Sirius Jumps On News – Then Settles Down
This is not the merger news that everyone is waiting for, but instead is the news of subscribers, a stable churn rate, and most importantly the pre-announcement of a positive cash flow in Q4 2007. For quite some time Sirius and XM traded on subscriber news, content deals, and OEM deals. Those were the markers that illustrated that the fledgling companies could become “real” in the early days. Announcements such as those typically no longer move these stocks. People are looking for signs of financial success, and viable business operations.
Last year Sirius finished Q4 by putting about $35,000,000 into the bank. This year they have already stated that they expect to announce a number significantly higher than that. That is the kind of news that will move a stock, or at least instill a bit of investor confidence. How significant will the cash flow number be? That remains to be seen, but it would appear that Sirius will be having a good quarterly report in February.
Yes, looking at subscriber comparisons on a year over year basis is important, but it is cash that people want now, and it appears that Sirius will deliver some Q4 cash to the company coffers. While the subscriber additions were 28% off of last years number, the churn Sirius is reporting is very healthy, and demonstrates that subscribers tend to stay with the service. Self paying churn is 1.6% and fully loaded churn is coming in at the low end of guidance at 2.2% (Both metrics slightly better than what XM has been reporting).
Sirius had offered no financial guidance this year because of the pending merger with XM Satellite Radio. The news regarding cash flow in Q4 was well received by Wall street, and sent the stock on an immediate uptrend, but the equity settled down, as the merger is the news everyone is really waiting on.
XM Satellite Radio has not yet announced subscriber numbers, but a strong OEM quarter is anticipated from statements made by Nate Davis in Q2.
Position – Long Sirius, Long XM
I looked back on the old reports you posted from q3 and it looks like these numbers basically match or beat all the estimates. Sure, it would have been nice to blow the numbers out completely, but we can’t kill them all the time.
Tyler, you generally are very good at estimating the subs numbers, so what do you think?
Tyler, I’m looking forward to seeing any additional info you may have on the Stifel Nicolaus comments mentioned in this article:
http://tinyurl.com/35xmvx
Weak, weak, weak.
Considering the huge number of these that are unsold vehicles on dealer lots (owing to the increased penetration in the new models) AND the massive expenditure on Howard Stern, who is supposed to drive retail going forward, this is disappointing.
I hate to see XM’s #s, because they’re likely to be even worse (since XM is not driven by retail and counts many of its new OEM subs only after the promo periods expire and the subscriber becomes a REAL subscriber).
The industry is fading fast.
anonymous (Frontmed/stackpointer….
You should look deeper into how the “promo” periods are counted.
Both Sirius and XM count subscribers for which they receive subscription payments from the OEM. GM, Ford and Chrysler fit into this category.
Both Sirius and XM do not count subscribers for which they do not receive a payment from the OEM. Toyota, Nissan, Hyundai, Kia, etc are all in this category.
Good news…. Can’t wait to see the subscriber numbers once this merger is done. Just about every electronics store I went into over the holidays was saying wait until the merger then buy the radio. There are a lot of people, like me, waiting to buy sat radio equipment for the first time. I just don’t want to pay two companies. Said it before.. but it’s like paying Sprint for local cell calls and then having a second cell for long distance with Verizon…
and I disagree with the post above… whether Sirius and XM are around remains to be seen.. but sat radio is about to explode. Won’t be long before Apple is in the mix of all of this and several other players…
Fading fast is traditional radio… I don’t know anyone who listens to it anymore. Most people have their ipod in their car these days…
Please. I forgot more about how Sirius fluffs up its sub #s than you ever knew.
>>> You should look deeper into how the “promo” periods are counted.
I don’t need to. XM’s promos are shorter, while SIRI employs long-term promos in order to prevent churn (even though we know that half would have churned if they could).
>>> Both Sirius and XM count subscribers for which they receive subscription payments from the OEM. GM, Ford and Chrysler fit into this category.
Yes, and Sirius actually counts huge numbers of subscribers that are actually unsold cars sitting on dealer lots — as of the end of last quarter, 11% of SIRI’s subs fell into this category (almost a million of their subscribers).
>>> Both Sirius and XM do not count subscribers for which they do not receive a payment from the OEM. Toyota, Nissan, Hyundai, Kia, etc are all in this category.
This is true — but for SIRI, only Kia, the numbers of which are less than insignificant (in fact, I don’t know that the first Kia with Sirius has rolled off the line, perhaps it has). OTOH, XM is being installed into huge numbers of Nissans, reasonable numbers of Toyotas, and almost every Hyundai.
It is the same old slop — Sirius counts subs before they’re subs and counts them well after they’ve lost interest. XM employs extremely conservative subscriber accounting.
