XM Reports Q4 And Full Year 2007 Results
XM Satellite Radio announced operations results today and is conducting their conference call as we write.
Key Notes:
– Revenue of $1.1 Billion
– Subscribers of 9,027,000
– 3.5 million OEM installs in 2007 – over 1,000,000 installs in Q4 alone
– Lawsuits with labels over Inno settlements costs of $13,000,000
– Q4 revenue of $308 million
– Q4 loss of ($239) million
– Full year loss of ($682) million
– Merger and settlement charges were ($86) million including $36m To sound exchange – $30m to merger
– Gross subscriber additions of 1,130,000 (766,000 OEM and 364,000 retail)
– OEM conversion rate of 53.9%
– Churn rate of 1.72%
– ARPU of $11.71
– SAC of $87 – CPGA of $140
Position – Long XM
And finally, XM sets the record straight about subscriber #s — if XM counted subs the way Sirius does, XM would be reporting 10.2M subscribers.
Hopefully, this provides a little perspective on the truth about the companies’ growth rates.
Frontmed because the deals they are in, XMSR cant and SIRI has to. What I did not see is any FCF positive for the quarter for XMSR, compared to SIRI being FCF positive for half of 2007. What I did see so far is XMSR losing more money in the quarter and for the year then SIRI (XMSR (239) mil., SIRI (166) mil. for the quarter, XMSR (682) mil., SIRI (565) mil. for the year). It is amazing the anaylst and news releases covering both do not look at the subcriber count the same way you do. In their reports they consistantly say 8.3 mil. subcribers without putting in the 900,000 still on dealer lots as a side note.
John, these “parking lot subs” is a very important number. They are not comparing apples to oranges here, they are talking the same style contracts that Sirius holds. The way they talked about it in the conference call which I listened to live, they said basically “If we count prepaid subs in cars that have not been sold yet, also known as parking lot subscriptions, we would have approximately 10.2 million subscribers” and then talked about how that would also slightly drop their ARPU (which is bad), but significantly drop their SAC and CPGA (which is very good).
The XM conference call was definately a very good one, with some really good numbers reported. I was plesently surprised.
Newman I understand what you are saying but according to the SEC, SIRI is required to count them because of the deals they have made with auto industry, and XMSR cant because the deals they have made are totally different. The deal XMSR has with its OEMs make them nonsubricbers until the trial period is over or at least until the car is sold. Siri is Paid by the auto industry for those cars on the lots, XMSR is not. Reguardless if the money originally came from SIRI or not.
>> I understand what you are saying but according to the SEC, SIRI is required to count them because of the deals they have made with auto industry
Absolutely, patently false. You simply do not know what you’re talking about.
SIRI’s decision to count nonsubscribers as though they were subscribers is wrong and nobody who is vaguely familiar with financial reporting would suggest otherwise. It is allowed only because there are no standards for reporting these data.
It has absolutely nothing to do with the prepayments. Nothing to do with GAAP or SEC. Nothing to do with making it easier to account for them (which it isn’t — they basically have to maintain two sets of books to handle the revenue accounting on these).
It has everything to do with SIRI’s efforts to overstate its growth. There is no other conceivable justification for it.
It would be wrong for XM to count subs in that manner as well. But when the only competitor in a two-player industry is using a bogus subscriber count, it totally makes sense for XM to do as they have — “We choose use conservative subscriber accounting, but if we did it like our competition, we would have another 1 Million subs”.
For Clarity….
XMSR
They count a subscriber for which they receive payment. They begin counting when the payment is received.
They do not count subscribers for which they do not receive a payment. Toyota and Hyundai are an example of this
SIRI
They count a subscriber when they receive payment. They begin counting when the payment is received. for Sirius this is when the car rolls off the assembly line for the bigger partners in their deals.
They do not count subscribers for which they have received no payment. Toyota is an example of this for Sirius.
The Sirius method carries a negative impact on ARPU. By example, if the 900,000 were to be backed out, ARPU would jump to $11.26 ($250m/7.4m/3 for quick numbers)
If XM were reporting 10.2m subs, then their ARPU would be $10.07. ($308m/10.2m/3 for quick numbers)
At the end of the day what matters is the bottom line, cash flow, and having deals that enable you to get to profitability.
