Where Will Sirius XM’s Growth Come From
Satellite radio is a wonderful service that delivers unique content appreciated by nearly 20 million subscribers and about 35 million listeners. The service is growing with each passing quarter, but the days of exponential growth are now behind them. Investors who enjoyed the initial runs up for Sirius XM and the run from the $0.05 to to current levels perhaps do not know how fortunate they were to be able to participate in what was a growth story. Yes, there were runs down as well, but the question that should be on the minds of investors is where growth in this company will come from going forward.
I often hear the words of passionate fans of Sirius XM who say that satellite radio is so awesome that it can’t help but grow. I also hear all of the arguments about unique content that is not available anywhere else. I get it. I understand that satellite radio is something special, and that they are capable of delivering a wide range of audio pleasure to listeners. However, I refuse to ignore that progress will happen, and other forms of entertainment will be competing with Sirius XM. So how might Sirius XM grow?
DEEPER PENETRATION IN THE OEM CHANNEL
This is an obvious candidate for growth. Currently satellite radio is installed in about 60% of all cars manufactured. Yes, this a lot leaves room for more satellite radios to be installed, but the issue runs deeper than that. Sirius XM pays for each of those installations and by extension cash flow becomes a factor weighing on deeper penetration. With a 46% take rate on the service after the promotional period the company has to grow here carefully. In addition, the lower priced cars may not present the same take rate delivered by the current cross section. Growth here will most likely be measured and careful. That is the prudent move for Sirius XM.
GO GLOBAL
I hear this argument all the time. The fact of the matter is that this company is not yet mature enough to take on that task. Via the Internet, they already have a global presence, but to manufacture satellites, launch them, get political permissions, and then market the service on a larger scale would be a costly endeavor that Sirius XM simply can not afford now. It should also be considered that there are countries that have perhaps soured on the satellite radio concept after the failure of World Space. I understand the enthusiasm, but the costs would be enormous. Sirius XM is just now getting their balance sheet in order and such an expansion would send things into a literal tailspin at this juncture.
INCREASE PRICE
This is another obvious choice. Aside from the royalty fee, and some modest moves in family plan, etc., Sirius XM has remained at a stable price for quite some time. The company is still under a price freeze that was a condition of FCC approval from the merger as well. That price freeze ends in the Spring of 2011, but will be under review by the FCC beginning this Fall when the FCC will open up a comment period on pricing. There is no guarantee that the FCC will allow a price increase. In addition, other services that cost less are becoming more widely available. Smart phones stream all kinds of content, and speeds on these networks are improving. Yes, I can see the argument that you need to pay for the cell phone data plan, but people are doing that anyway. The consumer perception is that all of these wonderful apps are free. or less expensive. Prices can increase, but the elasticity in pricing that existed only a few years ago is eroding.
What may actually deliver growth is not a price increase but a price decrease. If the service is priced less expensively, and the company can garner a higher number of subscribers, it could have the effect of actually allowing more revenue in the door than at a higher price. This situation would be about higher volume, would take the FCC out of the picture, and would deliver more ears to advertisers on non-music channels. The key for growth with lower prices is that in getting more subscribers on board that deliver higher overall revenue.
SYNERGIES
Most merger related synergies have already happened. Yes, there are many aspects that could still see synergies. Customer Service consolidation is one area. realistically though, the cost savings of the remaining facets are not that substantial. The biggest synergy left on the table would be the consolidation of the Sirius and XM platforms. This will happen some day, but likely it will not happen soon.
EXPANDING BRAND TO BIGGER DEMOGRAPHICS
In my mind this is a key area of growth for Sirius XM Radio. Satellite radio tends to appeal to males between 25 and 44 that make in excess of $60,000 per year. This is not to say that people outside of this range do not use the service, they do. What I am saying is that Sirius XM currently has a narrow focus of appeal that could be broadened to attain growth. In this section I will outline some data supplied by Alexa.com. The data breaks down the demographics of Internet users that visit websites. I am drawing a comparison between Sirius XM and some other popular audio entertainment alternatives.
