Sirius XM Reaches Proposed Settlement in Class Action Suit – A Deeper Look
In a move that was widely anticipated, Sirius XM Satellite Radio (NASDAQ:SIRI) has settled a class action lawsuit brought against it. Class action suits that reach a trial date without dismissal are often settled. The settlement, like many sees the attorneys getting the most benefit, but there are some aspects of the settlement that can benefit subscribers to Sirius XM.
The first item to note is exactly what the class is, and to understand that it is the class, and not new subscribers that can benefit from this settlement. If the FCC decision comes regarding the price freeze, The company can raise rates at any given time for new subscriptions. The settlement requires the company to not increase prices until December 31, 2011 for members of the class. Interestingly, it may be possible for that date to change at some point, knowing that currently the company can not raise base rates anyway. Recently one of the FCC commissioners resigned, and that event could put a hold on a lot of what is happening at the FCC regarding decisions. If a price increase could not happen anyway, the judge and/or attorneys may seek an extension of sorts.
The thought of a price increase had the street excited about Sirius XM. This proposed settlement could hamper the happy thoughts of the street in that it mentions the current pricing existing until at least the end of the year. Remember, when it comes to a stock, the facts do not always rule the day. It is perception that oft dictates what happens with an equity. The proposed value of the settlement is $180 million. This will not be paid in cash, but rather in price freezes, etc. to the class.
Another interesting aspect of the proposed settlement is the offer for 4 million who no longer subscribe to re-subscribe without an activation fee. I can already see passionate Sirius XM investors chomping at the bit and having visions of massive subscriber numbers coming into the folds. Think again. First, these people churned out for a reason. They did not like the current price. There is nothing new in pricing for these people, and a $15 credit of an activation fee is not going to get these people motivated. Remember, most in the class will NEVER BE AWARE OF THE SETTLEMENT! My advice is not to get ahead of yourself here. These 4 million will have NO IMPACT on subscriber metrics. Stern renewing had minimal impact, Dr. Laura had minimal impact, and Certified pre-owned cars to date have had minimal impact. A class action suit that no one is aware of will not have an impact either.
The bottom line is that this case will cost Sirius XM $13 million in attorney fees, freeze prices on existing subscribers (members of the class) until the end of the year, and push of any real benefit from a price increase until at least 2012. The bigger news here is that with Meredith Baker Attwell resigning from the FCC, a decision regarding the price freeze could be delayed substantially.
I would anticipate that this settlement will not be viewed as positive, and thus the stock price may suffer. In the conference call Mel spoke of a price increase later this year. That is now off of the table for the members of the class (most of the self-paying subscriber base). Time will tell.
Position – Long Sirius XM Radio
I think they choose its better to be safe than sorry approach. They would have won anyhow but with attorney fees and that FCC member leaving, it probably would the possibility of price increase anyways. So SIRI probably thought they could do it by summer but with FCC potential delay, they just pushed it back like 6 months. Overall, I think it was smart for them to do.
I beg to differ that the stock will react negatively. I think the stock will pop up to have this “antitrust” lawsuit retired. Markets like certainty and this helps. Although it may push back the price increase, the FCC thing may have already done that.
Brandon is saying you are 100% wrong and the class is not everyone. Who is right here? Did Brandon get it wrong again?
I guess spencer is wroong but thats ok … there’s alwahys next time
Kloom….
Try again. I do my research and analysis before I post an article. I do not go back, and invisibly modify my stuff after the real facts are known, nor do I pat myself on the back proclaiming greatness. I simply analyze and write, giving the community valuable, correct, and timely information.
The class is not everyone, but all subscribers from a specific date in 2008 forward. The class covers the bulk of Sirius XM’s self paying subscriber base and anyone who argues otherwise is being foolish. I cover who the class is in this article. If someone wishes to split hairs, and call me out as being wrong, perhaps they should do some research into the subject.
