Consumer vs. Business – What’s The Priority?
This gets down to the classic argument about whether a company should do what is right by the consumer first, or do what is right by the company. In an article published by John Paczkowski of All Things Digital, he seems to be critical of the company for making moves that have alienated some subscribers because they have lost their favorite channel in a recent channel shuffle in satellite. The changes were brought about because of the merger.
Paczkowski is critical of this comment by Karmazin:
“We’ve gotten hundreds of people who hated it and claimed they were going to cancel. So we’ve analyzed all the cancellations since the rationalization…. If we took the most aggressive number of people who canceled and we take that away the $120 a year they pay, it doesn’t get to a $1 million as compared to the significant amount of cost savings as a company that needs to make money…. You as a subscriber, though you may miss your channel, need to make sure we make money because you want us to be around so we can invest in programming and we can provide you with all these services.”
Certainly if you are a consumer, you will be ired by the comment. However, if you are an investor, such news would be welcomed with open arms. 8,000 cancellations at a cost of less than $1,000,000 to realize substantial savings in duplicate content, duplicate program directors, duplicate dj’s, and duplicate supporting staff.
Given the numbers, I can’t blame the company for making the move. While fans of specific channels may be upset, there is a fine line between the types of programming a company such as Sirius and XM should put on the air vs. additional programming that acts like a “loss leader” (a program that costs the company money relative to the revenue they derive from it.
With Sirius’ music channels, there is no advertising revenue. This means in point of fact that each and every music channel actually costs the company money to broadcast. The hopes of the company are that enough subscribers will pay a monthly subscription fee that will at least offset the programming costs and hopefully deliver a profit. The problem is that the company has never made a profit. Thus, changes need to be made.
Paczkowski takes Mel’s comments to mean that the channels are gone forever, and that consumers should pony up the dollars to the company even though they do not have what that particular consumer wants. I disagree. Mel was being pragmatic. He was basically stating that he needs to get the company to profits before allowing for the luxury of more niche type programming that has a smaller audience. In other words, when the company is profitable, they will better be able to consider additional programming. A long term investor actually hopes for the day that a “wind chimes” channel exists.
This is not to say that Sirius and XM were budget conscious a few years ago with some of the high priced talent they brought on. Indeed, they were. Part of the reason was the competitive landscape, and another part was that they needed to bring in big names to spread the word. Rest assured, now that the bottom line is a bigger focal point, some of those big names will fall by the wayside. Maxim Radio is no longer a deal that costs money. There is no longer a Maxim channel. Instead, it is a show, and the dollars going out the door to Maxim no longer exist. XM made a similar move prior to the merger in their deal with Starbucks. The branded channels cost the company money.
There are those that are critical of Mel for not saying anything, or saying things that frustrate one person or another. Get used to it. The days of trying to satisfy everyone all of the time are gone. The company needs to make money. Satellite radio is many things, but it simply can not be all things to all people and continue to exist. The growing pains need to happen. Investors have had to bear the burden, now some subscribers will as well. It simply needs to happen.
Sirius XM Radio needs to get leaner to get stronger, and that is what is happening. The survival of the medium is at stake, and even without your favorite channel, odds are that the service is still better than the alternatives. Like it or not, satellite radio has to have a better mass appeal before it can add back some of the less popular programs.
Bye satellite radio…it was nice knowing you from 2003 to 2006. 2007 was the beginning of the end and we all know what 2008 has been. But those 3 years were magical.
It used to be that the customer was always right… not anymore.
Screw the clients – specially the bad ones – , the company needs to be saved. Usually – and this is happens with all sort of business – the clients that are the most picky, are the ones that bring the least revenue or even losses. They constantly complain, call customer service, cause the company to spend time and money on them, etc… They probably have had a contract for the last 5 years -or even the life contract – and still have one of the first generation of Radios because they are cheap… ask Bank of America, JP Morgan Chase, Wal-Mart, etc… Why do you think they all revise their policies ?
Screw the consumers, SAVE THE DAMN COMANY !!!
Are the critics saying we do not care if you cease to exist? That would seem to be the old ‘shooting foot’ symdrome. I say give the changes a few months. If you cannot live with some change, and there are enough numbers, SIRIUS XM would be crazy not to listen. It sounds to me like the listener base is so diverse that any change will be controversial. Maybe that is what we need – a database profile of the customer base. Wouldn’t that be interesting? And maybe a good place to start for making changes and for some marketing support.