Age
Sirius XM appeals to the most populous segment of the age demographics (click image to enlarge) and that is good. However, there is a key segment that the company should work on appealing to for several reasons. The ages 10 to 24 are also a large segment, and they are building their brand loyalties now. This segment are the ones using the Pandora’s, Slacker’s, and Last FM’s. If Sirius XM were to become relevant to this segment of the population, they would be able to not only build brand loyalty going forward, but be able to grow as well.
As you can see by the age data from Alexa (click to enlarge image), Sirius XM Radio enjoys a good cross section of users age 25 and up. Interestingly XM Radio has above average demographics for people over 45. This is good. Between the two brands (Sirius and XM), the coverage from 25 to 65+ is good. What we can also see is that the competing Internet Radio services are appealing to the younger audience, as well as the female audience. Both of these ares are segments where Sirius XM could and should improve, and thus grow.
Gender
As stated earlier, Sirius XM tends to appeal more to males than females. While this may seem logical to most at first blush, we can see something glaring in the data provided by Alexa. Internet radio services like Pandora and Slacker have a larger than average appeal to females. Pandora in particular seems to be highly enjoyed by females. Sirius XM has plenty of programming directed toward females. Fro Oprah to Martha, to Cosmo, they would seem to have all of the bases covered. I found it interesting that a company with such strong programming geared toward females seems to have a hard time garnering their attention when it comes to audio entertainment. After thinking about it for a while I began to poll several women about the subject. The answers I got were interesting. On a whole, men seem to enjoy talk radio and news more than women. Women want simplicity, and want that simplicity to be budget friendly. It seems that Slacker and Pandora fit that bill more-so than Sirius XM. This is not to say that Sirius XM should abandon the programming geared toward a female audience. On the contrary, they should keep it and find a way to appeal to those that are using Pandora and Slacker. This may come through more promotion of their tiered services. If Sirius XM can get them into the door, they can market upgrades to them later.
Income
Satellite radio is a subscription service. Subscriptions cost money, and in today’s economy money is tight. Most Sirius XM subscribers come from income levels that are greater than $60,000 per year. According to 2006 data from the government, only 29% of individuals make over $50,000 per year. The segment of $25,000 or more is a larger segment and equates to 36%. The easiest and quickest way to appeal to these people is bring down the price to a level where they are enticed to subscribe. This can happen through tiered services or a simple price reduction to rely on volume. While lower prices may seem counter-intuitive to most, it may actually pave the way for Sirius XM to grow at a rate that will be acceptable to investors. It is a question of household economics. People can not live without their cell phone. Cell phone bills have virtually doubled over the last 5 years, but people willingly pay because there is a perceived need for cell phones. Satellite radio does not yet qualify as a NEED-TO-HAVE service in the minds of consumers.
In looking at the Alexa data we can see that Sirius XM has below average participation from people between $30,000 and $60,000 (click chart to enlarge). By contrast, the other Internet radio services enjoy an above average participation from those same people. It is obvious that there is vast growth potential by getting to a younger audience that makes fewer dollars. Sirius XM simply needs to figure out the best way to maximize the demographics between age 10 and age 60.
In summary Sirius XM can continue to grow, but it has to happen at a reasonable pace that the company can absorb and work with. The growth not only has to be smart, it has to be profitable. Investors thinking of exponential growth at 20% per year need to consider that such growth is unrealistic. Yes, in years past Mel Karmazin has grown many companies, and maintained effective EBITDA growth year after year. That happened through expansion and aquisition. What is left out there for Sirius XM to buy? Those that think outside the box may envision partnerships with terrestrial or HD radio in some way, but that is outside the current scope, and would require an FCC process that may make the merger process Sirius and XM went through seem trivial.
Bear in mind that the company can grow through efficiencies, and many other things, but that the pace of that growth will be how the company is valued. Currently Sirius XM trades at 18X EBITDA growth. There are those that feel that this multiple is justified, and those that feel it is aggressive. Until Sirius XM can demonstrate through concrete plans how they intend to grow, the debate will continue to be waged, and longs and shorts will continue to fight it out each trading day. As an investor in this equity, you owe it to yourself to consider with a realistic approach where the audio entertainment marketplace is and how Sirius XM, as a segment of that space, will continue to grow in a profitable manner.