What kind of dollars have to be invested into a GM sub? a DCX sub? What kind of dollars do you get in return from a GM? A DCX? What kind of revenue share do you have to give a GM? A DCX?
Millions of subs that make you nothing is not better than 1 that does.
P.S. I liked what XMSR had to say also. I have considerable amounts of money in both (now more so in SIRI then XMSR sence Mel came to SIRI). But I feel SIRI to be in the better positioned to move forward if a merger does not happen. Every quarter for the last 9 they gained major ground. What I find most compelling is SIRI has the majority and not a small majority but a big and growing bigger one of the retail market, where people have a unabated choice.
>>> They count a subscriber when they receive payment. They begin counting when the payment is received. for Sirius this is when the car rolls off the assembly line for the bigger partners in their deals.
True, but still misleading — since they count the subscriber, on average, 3-4 months before it becomes revenue producing.
The DCX deal involves less revenue share than the GM deal, but far more than some of XM’s other deals. As does SIRI’s deal with Ford.
Nobody knows, but over time and over all product lines, they are probably about the same — perhaps a 25% average revenue share.
For Comparison…
At the end of Q2 2007 XM had 8.25 million subs and generated $277m in revenue. Implied ARPU of $11.19
At the end of Q4 2007 Sirius had 8.3 million subs and generated $250m in revenue. Implied ARPU of $10.05
If you were to back out 900k subs from Sirius, the implied ARPU would be $11.26. Of those 900,000 subscribers on “dealer lots”, all of them have been paid for already. The money is seen in the deferred revenue section of the filing. Once a consumer buys the car, and the contracted service is being delivered, the money moves from deferred revenue to revenue at the rate that the contracted service is being delivered.
The companies are on very similar revenue paths with neither making anything material over the other in terms of proportional revenue.
Another thing to point out though Tyler, is if Sirius Backed out those parking lot subs, their SAC and CPGA would go up dramatically.
But as you say, it is the bottom line that truely counts. XM had a very nice quarter and year from the looks of it, as did Sirius.
Of course this means absolutely nothing, because nothing short of a merger approval will make the stocks jump significantly. Financials dont matter at this point.
It depends on what you call dramatic. The subsidy at this point for a DCX sub is unknown. It used to be about $150, but that was at least a generation of chips ago.
This is where deal structure is so important.
If you are going to pay $150 as a subsidy, but get back $150 in guaranteed subscription payment, then your net is $0. In the end, half of those will renew the service, but you are already “whole” before that happens. Meanwhile, when you get back the $150 you can reinvest it into another radio in another car.
If you pay $100 in subsidy but get back $20, then you are still in the hole by $80. In the end half of those will keep the service but you need that half to be subscribers for 12 months to recoup your $80 and then you are “whole”. You only get back $20 to invest in the next car and need to come up with another $80 to get another radio installation.
I would take the first deal structure over the second if given a choice.
FrontMed SIRI is required to count them as subcribers, they dont count the revenue until the car is sold. SIRI is paid for those on the lot cars XMSR is not. It would be wrong for XMSR to do so, now I have no doubt if XMSR had the same deal with the auto industry that SIRI does XMSR would be counting them also. But once again they cant because they dont.
But lets get back to the FCF positive, were is XMSR’s, FrontMed.
“We have been vary consistent with the way we count our subcribers. When Sirius receives payment, they are counted as a subcriber. The revenue is not counted until the car is sold. Sirius has followed all of SEC rules and regulations. It is vary simple if Sirius gets a subcribtion fee it is considered a subsciber.”
Forbes, Mel Karmazin
Technically, it IS the structure of the deal.
XM has a few deals where they get paid for the subscription by the car dealer/manufacturer, just like Sirius does. The difference is that they get paid WHEN THE CAR IS SOLD, as opposed to When the care is MADE.
Would you expect XM to be FCF positive after the large hit that XM had to take on the lawsuits with the recording companies, PLUS having to expense the merger fees? I am not surprised at all that they did not come out cash flow positive, although I really didnt look at the metrics too closely yet.