If you boil it down, XM has nearly the same subscriber lead it held before Stern arrived on the scene (at a 3/4 billion dollar cost).
More opinions backed up with nothing substantial:
>>> Please. I forgot more about how Sirius fluffs up its sub #s than you ever knew.
You are entitled to your opinion. It does not mean it is a correct opinion.
>>> I don’t need to. XM’s promos are shorter, while SIRI employs long-term promos in order to prevent churn (even though we know that half would have churned if they could).
Let’s apply some logic here:
1. XM has stated that they are looking into and using longer promotional periods.
2. Longer promotions do prevent churn. That is a GOOD thing. The promotion is fully paid for. That is a GOOD thing. Half of the OEM subs elect to not keep the service….true with a three month promo, a six month promo, etc. Thus, if you can get full price for a longer promo from an OEM, it is a GOOD thing.
>>> Yes, and Sirius actually counts huge numbers of subscribers that are actually unsold cars sitting on dealer lots — as of the end of last quarter, 11% of SIRI’s subs fell into this category (almost a million of their subscribers).
These subscriptions are PAID FOR. That is the goal. To get your service PAID FOR. The longer the term the better. 11% of 7,700,000 is 847,000. You round it up to a million….priceless. By the way, those 847,000 cars were sold in Q3 and Q4.
>>>>This is true — but for SIRI, only Kia, the numbers of which are less than insignificant (in fact, I don’t know that the first Kia with Sirius has rolled off the line, perhaps it has). OTOH, XM is being installed into huge numbers of Nissans, reasonable numbers of Toyotas, and almost every Hyundai.
You need to do more research. For Sirius it is Kia, Nissan, Toyota, Subaru, BMW, Volkswagen, and Audi, etc. For XM it is Toyota, Nissan, Hyundai, Porsche, etc.
In fact, with these types of deals, it becomes difficult to determine their value since we never know how many installations took place. With either Sirius and XM, if 100,000 installs happen in a Toyota, and only 40,000 keep the service, we will never hear about the 60,000 that did not.
>>> It is the same old slop — Sirius counts subs before they’re subs and counts them well after they’ve lost interest. XM employs extremely conservative subscriber accounting.
Slop? A subscription is a term of service that has been paid for. Plain and simple. If someone gave a Sirius or XM Radio as a gift with a 1 year subscription, and the recipient never listens is it counted as a subscriber? The answer is yes. A One year subscription has been paid for.
TV guide comes to my house each week, but no one reads it anymore. Is it still a subscription? Yes, it is.
>>>If you boil it down, XM has nearly the same subscriber lead it held before Stern arrived on the scene (at a 3/4 billion dollar cost).
Selective counting on your part, but if it floats your boat, you can keep at it. You complain about Stern’s cost, and someone else will complain about the GM cost to XM with the highest revenue share. It all boils down to perspective.
All this bantering belongs in the forums. Its so much easier to go back and forth and track the fighting…I mean the conversation 😉
>>> For Sirius it is Kia, Nissan, Toyota, Subaru, BMW, Volkswagen, and Audi, etc. For XM it is Toyota, Nissan, Hyundai, Porsche, etc.
You’re confusing factory exclusives (like XM has with Toyota, Nissan, Hyundai, etc.) with dealer/port installed options (like Sirius has with Toyota). These are two totally different things. Dealer installs are not nearly as productive as we know from empirical results.
>>> A subscription is a term of service that has been paid for.
But not by the subscriber. That’s the important point, because half of those are GONE at the end of the one year period, and Sirius makes every effort to hide this fact (for example, they have flatly refused to disclose their conversion rate, whereas XM is totally transparent in its numbers; furthermore, after Sirius promised for more than a year that it WOULD present conversion rates, it has now changed its mind and said, “Nope, not going to do it” — which suggests their numbers are probably worse than anyone expects).
It is, as you say, about perspective — I just think it important that companies be up-front about their reporting, and if you adjust SIRI’s numbers to put them on equal footing with XM’s, the SIRI picture isn’t quite so rosy.
I don’t believe it is illegal, it is just not very shareholder friendly — since tons of Sirius shareholders (you, included) have been confused for several years about precisely what SIRI’s subscriber #s look like.
No confusion at all. The discussion was when a subscriber is counted. Whether it is a factory install or a dealer install does not matter.
Your rosy and not rosy pictures are as a direct result of the perspective from which you choose to slant things.
At the end of the day, it is cash flow and profits that matter. The picture has not been rosy for either company.
You can make ARPU look good or bad. you can structure a deaql to make SAC look great, but at the expense of a higher revenue share. you can structure a deal that makes subs look great, but at the expense of ARPU.
Get to brass tacks and look at the picture