I remember when MTV was just taking off. They had to plead with artist and record companies to come on the air and be interviewed. One day, the paradigm shifted and MTV got so popular that you had to do it. I see the same thing with Satrad.
One thing is for damn sure, there are a lot of country music stations. But heck, as an investor who gives a crap if its called “Country Music Satellite Radio” if there are 80 million country music fans. My point is, sorry to the 8,000 people who cancel, but in this case the customer is right, they reviewed the niche and it wasn’t the customer.
I sure hope someday there is a “Wind Chime” Station, though. And more Rap.
Sirius XM rules.
If I was the CEO I would do the same thing in a heart beat. Making money comes first, without it the company ceases to exist.
vaporgold
Any idea how many folks listen to Oprah on an hourly basis?
That database information would be interesting to get a hold of… see how much Melvin continues to overpay for content.
Good ole Melvin, quick at-the-draw when it comes to screwing his bread-n-butter, but slow as molasses when adding value to the organization.
Screwing his bread-n-butter?
Sorry, but if the information shows that the channel line up lost the company “less than 1 million dollars”, then they were obviously not the bread and butter of the company.
Sure, it pisses people off, but a company has to do what is best for the MAJORITY, not a small vocal minority.
I agree that it sucks though. Sirius XM have done a crappy job of advertising and pushing their service, so a lot of the advertising has been done by the consumer. If the consumer aint happy, he is not telling his friends to buy a radio. Hopefully the channel lineup won’t hurt the company much, and the savings in revenue is worth it.
We will never know.
max….
I do not know the numbers for Oprah. However, please note the following. You could choose a different example.
1. Mel did not hire her.
2. She has a contract. It makes no sense to cut her loose if you still have to pay her.
3. Mel has gotten rid of certain talent. candice Bushnell is gone, Maxim is gone, as are others.
4. Oprah is one of about twelve channels now available to Sirius Sirius subscribers via “Best Of”. This means she is adding to the bottom line. All accounts are that the Best of sales are going well.
5. Your continued use of the name “Melvin” is getting tiresome. It was funny once or twice, but is now bordering on getting to be somewhat of an obsession. It actually takes away from your posts. If you do not believe me, simply listen to the opinions that follow. You are coming off as adisgruntled person who will never have anything positive to say regarding Mel. Even if he makes a right move in your eyes, you will be negative.
The problem with using the number 8,000 subs as an acceptable loss of less than $1 M, is that the dispersion or “scatter effect” of the loss has not been considered. The unintended consequences of a decision that says 8,000 subs is OK doesn’t take into account who they tell about their negative experience. They tell two friends…. and so on.
I agree that “niche” programming is at a cost, or a loss leader, but maintaining the “Content is King” reputation is important also. Trimming marketing cost to save money is already apparent, leaving word of mouth as an important subscriber growth component to the future. This company already is behind on the “Cool” effect, with its limited portable player lines, giving a wide birth to the Ipod.
A perfect example of cult media bringing in subs is Howard, so pissing off the loyal faithful is just not a good idea. Even the small vocal minority can cause a very loud disparaging noise. If the company marketed better they could easily overcome the scatter effect of a few, but marketing of their product nationally is almost completely absent.
Like most people here, I have seen a few adds tied to the OEM’s. I think what Mel is doing to cut costs is good, and if he is holding back on adverts, then so be it. Anything to improve the bottom line is good. He was brought in to do exactly this, cut costs, when I invest in a company one of the first things I look at is the CEO, and whether or not he is frugal. He is sticking to his game plan, and if he lops off a bunch of heads in the process, then good!!
Tyler posts:
“5. Your continued use of the name “Melvin” is getting tiresome. It was funny once or twice, but is now bordering on getting to be somewhat of an obsession. It actually takes away from your posts. If you do not believe me, simply listen to the opinions that follow. You are coming off as adisgruntled person who will never have anything positive to say regarding Mel. Even if he makes a right move in your eyes, you will be negative.”
Well, I posted once this evening the following link… http://en.wikipedia.org/wiki/M.....l_Karmazin
The above link was apparently censored by the host. I’ll post it again.
http://en.wikipedia.org/wiki/M.....l_Karmazin
Unless Wikipedia.org is incorrect, the correct birthname of the CEO of Sirius is Melvin Alan Karmazin (I don’t think his birth certificate had the following added: “Mel”.
