

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#7 of 10 Brent T

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Posted July 07 2006 - 04:41 AM

Quote:
Originally Posted by Ronald Epstein
My apologies.

I glanced at the article and read this: well below the 568,900 it added in the first quarter instead of taking note of the second paragraph.

My mistake and I apologize.

Darn ! I was hoping you were busting stones.

Thanks for clearing it up though.

#8 of 10 Jeff Gatie

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Posted July 08 2006 - 06:59 AM

Ron, since it was posted in another thread that O&A are the biggest draw on XM, is it your opinion still that the CBS deal was good for XM, even though the predicted effect of O&A on Free FM getting people to sign up for the uncensored XM stuff has obviously not happened? Just curious. I always thought the move was great for O&A, but lousy for XM. I know you felt different before, but have you now reevaluated after this news?

#9 of 10 dailW

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Posted July 08 2006 - 07:31 AM

although i'm a huge stern fan, i do think that in the next ratings book and the next 3Q report will determine if theres an impact.its to early to tell from what i read on SFN (someone posted a thread from wackbag) a couple of o&a fans are disappointed in XM and staring to think about canceling their subs.

#10 of 10 Ronald Epstein

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Posted July 09 2006 - 12:41 AM

Jeff,

Being that O&A are amongst the most listened talent on XM, I am
not sure anyone can't say that the numbers XM is drawing in
(despite it being down) is not related to O&A.

Look, O&A never had the listener base that Stern had. Nobody
can expect the type of onslaught to XM that happened with Sirius.

Listening to O&A, however, the boys have continually said that
their ratings on Free FM are very good and that they have acquired
many new listeners to XM through that deal.

Absolutely, I think it's a win/win situation for both CBS and XM.

Ronald J Epstein
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