With the bulk of Sirius XM’s subscribers being in the class, I did not think it necessary to spell it out. Further, it is not the class that matters here from an investment perspective, it is the details of the settlement…..sorry to digress
https://siriusbuzz.com/antitrust-suit-against-sirius-xm-gets-class-action-status.php
Readers…..
Apparently this suit is a sore subject for some. For those that must know:
1. I was informed of the settlement by Jud, a reader of SiriusBuzz. I was actually driving and otherwise engaged most of the weekend.
2. Upon reading the email from Jud, I began to research the issue, looked up the suit docs, and wrote a piece based on what I saw.
3. I do not read satwaves,and am not a member there. The information I get is not from that site, and not being a member, I can not read it even if i wanted to.
4. My article took a look at the fact that a settlement came, the fact that a member of the FCC resigned, the fact that the suit has $180 value to it, the fact that Sirius XM is paying attorneys fees, the fact that 4 million members which had churned were being offered a deal to come back, and the fact that the street was appreciating Sirius XM for the possible price increases.
5. I offered my opinion that the settlement may put a damper on the street because price increases will not happen this year. I offered an opinion that the 4 million members of the class who were no longer subscribers would likely remain that way.
6. It appears that some feel that I want to prove them wrong. I never have to do that. This person proves himself wrong all of the time. I have had several people express that this other sites opinion was that the Q1 was bad (because he was expecting well over 1 million subscribers) and the stock would tank to $1.65. These same people told me that evidence of that call was wiped away from the record and/or edited out (I am not sure which). Instead readers were treated to this person championing himself as being right. I guess that is easy to do when the record is being modified.
no body knows exectly what reason is behind the pps hike. but to say mel announced fee hike during cc at the half year was the only reason, i doubt it. did mel get a tip before cc that fcc would prove the price increase in aug? how about fcc proved the price increase, but order until the end of year. a lot of people think that even with fcc’s proval, mel may not increase the price right away. with the price increase inevitable, mel and comany can do a lot of things, 2.0 and holiday reason getting closer, people want to lock in the cheaper price, better hurry, etc, etc,…. i agree 100% with you — time will tell.
While losing 5 months or so of the price increase in itself is not a big deal, but delaying any increase until January 1, 2012, you lose the ability to entice people to pay ahead to avoid an increase until Jan. Any potential net cash flow benefit is pushed off until next year.
Many one or more year contracts expire in December. Those people will be able to renew their contracts as usual without any worry of a price increase until January 2013.
“The bigger news here is that with Meredith Baker Attwell resigning from the FCC, a decision regarding the price freeze could be delayed substantially.”
With the Class Action agreeing to the removal of price caps after 12/31/2011 there is no way the FCC can justify price controls past this date.
We left because BUBBA left!
http://Www.radioio.com a company that pays for talent not 50 mil to some jobber that doesn’t even do a show!
By the way, this will get out to the masses, screw Sirius… They screwed us!
Spencer,
To lament a five month delay, and I am sure Mel already knew that when he talked on May the 3rd, on the scale of the things is straight ridiculous. The FCC will have had six months plus to decide by August and they will DECIDE positively. There are no such laws in this country that could allow them anything different. It is not appropriate for you to make such allegations having NO legal basis as to how the process works. What would make sense in a case like that is a real lawyer’s advice in this field. You are not competent enough to claim such preposterous things like the “absence of a commissioner will delay the process”. How do you know?
V.I….
Mel may well have known, but what he spoke of was the possibility of a price increase THIS year. Analysts and the street loved that news. Now it appears that it can not happen until at least 2012, and that will push any benefits that come with it off until then as well.
To assume that the FCC will decide positive with regards to Siri is a bit early. You need to remember that Sirius XM expressed to the FCC that they would be more inclined to LOWER prices, not raise them.
“As discussed above, Applicants have argued, however, that due to the particular nature of
demand for satellite radio services, the merged entity will have an incentive instead to lower prices.316”
As for the FCC’s authority and legal basis….
