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"Sirius just announced a price increase, and it's unclear how quickly it's going to roll through to the entire sub-base. They are also experimenting more with the used car market. So there are a lot of interesting developments there. I think the penetration is still low enough such that they probably have less macro risk. If you're one of the 20-million-some-odd subscribers to Sirius, you probably aren't going to churn because it's a choice of buying Sirius or buying food or gas or something. You're still a relative early adopter, and you're probably skewed more toward the middle or upper classes. I think we'll be looking at potential capital allocation there as the company starts to delever."
David Bank, RBC Capital Markets
Last edited by Sirius Roadkill; 11-02-2011 at 04:34 PM.
"Sirius XMís (NASDAQ:SIRI) stock hasnít recovered much since the S&P 500 dip in August 2011 due to concerns around the worsening economy in the U.S. and Europe. In October, the stock showed some signs of recovery, but dropped by more than 5% followed by the companyís earnings announcement on Tuesday as a result of lower than expected subscriber gains. We maintain our price estimate for Sirius XM at $2.11, implying a premium of close to 20% to the market price. We think that the business model for the company is intact, and that partnerships with big automotive companies such as GM (NYSE:GM) and Toyota (NYSE:TM) will go a long way."
in case Spencer deletes my post on the main news page:
November 4, 2011 at 2:43 pm
Okay,. I stole away a few minutes to give you a proper response.
This article was not misleading at all. In fact, it gets to the heart of the matter with acual numbers.
You see, while the churn rate may remain the same, the absolute numer is rising. It is the absolute numbers we need to deal with. I can make percentages say anything I want.
Gross additions 2,179,348
Churn – 1,727,201
Gross additions 2,138,131
Churn – 1,804,448
You see what is happening here? Gross additions went down while churn went up. If you simply follow percentages you would would be missing that picture.
next quarter churn will approach 1,900,000. With auto sales being weaker, and gross additions not growing as fast, it becomes very imp[ortant for Sirius XM to garner more gross subscribers. This can be accomplished by:
1. More car sales – not likely
2. Higher penetration rate – not likely
3. A ramped up used car program – in the works
4. Better retail – in the works
Trefis is simply quoting Sirius XM and ignoring the fact that “retention” and “win-back” programs are code words for SELLING OUR PRODUCT CHEAPER. You will see that if you look at the ARPU line. Winning back subs is fine, but there is a cost to doing it.
A take rate of 44.7% may seem impressive, but you need to remember that KEEPING subscribers is how the company makes money. 24% churn out each year. Winning 100 subs, but losing 85 is the reality. The sub growth is much more modest than people realize, and a dipping conversion rate makes that qynamic change greatly.
In Q2 the situation was win 100 subs lose 80. Do you see the difference.
What happens if we lose another half point on take rate combined with lower OEM sales and churn remaining stabnle at 1.9%? Think about that
sirius roadkill says:
November 4, 2011 at 7:34 pm
“We are not seeing any change in conversion that concerns us about how customers feel about our product. Conversion of the same vehicle models are basically the same. What changes every quarter is the mix of OEMs and the mix within OEMs, as all models convert at different levels.”
November 1, 2011