Newman The fact of the matter is they did not have any FCF positive. They ether lost or settled because they owned the opposing party the money. That is money, if paid out when they were supposed too would not have now anyway. XMSR adjusted operating loss got alot bigger, while Sirius’s was able to cut theirs. This is why Mel is such a asset to Sirius, he was known through out the radio industry as a cost cutter.
>>> FrontMed SIRI is required to count them as subcribers
Wrong, wrong, wrong.
They CHOOSE to count them, inappropriately.
This is obviously a subject you know nothing about. IF you want to discuss something you know about as though you do, fine.
re: Cash flow.
>>> Would you expect XM to be FCF positive after the large hit that XM had to take on the lawsuits with the recording companies, PLUS having to expense the merger fees?
The real problem is that a lot of people are confused about what is meant by “cash flow”. Because these companies, particularly SIRI, have conditioned shareholders to think in terms of cash, many do. However, cash is, in no way, a measure of financial performance and basically is unimportant unless you don’t have enough.
What matters is net income. Always has been, always will be. The cash flow misdirection really gained a lot of energy when Sirius knew it was looking at a 1 billion dollar loss for ’06, and literally quit talking about earnings, changing the conversation to be about cash. The problem, of course, is that you cannot measure earnings with cash. Then, conveniently, when the 1.1 Billion loss was reported for ’06, they declined to give further cash flow guidance.
Cash only matters in the context of whether you can meet your obligations. This is where SIRI faces a serious problem — they do not have sufficient funding to do what they need to do going forward — launch satellites, cut a new deal for the 2nd term with Stern, etc. And they don’t have liquidity in place to take care of these matters. XM, OTOH, has enough line of credit to get to a point of cash self-sufficiency.
When you see people talking about how great is is Sirius had FCF for Q4, you instantly know they have no idea what they’re talking about, because no competent analyst of the situation would consider it to be important, unless it represented the beginning of a long-term trend, which in SIRI’s case, it does not. These are people who just don’t understand the issue.
>>>SIRI is required to count them as subcribers, they dont count the revenue until the car is sold. SIRI is paid for those on the lot cars XMSR is not. It would be wrong for XMSR to do so, now I have no doubt if XMSR had the same deal with the auto industry that SIRI does XMSR would be counting them also.
FWIW John, the majority of XM’s OEM installs ARE paid for by GM/Honda and whoever else PAYS XM revenue on the promo period. The others, Hyundai, Toyota, Nissan etc, where XM does not get paid — cannot be counted.
Technically, since XM gets paid for the promo sub from GM and Honda, they could account for them just like Sirius does — assuming that it is proper for both to do so. I’m reserving judgement on this right at this time… but XM could do this too.
The fact is GM, Honda and the others that PAY XM revenue, manufactured approximately 1 million XM vehicles in Q4 last year (my estimate) — the remaining 255k came from the “newer” OEMS (Toyota, Nissan, Hyundai). I do not believe that those should be counted since there is no revenue coming from their promo periods. However what about the other 1 million where XM gets revenue JUST LIKE SIRIUS DOES? Sure it’s not the same amount (12 months) — but they are paid nonetheless, just like Sirius.
After the merger, this WILL come to a head… only one accounting method will be used. Either Sirius will no longer count the unsold vehicles on the lot, or they will begin to count the XM unsold (and prepaid) promo subs too. I suspect they will begin to count the XM unsold pre-paid vehicles. Again, for example, I do not believe that the full 1.255 million should be counted, like Nate said — but certainly the amount that they are paid on, which I believe to be at least 1 million currently.
———–
Tyler, you said… “They count a subscriber for which they receive payment. They begin counting when the payment is received.”
I know you know the details, so I’m assuming this was an unintentional mistake here… XM doesn’t count them when they receive payment — they count them when the “promo period” is activated as the car is sold and driven off the lot.
Like Sirius, XM has already received payment of the promo by that time. So XM “could” count them too.
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FrontMed is a lun who has no clue what so ever of what the making of a great company is. He turns positives into negitives when they go against his arguement. As proof ask anyone in finance if it is better to have a company generating FCF positive or not to be. You will find the answer to be, it is better to have a company FCF positive then not.