Position – Long Sirius XM Radio
I always thought a usage marketing campaign would be good. Imagine a traffic jam with the drivers of two cars laughing while the rest are miserable. Imagine a nice sunny saturday morning a married couple having coffee with Jack Johnson playing in the background on the Spectrum. Imagine a radid NFL fan screaming YES and pumping his fist when driving. Or a party where a guest asks what station is that. I’ m sure there are plenty of great scenario’s.
Good article. As an investor, I am no longer expecting exponential growth of 20%, would be nice. The flipside to that is the fast moves down by 20% will hopefully be recovered where the stock trades in the $1.10 to $1.20 range. This trading below a dollar bothers me the longer it stays….
Good article dude. I am defaulting to you for my main “Everything Satrad” source over Satwaves now. Satwaves is more and more all about the writer- you know who.
I found your article very balanced, objective, and well thought out, with sound reasoning that I can get behind. Thanks and Happy 4th.
Ditto here. I’m looking fwd to following SIRI without all of the SW agenda and drama…
peace
yes, I also find your articles very helpful and informative.
Any chance a critical and unbiased article could be written about SXMs marketing department, or lack thereof? I’ve had huge issues w/ the very weak marketing ideas put forth thus far. That “largest ever” marketing campaign last fall was useless.
I’d like to see some interaction between listeners/investors and marketing. Between these groups of people many valuable and motivated ideas could be inacted.
I still do not understand why they do not do what cable does and steam and charge for live music concerts and set up revenue sharing with the artists.Musicians are looking for new revenue streams because of the P2P issue and I would LOVE to hear many shows that i can not get to, either bec they are sold out,far away, or cant get a sitter.The cost should not be prohibitive.What am I missing-seems not only logical, but win win fore everyone involved!
Spencer – You could not be further off base on this one. Believe it or not Sirius is still a nascent media company. Most of it’s huge growth is still ahead and it will come from car sub growth.
The simple fact of the matter is that there are 240 million cars on the road and Sirius only has about 19 million subscribers. Eventually in the years ahead Sirius will become standard and over time with used car OEM penetration will be available in over 200 million cars. Much like the air bag or terrestrial radio it will be a standard buit in feature. It is not stretch to say that satellite radio could have between 50-100 million subs within the next 15 or so years.
Muscle.. I hope you are right.
However, long term I think Spencer is right on track. The tier pricing for the younger age group makes sense. The same holds true for the female market.
If we could add subs even at less per month tier rate it would still add to paying the overhead and increase profits.
As Spencer pointed out so well, gettng young people and females to join the fold is a win win.
The brand loyalty bus is what he is talking about getting them to climb aboard.
Just like most of us have made our decision regarding Coke & Pepsi.
It should be SiriusXM rather then Pandora. But SiriusXM has to market to that demographics to make it happen.
imho
vaporgold
Good article Spencer!!
I have to agree with muscle now that we have the new and used car market to grow subs we should see an increase in subscriber growth as the economy recovers and as the used car program takes off. Sirius xm should offer the ability for each subscriber with internet access to be able to build there own radio station( by selecting their own music), which could link to their car radio’s. This would appeal to the younger crowd and drive revenue growth.
I am not sayi9ng that the oem channel presents no growth. It will simply be slower than people think. The average car in the US is almost 10 years old. 54% of those exposed to satellite in a car refuse it. That model needs repair. All I have said is that the growth that remains in the OEM channel needs to be measured and careful
Spencer,
What you are saying is that you believe it will be slower then what others think.
I disagree with you. I can’t find the article but someone wrote that the maturation of subs is about 20 million. We are almost there now. There is very little growth beyond that number. Churn will be killing us sooner than later. They have to find a way to generate more money with what they currently have. Price increase is the only way. Decreasing pricing on the surface makes sence but I don’t see that happening. Ads scrolling on the sat screen may be another option. Giving the service for free with ads for limited channels is another thought. But bottom line we are almost maxxed out.
Spencer,
As always high quality and as objective write up as it can be. You really stand out with the timeliness and depth of your material. In the meantime, I have a few comments as well.
