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Thread: XM ends Starbucks Marketing Pact

  1. #1
    Newman is offline
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    XM ends Starbucks Marketing Pact

    Initial reports are just coming in off of the news wire, but apparently XM has ended its marketing pact with Starbucks.

    It looks like XM is going to be selling 1.85 million shares, or approximately 22 million dollars worth of stock for Starbucks. Stock prices plummeted in early trading, dropping at one point over 12%.

    Why would XM be canceling a marketing pact with one of the largest brand names out there today? We will wait for the official filing of course, but this does not look very promising...

  2. #2
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    DOW JONES NEWSWIRES


    XM Satellite Radio Holdings Inc. (XMSR) disclosed Monday that it will resell 1.85 million shares of its Class A common stock on behalf of coffee retailer Starbucks Corp. (SBUX).

    According to a Securities and Exchange Commission filing, the satellite radio broadcaster issued the shares to Starbucks on Dec. 31, 2007, in a private placement related to the termination of a channel development and marketing pact between the companies.

    XM said the shares issued were valued around $22 million.

    Also in exchange for issuing the shares, Starbucks has released XM from the remaining cash payments and other obligations due under the marketing agreement through 2009.

    The agreement included cross-marketing and co-promotional activities such as development and broadcast of the Starbucks XM Café Channel on the XM system; the companies' granting of certain non-exclusive, non-transferable, royalty-free and limited-purpose licenses to use each other's marks; and mutual exclusivity.

    Shares of XM were trading late Monday morning at $11.45, down $1.30, or 10%, while Starbucks shares traded at $18.70, up 59 cents, or 3.3%.

    -Chad Clinton, Dow Jones Newswires; 202-862-1349; chad.clinton@dowjones.com

  3. #3
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    NEW YORK (AP) -- XM Satellite Radio Holdings Inc. will no longer broadcast the Starbucks XM Cafe channel after ending a marketing agreement with the coffee chain operator, the company said in a regulatory filing Monday.

    As part of the breakup, Starbucks has the right to sell $22 million in XM shares. At the time of the filing, that amounted to about 1.85 million shares, which represents less than 1 percent of XM's total 314.2 million shares outstanding at the end of September.

    XM said in the filing that if Starbucks does not realize $22 million from the stock sale, XM may be forced to issue more shares to Starbucks or pay the difference in cash.

  4. #4
    TSavery is offline
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    newman

    looks like the deal was an expensive one. Starbucks basically got bought out of the last 2 years of the deal for $22,000,000.

    Whether this deal was $10,000,000 per year or not is unknown, but if it was, it is my opinion that they did not get $10,000,000 in annual value.

    I look at getting away from the deal as a positive thing.
    Tyler Savery
    Satellite Standard Founder

  5. #5
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    My primary question is did XM pay MORE than they would have to get out? Or did Starbucks take the long term hit for the immediate short term gain? I still think having your name associated with something as big as Starbucks is a great thing, but I agree they were not getting their monies worth. Starbucks did little to promote the service in thier stores other than having a few signs up, but did XM get out cheaper than they would have?

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