He also has no glue what constitutes a subscriber, the fact that a radio is in a car does not make it a subscriber. As a matter of fact it cannot be considered a subscriber until money (or at least the commitment to pay) has been paid, that is the one and only condition that needs to be met. Something XMSR cannot do with its deals with the auto industry and why they cannot claim them as subscibers, and why SIRI can. It is also why the SEC would be investigating them for claiming subscribers they do not have. Under FrontMed assertion both companies can claim an extra 15 milion subscribers, and not have to worry about the SEC investigating them for claiming something in there financial statements that was not true. FrontMed needs to get a dictionary so he doesn’t look like a idiot, who has no clue about what he is talking about.
Homer they dont get a dime until the car is sold and the promotional period starts.
Sorry about the cut off, the wife needed me. Homer, they dont get a dime while the cars are still on the lots. If a merger happens, SIRI would have to have the same agreement with XMSR’s auto manufacturers that SIRI has, other wise they would not be counting the cars still on the lots. Sirius will only count cars as subscribers they get money for.
>> I suspect they will begin to count the XM unsold pre-paid vehicles.
Homer, I actually think they will go the other way.
SIRI’s subscriber counting is 100% a result of wanting to overstate their growth to allow them to claim more credibility in the marketplace. And it worked like a charm.
There is no rational basis for them to count unsold vehicles. The only real argument they have given supporting this obviously incorrect treatment is that it was easier since the OEM activates the receiver. This, of course, was a rather obvious lie by Frear, since it effectively requires them to track additional information about each subscriber.
When this inappropriate method was first disclosed (by Jacoby, if memory serves), it was, to me a shocking development. As a young CPA, I learned that the attest function makes you responsible not only for the GAAP and financial accounting data, but for the notes to financial statements and ancillary data provided in the report. The CPAs cannot disclaim responsibility for what amounts to a blatant material overstatement of the subscriber #s, even though they are not his #s.
These days, the CPA business isn’t what it used to be, and the permissive attitude of SIRI’s auditors is absolute proof of it. When I was practicing and performing audits of my [much smaller] clients, there is no way in hell I would have knowingly signed an audit report on something like this — those numbers would have been corrected or there would have been a qualified opinion.
>>>Sorry about the cut off, the wife needed me. Homer, they dont get a dime while the cars are still on the lots.
John, this isn’t exactly correct. The OEM’s are invoiced at the time of activation… this was stated many many many years ago.
GM invoices XM monthly for “New Enabled GM Vehicles” — giving XM the VIN and ID number of the XM radio… XM then invoices GM back for the service. This is all done BEFORE the vehicle is sold.
XM’s OEM’s began activating the receivers at the factory (at the time of manufacture) at least 4 years ago.
“Promotions for free or discounted service are treated as a reduction to revenue during the period of the promotion. Consideration received in advance of revenue recognition is recorded as deferred revenue.”
XM’s deferred revenue increased by $40 million in Q4… don’t even try to tell me that it all came from that scary retail gross that XM had in the quarter.
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>> As a matter of fact it cannot be considered a subscriber until money (or at least the commitment to pay) has been paid, that is the one and only condition that needs to be met.
Actually, this statement is 100% incorrect.
“Payment” is not an appropriate criterion for deciding whether a car constitutes a “subscriber”.
The REAL test is whether the subscriber revenue has been “earned”. That is, has Sirius done what it is obligated to do in order that it can recognize revenue from the subscriber. This, NOT payment, is what matters.
It is really same problem as people using cash to measure financial performance. Payment can occur at any time — years, or in SIRI’s case, MONTHS — before it is earned.
The argument is ridiculous. It is obvious, when Sirius receives payment for 12 months of service, that the subscriber SHOULD NOT be counted for 16-17 months.
I don’t know how you guys make this argument with a straight face.
Frontmed
1. DCX is the 1 year sub program. Why lump all fords into that category when they are 6 months on average?
2. You are adding up to 5 months to the term. that represents 150 days! Do you know what the average days to sell is?
GM – XM gets paid for 2 months the car is counted as a sub for 4 months (1 month post promo for marketing efforts) – paid for 50% of the time it was counted.