First, if we understand “growth” as growing EBIDTA and Profit, sirius still has a huge potential through savings from re-negotiating contracts as they come up for renewal to consolidating services and platfroms in both near- and long-term future. This is still a huge field to plough and sow, and as the company keeps growing, they will enjoy more and more negotiating power in view of practically very soft competition. We are talking as few as tens of millions in savings and as much as a few hundred down the road.
Second, natural growth both via auto industry and smart phones market. We should not forget that today auto industry is still at the rock bottom, and the situation will be improving although not as fast as we would like. Smart phones market is sill nascent for siri. We will see very significant growth within the next two to three years in both markets.
Third, if price increase for existing customers is possible, I would treat it as mandatory. Their prices are definitely low for the value of services they provide. A $2 to $3 increase is quite reasonable and I do not understand how FCC can stop it. As to lower pricing, I would implement it for new customers only for a period of 12 to 24 months. A price between $7 and $9, including roalty fees, to brand new customers could be quite attractive. I do not believe that siri’s business model and current cash flow can support a price decrease across the board. There is still no gurantee that such move would help garner new business. I personally doubt that it would. This might be possible in the distant future when they have over 50M subscribers.
Fourth, I hope as ad market improves and sirius keeps growing and becoming more attractive to ad business, their ad revenue could increase substantially and one day meet Mel’s target of 10% of revenue. This is feasible, and I am sure Mel will be pursuing this relentlessly.
And last but not leas. Increased use of their satellite fleet for other services like navigation and/or lease/sale of some of the satellites as siri consolidates its paltforms. This will bring not only significant new income but also new savings.
This is a cursory view of siri’s global growth vistas. I am sure that their opportunities for growth are quite more significant than I can describe in such a short summary.
I keep saying that sirius will turn into a very profitable company within the next two to three years. By very profitable I mean EBIDTA between 1B and 2B and cash flow between 0.5B and 1B per year. I can see this as early as 2012 FY. Let someone disprove me.
All good points. I tend to think we are at rock bottom as far as subs go. This is as close to the great depression as we have come. SIRI XM has survived some of the worst luck any company ever went through. Ford has the right approach, two years for a SIRI sub. Who wants a new bill coming in right after making a major purchase. Think of the old options for an upgraded stereo, air conditioning, automatic, etc. They all just added a few dollars to your car payment or lease.
One addition for adding subs not mentioned was the minority channels. Doesn’t that have the potential for adding a few million?
Nice article Spencer. I’m glad you’re writing more again. You’re one of the most balanced and informed people out there when it comes to Sirius/XM. It will be interesting to see how the pricing issues play out in the next year. I think dropping the price across the board is a non-starter. The lag time between a decreased price and the hoped for increased subscriber numbers would put serious pressure on cash flow and the company’s ability to service it’s debt. I think subscribers are loyal enough to maintain the service, even with a modest price increase.
It would be great if somewhere down the line, Sirius aquired the technology to offer a Slacker/Pandora type service in addition to the satellite service. I think a lot of Pandora/Slacker users also subscribe to Sirius/XM. Having it all offered by one company would be great, and it would be a more premium service than any other internet based company can offer. National coverage, great content, and the ability to personalize your listening experience when connected to the internet, would make a pretty great product.
Thanks again for all of your efforts.
An extremely poor article. Worst I have seen from Spencer other than the Facebook nonsense he wrote.
The numbers don’t lie. Eventually Sirius XM will be available in most if not all of the 240 million cars on the road as Sat radio becomes standard in cars. There is absolutely no disputing that Sirius growth has only just started as it hasn’t even been available in used cars until recently.
I remember laughing with Spencer about a year or 2 ago when another writer said Sirius growth will stop at about 20 mil subs with absolutely no consideration given to the fact of 240 million cars on the road Read it – 240 MILLION CARS. Indisputable fact.
I did nit state that there is no growth in the OEM channel. That us where radio is prolific. What I am saying is that OEM channel growth through deeperpenetration has to be measured. Installing radios is not cheap. My points are that they increase their appeal to a wider cross section of the population. If they do that, they will improve on the rake rate in the OEM channel. Sure there are 240 million cars on the road. I do not dispute that. Satellite radio also appeals to less than half of those exposed to it. That is another fact. The average age if a car is 9.7 years, thus there are a lot of cars without satellite.
