Channel Changes A Positive For Investors
In an article I wrote previously, I eluded to the fact that the recent channel consolidation of Sirius XM had many benefits, yet I only touched on one due to the fact that other news overshadowed my original thought process.
The first benefit I mentioned was that it made the service easier for the general public to follow. Having an identical service on any GM, Ford, Honda, Chrysler, Toyota and every other make and model sold in the United States makes the end user more likely to continue the service. This should lead to increases in subscriber retention.
Having said that, most investors know the lowered costs that will be associated with the new format, yet the big picture is being missed by most investors. Those who have the service may have noticed an increase in the number of quality advertisers on the non-music channels.
Every channel now has double the listeners, and that is a huge plus for Sirius XM going forward. Sirius XM advertising just became more attractive to quality companies who want to reach a larger audience. Prior to this move, each service had about 10 million subscribers, and advertisers could only reach a portion of that pool at any given time. Sirius has consolidated that listener pool to 20 million and as such I look for a large increase in ad revenue.
Investors need to remember that this is what Mel Karmazin has been expected to do. He has a created what some have termed a satellite radio monopoly. He is creating a media company that has excelled in an environment in which all other media is faltering. He has managed to increase revenues despite the worst economic crisis that most of us will live through.
Ad revenue last quarter rose 6 million dollars over the same quarter in 2007, and yet its only up 7 million for the full year. This indicates to me that we are seeing dramatic increases in advertising revenue since the merger, and this is actually the first full quarter of the combined company. I expect that the ad revenue number will increase dramatically in this, the final quarter of 2008.
| (in thousands, except per share data) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Subscriber revenue, including effects of rebates | $ | 456,357 | $ | 226,844 | $ | 978,516 | $ | 627,275 | ||||||||
| Advertising revenue, net of agency fees | 14,674 | 8,524 | 31,413 | 24,422 | ||||||||||||
| Equipment revenue | 11,271 | 6,290 | 25,290 | 17,216 | ||||||||||||
| Other revenue | 6,141 | 128 | 6,590 | 3,337 | ||||||||||||
| Total revenue | 488,443 | 241,786 | 1,041,809 | 672,250 | ||||||||||||
Position: Long Sirius XM.
They consolidated the music channels. There is no advertising on the music channels. So how does that help advertising dollars.
They consolidated other channels as well. You should try listening to them
20mm subscribers?
better go back & listen to the CC mon frere
Another way to look at is they have almost 40 million ears listening. That might help too.
The channel change isnt as big of a disaster as some of the negative media would have us to believe. They dropped some channels that people liked and added some other options.
They screwed my personal favorite up but it seems are starting to fine tune it and get it better. The thing i would have like to seen happen is more advance notice for one.
The other thing that siriusXm should do is make both sirius and xm the same. They are one company they dont need two different sets of lineups. They shouldnt have dropped any stations and I would have like to see them add more back. If they gave more content and some of those channels they dropped they could then make the valid point that they gave the listener more for their dollar. The downside to that is it would likely have kept them from laying off people which they felt they had to do for cost savings.
Overall siriusXm is doing alot of things right we just have to adjust.It will take time for listeners to adjust to the new things and thats even harder to do when most of us was convinced there wasnt any thing wrong with the old. We just need to give them a reasonable time frame to tweak everything and then form a valid opinion from there.
Just received an email from AAA offering special AAA discounts on Sirius. Positive!
Brandon,
I agree with what you say about the channel changes. One thing I heard this past Sunday is bugging me big time. During the Sunday football, did you notice the Ford commercial that was advertising a 2 YEAR paid subscription of Sirius? Are you kidding? 2 years is way, way too much. Just wondering if you caught that too.
Rem –
Ford pays Sirius for a large portion of the 2 year sub up front when car is delivered to the dealer. Great deal, longer the better.
I have had Sirius and XM for years, but mostly listened to Sirius and only a few channels that are now missing from the lineup. I never really listened to XM music nearly as much because I got the Inno for potability and mainly for sports.
This being said, I am extremely impressed with the playlists of the decades channels & others that I can tell come from XM. Sirius had more top hits, but not as deep and I really believe they have improved the overall experience. Sirius has offered other content to XM and some nice channels of music XM was missing, so this is a big win.
Now if they could just stay out of bankruptcy along with car makers.
Brandon –
Are you kidding with the chart you attached and the AD revenue growth. This increase in revenue is teh comparison of Sirius standalone v Sirius + XM. It’s like saying Sirius subscribers rose from 9 million to 19 million since end of Q2.
Please get your facts right because people have lost enough $ in this stock already. AD rebenue has been dropping as a % of revenue, way below any estimates Mel thought he could reach.
The real tragedy of the changes is that the commercial-free music channels are all censored now. One of Sirius’ big selling points was uncensored radio. Adding Howard Stern and freeing him from the FCC constraints re-affirmed satellite radio’s commitment to edgy, real programming. Now, hip-hop, rap and hard rock songs (like Sirius Octane 20) are the censored, terrestrial radio versions. This is a deal breaker for me. No more subscription renewals; I’m going back to L.A. terrestrial radio and Internet radio with my iPod. This must be reversed. This is a very disappointing development for me.