DCX – Sirius gets paid for 12 months. It takes 3 months to sell the car and add a month for marketing. 16 months. paid for 75% of the time it was counted.
Ford Sirius gets paid for 6 months. It takes 3 months to sell the car and a month for marketing. 10 months. paid for 60% of the time it was counted as a sub.
By your logic, when XM receives a payment for two months should it be counted as a sub for 4 months? Just seeing how equitable you are about this.
Personally I find that SDARS receivers being installed in cars and SDARS capable cars on lots ready to sell is a good thing.
>>> 1. DCX is the 1 year sub program. Why lump all fords into that category when they are 6 months on average?
Most of SIRI’s OEM installs to date are DCX. But once Ford ramps, some will be less than 16-17 months and thus the misrepresentation will be less, but still material.
>>> 2. You are adding up to 5 months to the term. that represents 150 days! Do you know what the average days to sell is?
Of course I do. I have corrected you about this many times. From the date of manufacture to the date of sale will average 3-4 months (remember, these vehicles sit on OEM lots are are in transit prior to arriving at the dealer lot). I am assuming, correctly I believe, that Sirius takes a month or so to disconnect (I haven’t had an OEM Sirius unit in a while, but from what I’ve heard, they are providing a bit more grace period than that; at any rate, it is the ballpark of 0.5-1.0 months).
>>> GM – XM gets paid for 2 months the car is counted as a sub for 4 months (1 month post promo for marketing efforts) – paid for 50% of the time it was counted.
Actually, XM cuts of OEM subs within 1 week of expiration. I have two new cars that are XM/OEM equipped and both were cutoff on schedule. XM does, however, provide 1 free month of service that they do count as a subscriber that precedes two months paid by the OEM. XM does, however, disclose extensively the data surrounding these subscribers, INCLUDING separately stated ARPU figures.
>> DCX – Sirius gets paid for 12 months. It takes 3 months to sell the car and add a month for marketing. 16 months. paid for 75% of the time it was counted.
The question is one of materiality, something you may not know much about. Please don’t roll out percentages in an effort to make the situation look better. On any given day, Sirius is overstating their subscriber count by 11%. We know that. On that same day, XM is UNDERSTATING its subscriber #s when compared with Sirius. There can be no argument about this.
>>> By your logic, when XM receives a payment for two months should it be counted as a sub for 4 months? Just seeing how equitable you are about this.
It is a question of materiality. The misstatement by XM as a convenience is totally immaterial. The INTENTIONAL misstatement by Sirius is beyond material and pretty close to lying.
>>> Personally I find that SDARS receivers being installed in cars and SDARS capable cars on lots ready to sell is a good thing.
Sure, I do, too. I just don’t think they ought to be counted as subscribers until the car is sold to its eventual owner. It is an intentional overstatement of SIRI’s subscriber #s.
Frontmed….
With all due respect, you stated, ” The argument is ridiculous. It is obvious, when Sirius receives payment for 12 months of service, that the subscriber SHOULD NOT be counted for 16-17 months.”
I asked the question that do you feel the same way about XM reporting a subscriber for 4 months when they receive payment for two months. It was a simple question and you are dancing around answering it.
The ARPU for these XM subscribers is $5.97 per month. This represents less than half of what the ARPU would be with full payment. Full payment would be $12.95 per month. XM is getting 46% of full revenue for these subscribers. Thus, is the average that they shut off the radio within a week? Somewhere something is not adding up. Remember that the numbers here are pretty cut and dry.
Do you consider the lack of counting these subscriber in the churn number to be an issue of materiality?
For readers materiality is, “Information is material if its omission or misstatement could influence the economic decision of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful.”
Sirius discloses the number of such subscribers. Further, the impact of these subscribers on ARPU is reflected.
You state that XM is understating their numbers with regard to Sirius. How can they be understating if the method of the deal does not allow these vehicles to be counted? Remember, you stated that XM’s OEM partner pays the second and third month after the car is sold. When are you stating that XM is being paid? If you are asserting that payment comes when the OEM is footing the bill (months 2 and month 3), then there is no way that XM should count the subscriber prior to that time according to accounting standards. If XM is being paid earlier, then they can count it.