As to social media, we will have to agree to disagree. What I can tell You is that it is very important to sirius XM, and they rely heavily on it and will continue to rely on it
Just as every other company in the world uses Facebook. Completely inconsequential. A non-topic unrelated to radio.
The average time it takes for a car to get to a second owner is between 4 and 4.5 years as has been mentioned by Jim Meyer and numerous concalls.
Sirius will be available in 70 mil cars within 5 years. It will be available in most if not all of the 240 million cars on the road within the next decade or 2.
The fact is Sirius is a nascent media company that just turned EBITDA positive last year. The growth has just started. We are in inning #1.
Of course if Howard chooses to compete with Sirius than everything blows up and the game is over before it started. Mel shouldn’t let that happen. I am confident he will do the right thing.
The take rate of 40-50% is outstanding and like nothing I have ever seen in any media company ever. I expect it to drop substantially in order to get to my 50-100 million subs. You read that right -take rate % dropping in order to get to that number. Simply because second and third owners have less expandable income.
The take rate is applying to new car sales. My point us that the company needs to improve on that by appealing to a wider demographic. It is that simple. The take rate on cable is substantially higher than 46%.
Cable TV, which happens to be the most successful media business in history, has a much smaller target audience – 100 million households as compared to 240 million cars for sat radio. Also cable TV competes with sat TV.
The key % is going to be the used car conversion rate. There are only 10-16 million new cars sold each year with 240 million cars on the road. Used car conversion will never be up to the percentages of new car conversion because of 2nd and 3rd owners having less expendable income. But it doesn’t have to be 45%. Even at 30% of all cars on the road you are looking at a potential of 72 million subs 10-20 years out. I do believe that sat radio will go standard eventually.
I just came across this quote from a Chrysler excecutive from SPENCER’S POST LAST WEEK
“I have over 350 cars in stock and in-bound. Of that I only have two that do not have satellite radio….I really wont order a car without satellite radio because it is that much of a demand…It’s getting to the point where it is simply going to become standard equipment within the next year or so….Like air conditioning is virtually a standard feature on cars sold today.”
Those 240 million cars are where the growth will come from. The number is a fact and cannot be disputed. It is as plain as day. It is certainly not out of the question that Sirius over the next decade or 2 can top out at 50-100 million subs because of this fact.
SIRI could benefit from a longer free trial period. The average person needs at least 3 weeks to form a good habit. A one month free trial would be much better to help form an addiction to SIRI. Then, provide an option to extend the free trial for a second month for just $1, with an automatic enrollment in a one year subscription unless they cancel.
Good article, but Im still wondering how a company with some much potential that post prfit in the millions has a stock price of less than a dollar.
I’ve have researched all the posibilities and the only one that makes sence is that This companies stock is being manipulated by larger institutional investment companys. It seems that any time they need to show profit on thier books, this stock get shorted at volumes unmatched by any most any other stock out thier.
Are you kidding? Women will spend $500 on a purse and several hundred on shoes but prefer pandora/slacker over siri because of price of $12-$15 a month.
Dont forget the superior sound quality of Pandora and Slacker… to go along with the price. If Sirius XM wants to really take advantage of the mainstream they are going to need a hot portable product and to improve the sound quality of their music because it is sub par.
what everyone seems to be forgetting is that all these new subs are NOT necessarily paying subs but a ‘promotion’ in one form or another. Be it free trial for period of time, or the OEM paying up to 2 years for it. It’s built in growth until the OEM’s decide to focus more on other options.
What sirius xm needs is better marketing.
In a word, their marketing department SUCKS!
My wife said it best after I told her she could have been using xm in her car during that 2 week trial promotion…she said, ‘I didn’t even know it was happening’.
She’s right, only those of us reading these articles online knew they were offering it. The emails sent to past subscribers are now forwarded to those subscribers junk mail or automatically deleted because why would they want to receive the emails when they no longer subscribe?