“Some commenters submit that the price cap should be longer than three years, arguing that the potential harms will still remain at the end of the period.327 We do not know what the competitive landscape will be like in three years. Accordingly, six months prior to the expiration of the commitment period, the Commission will seek public comment on whether the cap continues to be necessary in the public interest. The Commission will then determine whether it should be modified, removed, or extended.328 We also note that Applicants voluntarily commit to a price cap, not a price freeze, and therefore retain sufficient flexibility to flow through to consumers
any cost savings or other efficiencies resulting from the merger.329”
“328 – Although it is not part of Applicants’ voluntary commitment, we are conditioning our approval of the merger on the Commission’s ability to modify or extend the price cap beyond three years. We also are conditioning our approval of the transaction on the merged entity’s continuing adherence to the other commitments and conditions, as specified herein, which continue indefinitely.”
Sirius XM agreed to this and there is where the legal stance is for the FCC to have and/or exert controls. I am very close friends with several attorneys. I speak to them often. I want Sirius XM to have pricing freedom, but look at this realistically.
Spencer,
Thank you for your response. Let us be specific. Your site is respectful because it trie not to omit details. To make sure, Mel arguably does have a possibility of a price increase THIS year on NEW customers. I also disagree with the claim that absence of one commissioner may delay the FCC decision. Once six months expire, they will have to decide, or sirius will go forward without any decision. And they will have to decide positively because they cannot regulate sirius prices. It is like trying to regulate HBO pricing. You do not like it or do not want it, you do not buy it. This is called free enterprise. No one can blame sirius for any collusion because they are the only ones with a business model that says clearly, “We Charge For Our Service”.
I initially contemplated that the settlement was for the class (almost all of the existing self paying subscribers and anyone who churned out from July 2008 forward), and that a price increase is possible for non-class members that add the service after the settlement. This may not be the case as Sirius stated this in an 8K
“Carl Blessing, a subscriber, filed a lawsuit against us in the United States District Court for the Southern District of New York. Mr. Blessing and several other plaintiffs purport to represent all subscribers who were subject to: an increase in the price for additional-radio subscriptions from $6.99 to $8.99; the imposition of the US Music Royalty Fee; and the elimination of our free streaming internet service. The suit claims that the pricing changes show that our merger with XM lessened competition or led to a monopoly in violation of the Clayton Act and that the merger led to monopolization in violation of the Sherman Act. Earlier the Court dismissed the plaintiffs’ claims for breach of contract and granted our motion for summary judgment as to various state law claims. Additional information on this action is contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.
As part of the settlement, we have agreed that commencing on July 28, 2011, the date on which our voluntary commitment not to raise rates on our basic satellite programming package is scheduled to lapse, through December 31, 2011, we will not: raise the price of our basic satellite radio service, our other programming packages or our internet streaming services; increase our US Music Royalty Fee; or decrease our multi-radio discount. Existing subscribers will be allowed to renew their current subscription plans at our current rates prior to December 31, 2011. Former subscribers who terminated their subscriptions after July 29, 2009 and go to our website will be entitled to receive, at their election, either: one month of our basic satellite radio service or one month of our Internet streaming, at no charge. We have also agreed to pay the costs of providing notice to the plaintiff class and not to oppose an application by counsel for the plaintiffs for reimbursement of up to $13 million of their fees and expenses. The settlement does not require us to make any other cash payments to the plaintiff class or counsel to the plaintiffs.”
and arent most of the people in the class non-subs now anyway?
Gary,
The class is anyone who WAS a subscriber from 2008 forward, not just those who subscribed in 2008 forward. I subscribed long ago, but am a member of the class, as you are likely a member as well
there is an old chenise saying “bad news going thousand miles, good news couldn’t go out the door steps”. remember what we saw news all over the place, when judge ordered the class may proceed? now what you see? none! is this a clue? only time will tell.