You say that the “misstatement” by XM is not material. By what rational do you arrive at this conclusion? How convenient is it? Is it convenient to count it as a sub? Yes. Is it convenient to break out subs in promotional periods? No. Is it convenient to break that number away from the overall number to arrive at a churn calculation that excludes these promotional subscribers? No
The percentages are what they are. They do not make a situation look better or worse. They show what the situation is.
Would you complain if the DCX subs were counted when sold for 1 year, but DCX only had to pay for 8 months? For a long time you maintained the position that the longer deals were an intentional way to keep numbers good. Is your stance still the same on that now that XM is doing 1 to 3 year deals?
Again, I am not bashing one method or the other. They are both fine by me, as long as we know how things are being done. Can it make comparisons more difficult? Yes. Does it really matter? No
Homer, It is my contention that given the deals XMSR has with their OEMs they dont get anything before the car is sold. That if they had the same deals Sirius has they would also count the cars that are on the lots. My problem is that FrontMed thinks Sirius is some kind of monster and XMSR is the White knight. Like you have said, if the merger happens we will see. I believe though the combined company will do things the way Mel K. wants them to be done. We will not see any of the cars still on the lots with deals like XMSR has, being counted, unless those deals can be changed to something like SIRI has with it’s OEM’s now. I feel the same as Tyler, in that I dont think the way ether company counts is subcribers is in the wrong or in a ill-moral way.
Oh FrontMed get a dictionary and look up subsciber, I am 100% correct.
Frontmed….
From XM’s SEC Filings:
“We consider subscribers to be those who are receiving and have agreed to pay for our service, either by credit card or by invoice, including those that are currently in promotional periods paid in part by vehicle manufacturers, as well as XM activated radios in vehicles for which we have a contractual right to receive payment for the use of our service. Radios that are revenue generating are counted individually as subscribers. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments.”
>>> I asked the question that do you feel the same way about XM reporting a subscriber for 4 months when they receive payment for two months. It was a simple question and you are dancing around answering it.
As I clearly stated, XM’s treatment doesn’t lead to a material overstatement of the subscriber #s. SIRI’s does. That is the key difference, although, there is also the fact that Sirius takes extra steps to make the overstatement happen, while the case with XM is matter of there not being a better alternative. In SIRI’s case there is obviously a better [more correct] way of doing it.
>>> Do you consider the lack of counting these subscriber in the churn number to be an issue of materiality?
XM fully discloses churn and calculates it in a reasonably well-defined manner. So, I have no problem with it.
>>> Sirius discloses the number of such subscribers. Further, the impact of these subscribers on ARPU is reflected.
Yes, they do now — after Jacoby took them to task for it and essentially forced their hand. But the question is one of the sensibility of including as subscribers vehicles which are not, are months away from being a subscriber, and that is the reason Sirius looks foolish to those who bother to educate themselves on the matter. Unfortunately, most of the analysts simply don’t have the time/energy to do their homework on these issues.
>>> You say that the “misstatement” by XM is not material. By what rational do you arrive at this conclusion?
At any given time, the net overstatement of subscribers for XM as a result of this policy is immaterial with respect to their total subscriber count. Sirius, OTOH, systematically overstates their subscriber #s by 11%. 11%, by anyone’s standard, would be a material overstatement.
>>> You state that XM is understating their numbers with regard to Sirius. How can they be understating if the method of the deal does not allow these vehicles to be counted? Remember, you stated that XM’s OEM partner pays the second and third month after the car is sold. When are you stating that XM is being paid? If you are asserting that payment comes when the OEM is footing the bill (months 2 and month 3), then there is no way that XM should count the subscriber prior to that time according to accounting standards. If XM is being paid earlier, then they can count it.
I think this is indicative of just how confused you are. “When” the payment comes makes absolutely no difference. The question is one of when the earning process occurs. It doesn’t matter if the payment comes before, during or after. This is why we don’t use cash to measure profits.
>>>> For a long time you maintained the position that the longer deals were an intentional way to keep numbers good. Is your stance still the same on that now that XM is doing 1 to 3 year deals?