We MUST HAVE BETTER MARKETING !!!
also, we cannot rely soley cars. The general public does not realize units like the stilleto and s50 are the ‘ipods’ of satrad. I’ve had several radios over many years and the only one I care about keeping is the s50. Remote control, save songs, pull it out of the car and play it at home…that’s what will keep subscribers…playing it in the car AND at home.
our best buy still has large black ‘boxed’ displays for sxm yet there is nothing on them. this has been so for almost 3 years now! These displays take up at least 30 sqft and sit useless right next to their car radios.
again…marketing department SUCKS !
Pretty simple they will have to raise prices. Still strongly believe the end point is max $2.50 a share… minimum $1.75. Malone buys and Mel sells right after they announce a price increase. Mel and Malone can rationlize the price and its over. At over $2 a share Mel leaves with an abslute fortune of over 200 million.
Spencer,you know for years I’ve been for more lower tiered pricing & even some type of “close” to free format tied in w/ program sponsorship. I know putting the radios in new cars cost money, so I think the best way to offer this is thru the 20 million idle radios that are dash board ornaments. My case gets stronger by the day as the IDLE radio market grows. It’s marketing 101! If Mel can’t figure a way to put these little potential disciples to work to draw in the people that don’t make 60k + then he doesn’t see the forest due to the trees. I think the segment of most importance is the 10 to 24 year olds. Get them on board while they are young and create brand loyalty so as they get to the point in their lives when they are making 60k+ they will be able to afford a higher tiered subscription. My blood boils just thinking of the fact that these idle radios are bought and paid for and Sirius Xm lets these 20 million radios sit idle. The young people must be brought in to Satellite radio fold! Make it affordable to get them on board (with a limited format), this will also grab more Women who I believe are more cost conscious than men when it comes to this type product. Not only does it create brand loyalty,it will make Sirius Xm more iconic, it will help stifle the competition and generate more revenues. For those who think it will water down the brand, get over it,it will not effect the higher tiered subs because they will get what they paid for, more content. “Build it and they will come”, MEL,YOU BUILT THE RADIOS, LET THEM COME”!!! I’m going to Manhattan and climb to the top of the Sirius Xm building and threaten to jump if they don’t get these radios fired up I’m going straight down to the 1st floor and jumping (I have fear of heights). As I have said in the past, if they announced some well thought out new lower limited tiered programming you would see the stock jump.
Everyone misses Sirius’ BIGGEST potential market, one where their product has best advantage: THE OCEAN. Every naval ship, coast guard merchant, fisher, ATON, oil rig, science station etc would be VERY interested to have Radio 300 nautical miles out to sea. You can’t get that otherwise. Not to mention america’s greater than 10,000,000 seaboard recreational vessels! If SIRI makes a marketing push here, cuts deals with West Marine and other oceanic suppliers they are in for a VERY good harvest.
I’ve never read an article or release from Sirius pertaining to the potential of at-work and retail location subscribers. The product is perfect for at-work listening or for listening in retailer locations, restaurants, health clubs and so on. There are millions of potential subscribers and the cost is minimal for a business that would like to provide their customers and employees with a variety of quality listening choices.
What is Sirius doing to penetrate this market?
Holy Toledo! Spencer did you see today’s sub numbers??
Like the song says – We’ve only just begun……..
You couldn’t be more wrong. This is a nascent media company.
Muscle….
The point of the article was where growth would come from. We all know that the OEM channel is the “vehicle” of the growth. Investors and the company need to think beyond that. If the company adds 2 million subs this ye it is 10% growth. They are guiding to 6% subscriber growth. They can get beyond that with broader appeal. That is the point. Ithink youread the article with too narrow a focus
The days of hypergrowth are ahead of us, not behind us. The company just turned EBITDA positive last year and is just now beginning to penetrate the used car market which is much larger than the new car market. In fact it is 2 or 3 fold larger each year than new cars sold.
It is a nascent company. We are in inning #1. It just started Spencer. You’ll see.
Muscle….
Define hypergrowth. I write about tracking used car sales and you slam me for it, yet on this article you speak of that segment as the future. Again, the company will grow through the OEM channel as the platform. I get that…we all do. Appealing to a bigger cross section and having a proper price point is the key. What annual subscriber growth rate er year do you see as reasonable over the next 10 years? Growth will happen, it is just a matter of how much and how fast.
