Judge Delays Ruling on Blessing Lawsuit After Hearing Objections
For those that thought the Blessing suit was complete, and that a proposed settlement would pave the way for Sirius XM to raise prices beginning January 1, 2012, hold your horses. Judge Harold Baer has reserved judgement on the matter. What exactly does this mean? In simple terms it means that we will get a decision at a later date. in realistic terms it means that the recently filed objections to the proposed settlement have enough merit that the judge is giving them consideration.
The proposed settlement, valued at over $180 million dollars in “savings” to the class, has come under fire by several objections that allege the $180 million is vapor, and that the only party making out in this matter are the attorney’s which will receive a $13 million fee. In total fairness, the objections do have some merit. The proposed $180 million is based on the contemplation that Sirius XM would raise prices immediately following the expiration of their three year FCC price freeze on July 28th of this year. What Sirius XM did to settle the case was state that they were contemplating a $3 price increase, and that instead of implementing it the day after the price freeze expired, they would wait until 2012.
For Sirius XM shareholders the proposed settlement was a windfall. For $13 million dollars in real money the company could put all of this litigation behind them and insure that such challenges would not arise again. It also set the stage for a long anticipated price increase which would boost revenues for the company substantially. More revenue would translate to a richer stock price. Now all of that is up in the air.
Instead, Sirius XM investors are faced with uncertainty on this settlement combined with an economic disaster for the country. At some point the question needs to be asked about how flexible the pricing of satellite radio actually is, and even if there is some flexibility, when the company can impose such an increase. Banking on a January 1st increase is a dangerous assumption at this point.
In realistic terms, the proposed settlement does fall short of offering “real value” to the members of the class. I realize that my stating this will not be popular, but I am a straight shooter, and tell it like it is. As an investor in the company I loved the proposed settlement. As a consumer, I feel that I was offered very little other than an “imagined” price increase that likely would have never reached the $3.00 levels the company insists were being considered.
What will happen with all of this? Investors will need to consider that a price increase may be held off longer than anticipated, or that the company will be forced into a richer and more realistic settlement.
Position – Long Sirius XM Satellite Radio
why does everybody think they’re going to raise rates so little? i think they will raise basic sub price to $15.99. that’ll just cover inflation. i really believe the market and many analysts are underestimating this price increase. the price has been the same for almost 10 years. i can tell you every bill i pay has gone up since 2002. sirius n xm have spent billions in content, yet charged the same old price. you wont get something for nothing, that’s not how we do business.
expect a $3 increase come next year. or whenever we are allowed to. it’s long overdue, sirius will still be the cheapest bill i have and is one of the only services i enjoy.
But the price has not been the same. They have done a masterful job at making everyone THINK the price has been the same.
Years ago I got the satellite feed and the Internet feed for $12.95 per month and that included music royalties.
– They now charge for Internet – add $3 per month
– They now charge for royalties – add $1.40 per month
What used to cost $12.95 per month now costs $17.35 per month. Any way you slice it there has indeed been a price increase. It simply came in the form of taking things away from you.
– They now also charge an additional $2 per month on the family plan.
when sirius started in 2002, they did not have internet radio. i’ve been a sub since 2004, so it was a little after that they added internet radio without raising their $12.95 sub price. they had that crappy free 32kbps stream, and a $3 “premium” stream. that crappy 32k stream cost money but they didn’t charge you extra for it. so they removed it and kept the option for the premium $3 internet. want more? pay more. sounds fair to me.
royalties have gone up, i don’t have any numbers in front of me but these needed to be passed to the consumer. yes it is a form of a price increase, but everybody else does it (why not the company that has lost 8bil)? my verizon plan may say $109.98, but the total is certainly more than that.
and you’re flat out right on the family plan, that def was cheaper.
point is nothing is free, and that business model stinks. billions spent in new content certainly justifies their 1.98/now less royalty hike, and their base sub increase is more than welcome by me. i want these guys to be around for a long time as a consumer and an investor.
The point is that the price has increased. The fact that the company has consumers convinced that the royalty fee is not really a part of the cost is genius. Royalties used to be included in the subscription price….now they are an add-on.
Spencer,
“In realistic terms, the proposed settlement does fall short of offering “real value” to the members of the class” is not just “unpopular” but just outright wrong. If sirius had violated any FCC agreements w/r to price increases, they would have been in trouble with FCC. There is not much to discuss here. Sirius never breached any FCC binding requirements. Period. The class action law suit is frivolous benefiting attorneys as such law suits mostly do and is without merit. The ONLY reason siri agreed to settle is to curb its own legal costs. This is a usual practice. Sirius has never ever pledged in any contract with any subscribers that it has no right to increase its fees. I have NO DOUBT whatsoever that Mel will follow through on his intent to raise prices early next year. And the impact on sub count will be close to ZERO as it was with the roalty fees. The reason is simple – siri’s base loves the product and will not budge because the service is still very inexpensive for siri’s segment of the population. I would like to remind you of your own words when you compared a cup of coffee at Starbucks and siri’s monthly fees. Nothing has changed since then.
While the suit may be consideted frivolous by some, it had managed to last since 2009 with hundreds of filings. A pure frivolous suit would not likely make it this far.
Sirius XM ran all pricing by the FCC and DOJ. However, the second they decided to settle, they fall under new rules and precidence. The settlement must pass muster and not be a “coupon” settlement. That us where they now face problems.
The price increase this time differs. Sirius XM was able to convince subscribers that it was some sort of unavoidable tax or fee last time. They can not do that again this time. Further, there are more options for consumers now. It will be interesting to see how they sell a price increase
You know just as well as anyone that the law suit is without merit and if siri were to commit fifty million bucks to lawyers, the plaintiffs would have ended up with zero… but siri would have been $50M out of pocket. This is exactly why the companies choose to settle. I went through this once myself and saved myself 90% on what I would have spent on my attorneys. The law suit is baseless and pursues attorney’s gains only. It is unwise to pursue this argument that some customers are suffering. You knopw that this is bs why defendit. As to the price increase, I agree that siri did raise the price on whatever it possibly could. However, this is not a sin but a SOUND and NORMAL business practice when you charge “as much as the market CAN bear”. Let us not treat siri management as a bunch of palm readers. They certainly have hard facts to make a judgement about the price increase. If the facts were against them, they would not dare. As to competition, this market is obviously overcrowded and we should expect a correction when quite a few ventures go under in the next several years to clear the space for companies like sirius xm.
I repeat that I have ZERO doubt that Karmazin will follow through on the price increase early next year and the company will gain tremendously. He cannot hold this ace because a $2 price hike is a huge game changer for the company. Twenty bucks a month with all fees included is still a very decent deal for a consumer for the value he gets. We should hear the announcement on the price increase from Mel before November, 2011. This is the time when the stock will take off.
a. Lawsuit is one word.
b. Sirius XM has lawyers on retainer.
c. $20 per month is way too high for casual listeners. Don’t underestimate the drop off in new subs and increase in churn.