We’ll have to see if XM does a significant number of these deals; at this point, I’m not aware of how many they’re doing. I think they are just trying some to see whether they get better conversion rates with them. If they turn into a significant number, we’ll discuss its impact on churn. It is inarguable, however, that SIRI’s churn is favorably reduced by their longer term arrangements.
By the way, I have never said SIRI was, in any way, “wrong” for doing this. I have simply stated the facts — these deals were structured to minimize churn and this is true. I’m sure they hoped to get better conversion rates out of the longer term deals, as well — however, their refusal to disclose conversion rates is suggestive that it may not be working. I have also said you have to take it into account when comparing the two, something that even XM’s remarks yesterday failed to do, IMO.
>> They are both fine by me, as long as we know how things are being done.
Sirius is definitely pushing the limits of acceptable behavior with its counting of OEM subs, so I’m not “fine” with that. It is my opinion that we would still not know they were pulling this crap if Jacoby hadn’t pressed them on it and found out the truth.
>>> My problem is that FrontMed thinks Sirius is some kind of monster and XMSR is the White knight.
The above statement is not true; I have criticized both companies when they have applied inappropriate accounting methods (which I consider SIRI’s subscriber accounting to be — it just happens that GAAP doesn’t dictate it, although, in my PROFESSIONAL opinion, GAAS does).
It also happens that SIRI consistently pushes the limits routinely, while XM tends to be more conservative in its accounting. And that’s why SIRI gets criticized for it. I would point out that I am not the only person who notices this, and the derogatory term “parking lot subscribers” has evolved into general usage as a result of SIRI’s bogus counting procedure. IF they were doing it appropriately, we wouldn’t need a term like that.
>> From XM’s SEC Filings:
I’ve been reading them since long before you bought your first shares of Sirius.
Frontmed….
confused??? WHEN the payment comes in indeed matters. If there is no payment there is no subscriber. The fact is that a payment must exist.
Delivery of the contracted service is another part of the equation. This is exactly why the payment is in deferred revenue until such time that the service is delivered and it becomes reveunue.
You state that XM fully reports the churn number? Please show me where that is. 1.7% churn specifically excludes a large number of subscribers coming off of promotional periods. XM does not disclose this “fully loaded” churn, and in fact takes additional steps to back these subscribers out of their subscriber count.
If you want to say that Sirius is misstating sub numbers that is fine. On the same note though, you should be also saying XM is misstating their churn number.
XM gives more flavor on some metrics, sirius gives more flavor on others.
By the way, how long you have been reading XM’s SEC filings means what exactly in terms of this conversation?
Tyler in FrontMed case reading is one thing and understanding is another.
Also the only time I have seeen FrontMed critical of XMSR is about their decision to merge with SIRI.
>>> If you want to say that Sirius is misstating sub numbers that is fine. On the same note though, you should be also saying XM is misstating their churn number.
Once again, you try to change the subject. XM provides all the data one needs to compute fully loaded churn if one finds it to be important. It is not an important figure for analytical purposes, so there is no need to report it. I could just as easily point to SIRI’s decision not to report CPGA (which would be a closer analogue).
This, in no way, is similar to Sirius reporting misleading subscriber figures, holding unsold vehicles out to be subscribers when they aren’t.
Frontmed….
Sirius provides all the data needed to compute the subscribers on dealer lots if one wants to find it.
You do not like the metod, that is fine. Many accounting professionals do not take exception with how the counts are reported.
As I have previously said it is amazing no other anaylist (everyone on here) or news agency (Reuters, The Wall Street Journal, Forbes, Briefing.Com, Associated Press, ect., ect.,ect., the list gos on and on) when reporting on the subcriber numbers ever bother to put the 900,000 as side note or discliamer. One would think if they thought like FrontMed, the it is such a travesty, lie, or misrepresentation that someone would be willing to break this story. As a matter of fact I believe Tyler is the only one who really mentions it in his post on the 26th of Feb. “Sirus Announces Q4 and 2007 Operating Results”. But I know what FrontMed thinks, he believes Mel has mezmerrized them all and only he and select few or able to see through Mel.