I define hyper growth as growing EBITDA at a pace close to Infinity Broadcasting’s growth in the 90s. Well over 20% per year. Infinity grew some years over 50%! I am not sure Sirius can match but Sirius just turned EBITDA positive last year. It has just now started to grow! Inning #1
As I have told you many times Spencer, I slammed you for talking about used car penetration numbers instead of conversion which is what this is all about. Used car penetration lags new car penetration by 4- 4.5 years. Thats when it gets to a second owner. If they can get around 30% conversion on used cars that would be unbelievably great!
With EBITDA and used cars just beginning I would say we are not only in inning #1 but the first batter is just now walking to the plate.
Muscle….
OK….20% per year. Lets start at $600 million for 2010:
2011 would be $720 million
2012 would be $864 million
2013 would be $1.036 billion
2014 would be $1.244 billion
2015 would be 1.492 billion
You are expecting the company to MORE THAN DOUBLE EBITDA in the next 5 years.
Infinty grew through acquisition (you should be well aware of this). Sirius XM does not have that liberty at this point. There are no other satellite radio companies to buy. They will not attain this type of growth with their current pace on OEM’s. They could expand through Internet, but that would be changing the equation, and to date they have not really concentrated on this area.
Buy your own numbers you say it takes almost 5 years for a used car to get to the second owner.
You yourself say that the cell market is not a real factor, so I ask you how they grow EBITDA to a level of 20% on OEM growth of 5% or less per year. The used car market helps, but does it get to the levels needed for growth over the next 5 years?
That is my point. In order to grow at higher levels they NEED to appeal to a bigger cross section of the population.
I do happen to like you a lot Spencer. I don’t like most everyone on the internet. I just disagree with you. This is certainly not personal. I think you know that.
The only way to learn is through disagreement not through agreement. It is very good to disagree.
Oops missed your last one.
YES! I expect high single digit annual revenue growth and OVER 20% EBITDA growth for the next 5 years. I think your numbers are conservative. I would even say maybe 30% annual EBITDA grwoth. I think this is Infionity all over again and I believe they can do it without acquisition. It’s about EBITDA. They turned EBITDA around by about $1 Billion from 2008 to 2009 with no sub growth! Believe it or not!
Also Spencer I expect the internet to become a revenue factor for Sirius revenue once Howard goes on the apps (of course everything depends on Howard).
You should really start contemplating what Sirius EBITDA will be a decade or two from now with 50-100 million subs.
72 million subs is 30% of cars on the road. That number when you really dig deep into potential and execution is probably an underestimate.
Spencer, why do you even entertain this nitwit? He is an out of touch, know nothing, pumper of the company (20% EBITA????). Not to mention an asshole to everyone on every radio website/blog I read.
Smart man – Name one company in the last 2 decades before he started running Sirius that Mel didnt grow EBITDA at 20% plus per year?
From Infinity Broadcasting to Westwood One to CBS to Viacom, name one.
Is it my fault that none of the sat blogs followed media or Mel before Sirius existed?
Now begs the question –
We talked about new cars, we talked about used cars, we talked about standard, we talked about 240 million cars. What we didn’t talk about here was the Xmas retail lineup for 2010. Do we find out in August like last year? I am salivating.
I’ve been using Sirius product since 2004. I have 3 radios, 2 are used in cars (1 XM, 1 SIRIUS), one in the house. The additional subscription has gone from (estimating here) $6/month to $12 a month. I can’t get a discount on the XM because “there systems haven’t merged yet” so i’m paying full price.
My point is, if they raise it again, i’ll be dropping 2 subscriptions. I’m paying on average over $150 per radio now so it’s getting expensive. There have been recent price increases already associated with the recording industry. Increase it again and i’m gone.
I still maintain that if the quality was actually different than commercial radio many people (like me) would promote it. As it is, their rule of not playing more than 2 songs in a row without an annoying jungle/bumper or mindless DJ chatter makes the service not much different than what I can get on FM. To many, SirusFM is a joke.