“Why might the market soon conclude that Sirius is worth less than $3 billion? Because it’s running out of cash. In the first 9 months of this year, Sirius had negative free cash flow (cash from operations – capex) of $300 million. $360 million of cash won’t last long at that burn rate”
Mt Blodgett is wrong in his assumptions. First, the companies did not merge until 8 months into the year, so you have zero synergies and the cost of FCC/DOJ lawyers tied in to the burn. Second, the company has stated that they are near break-even and will REDUCE losses for the year in the Q4 by 50M. Third, the company sells a product which currently has 20M subscribers. So long as they continue cutting costs, they will in the gren next year.
Also, didn’t Henry Blodget go to prison after the tech bubble?? Probably why he is a commentator now.
Ooops!! My brain is fried lol!!!
Time for bed
Brandon,
I actually asked Tyler about this on the radio show this past week. I think it will be a huge increase going into Q4 with advertisers wanting to go big for the hollidays.
Jon: It is not only the music channels that merged. All of the comedy channels merged, and there is advertising on those channels. Some of the news channels merged, and there is advertising there as well. Howard and Martha and all of them have advertising on their channels as well, which are getting increased audiences due to Best of Both. I think there is definately some growth of ad revs ahead.
Elude:
1 : to avoid adroitly : evade 2 : to escape the perception, understanding, or grasp of
Allude:
: to make indirect reference ; : refer
Thanks, I didn’t realize that they merged more than just music (obviously).
But now I have a different problem. I haven’t noticed that the music is now censored. I listened to XM for years, then switched to SIRI because the car I got came with SIRI. SIRI was much less censored than XM, which I liked. So, is this true. Are they now censoring the music. Has anybody else noticed that. That would be a big dissappointment for me.
Newman,
All current metrics are showing that advertising is not increasing. It’s actually doing quite the opposite. Many retail analysts are expecting the trend to continue for the forseeable future.
Jon, I think the censored music (Hip Hop Nation) is due to playlist merging according to some, but more so I think it is program based on time. For instance that channel is part of the Mature programming, and they have on the website showing uncensored programming later at night.
I just got back from being in the car for 2 hrs and I heard Tool on Faction (I think it was Faction) and it was not censored. Whew.
GetitStrait, Newman,
Don’t you both agree that current advertising budgets everywhere are being cut to conserve cash, along with the trend to reduce payroll. With an unwilling consumer to spend, why throw money away at this time. Holiday season aside, most who can spend… will, and those who can’t are not going to be enticed to do so by additional advertising. I’m not saying that advertising will be eliminated, but certainly to Getitstraight’s point, will not be increasing.
The point of merging channels and increasing the listening target market that Brandon made is still valid, but probably not as relevant until advertising budgets are refunded.
I only listen to a few channels that were not effected.
I am really surprised at the heat they are getting over this.
Since I don’t know, Is it really that bad?
If it was that is the last thing this company needs at this time, to piss off subscribers.
imho
vaporgold
Media stocks and advertisers do well in poor economic environments. I recently wrote an article that explained my position. A business without a sign, is a sign of no business. More money is put into the most effective advertising mediums in a poor economy because competition for discretionary dollars intensifies.
16 cents??
Brandon,
Regarding “Channel Changes A Positive for Investors?” Have you bumped your fucking head or are you a party to the scandal that appears to be taking place here. Have you been stranded on a deserted island for the last 3 months. “This pig is tanking and you continue to pump this POS? Give me a break. What’s your take in this to keep on pumping sunshine up everyone’s ass. Well, there it is, I said it and I don’t think I’m alone in thinking this eithe. It’s time you came clean.
Hip Hop Nation is not censored, listening right now and yep its dirty like I like it.
Geronimo.
Thanks.
Socal
GetItStraight writes:
“All current metrics are showing that advertising is not increasing. It’s actually doing quite the opposite. Many retail analysts are expecting the trend to continue for the forseeable future.”
The problem with your post is that 1) Best of Both just started at the begining of October (which is Q4) and the channel changes just happened this past week (Also Q4). Of course the metrics that were just released show declining ad revenue at this time, but NOW in Q4, they may start to improve because of these two changes. I say MAY, because it may take a quarter or 2 for Sirius to sell bigger name advertisers (Best Buy, WalMart, McDonalds, etc) on the concept.
As you state, ad sales in general will be abysmal for the next 6-12 months, but as Brandon is pointing out (and I am trying to help strengthen the case), advertisers are hurting this year and are going to try to have a decent Q4. They dedicate a certain amount to advertising every year, generally divided by quarter or shopping season. The Christmas season is the most heavily advertized season, and even if ad dollars do decrease, they will certainly be better for the quarter than previous quarters. As Brandon states, they are going to be looking for the most influential and wide spread advertising available, and next to TV, Satellite Radio would certainly fit that bill. I think Ad revenues surprise for Q4.
GetItStraight: Reread your post, not sure if you were talking about Sirius ad revenue or advertising in general, but the above post hits both points either way.
How much longer can you say siri long. It would take a 1000% increase for the luckiest owner to break even. They have no money, leadership or business plan. walter long island ny
This new channel line up sucked. Geronimo said it right earlier. Sirius is like the titanic sinking, very slowly. Also, I hate bpm, bring The Beat back. BPM=Bad Programming Move. Hate you mel and hate you jon.