Now, Tyler has a problem with THIS fact as well.
go figure.
If Melvin makes the right move, and resigns, I’ll give him credit for doing the right thing.
If he subjects investors to a R/S, additional dilution and other unnecessary maneuvers, it’s time for Melvin to go.
$.1589 in the After Hours is a joke. And, the joke is on Melvin.
Unfortunately, most shareholders are paying dearly for the Street’s apparent dislike of Melvin as well.
Or, as others have surmised, is this all a ploy to take the company private at a fraction of the cost of running an above board deal with shareholders?
Ask Tyler, he knows.
btw, cos1000, I agree with your scenario. Takes a lot to get a new customer, takes very little to lose many customers.
Just another unsophisticated bunch of yahoos subscribing to pay radio, is probably what Melvin thinks.
P.S. Its your investment, you make the call.
I have been visiting this site regularly for almost 2 years now, and it amazes me how polarized some opinions are… I’m always amused by the negative rants. I tend to be a glass half-full guy, and I usually find myself somewhere close to the middle opinion-wise, even when the market or company decisions leave me feeling uncomfortable. I think Brandon and Tyler et al do a great job of giving a balanced, informative picture. I finally have to say something however…
Watching Siri and reading the forums is like following your favorite sports team; sometimes we love how our favorite players play, other times they suck. Sometimes our team lets a great or beloved player go to free agency to save money, or trades them at the peak of their career (or when they still have something left in the tank) on prospects that what they get back in return will make the team better in the long run. Sometimes we want the coach or the gm fired for those decisions, or we hate the owner and implore them to sell the team to someone with more money, or more vision. But rarely do we totally lose faith, because we love our team and hope for the best.
I personally loved The Vault and Sirius Blues…and it ticked me off when both were killed. I’m still not thrilled with the BB King Blues channel, but I have found that I LOVE Deep Tracks. I never even thought about giving up my subscription, there’s waaay too much good content – and after nearly 3 yrs of listening, there’s still plenty of content to explore. In fact my wife loves the new pop and jazz channel lineups to the point that she made me redo all of her presets. Of course, there are programming ideas that I will always hope for, and I will not be shy with my suggestions. I think that’s where subscribers should express themselves…the suggestion box…with the understanding that we’re only a few months into the merger, we’re not even close to resolving all of the debt. Six months from now or a year or two years from now when revenues are still growing and money is finally being made, that’s when we can expect new and added programming.
Siri is on the brink of tremendous upside. As with all defining moments in business, there is also tremendous risk; some on this site would say that Siri is also on the brink of disaster. We can all play Monday morning quarterback if we want to, and question every move Mel makes, or question the removal of channels when, as business owners, as INVESTORS, we know they are doing the right thing and WANT them to do those things. The truth is, however, that the facts are what they are, and we can either abandon ship now or we can hang in there on faith that with the right winds, our ship will continue to sail toward a bright future.
OK I’m done now…that should fix me for a good 6 months or so! LOL
max….
Jumping to conclusions seems a common practice with you. We at this site did not censor your comment. The spam filter, for whatever reason, picked it up. With a site that receives hundreds and sometimes thousands of comments each day we need to rely on a spam filter to sort out the muck. Sometimes the filter catches something that is not spam. Sorry, but it is the cost of doing business.
I am well aware of what Mel’s birth name is. I am also well aware that the name he goes by is Mel. You are seeming to insert “Melvin” several times in everything you write. It comes off as someone who wants to “needle”, and it takes away from what you are trying to say. I was trying to give you a curtious nudge to let you know that you are not helping your argument at all, and are in fact degrading your own stance by continuously appearing to be someone more interested in “needling” than anything else.
If you want to degrade your argument, that is fine by me. That is your choice. Again, ask anyone here how you sound and you will see that at this point most are writting off your entire post once they see the word Melvin.
You see, you are bringing no balance. You attack the Oprah deal and blame Mel when he had nothing to do with it. By your thinking, he should get credit for getting rid of Ellen DeGeneres, yet you mention nothing about that.
Now you raise an issue of taking the company private at a fraction of what an above-board deal would be. What do you feel is a reasonable offer for Sirius XM Radio at this point in time?
Please stop being so general in your comments and get to some specific opinions.
You have got to b kidding. I am a long time subscriber, and the changes made Siri-Xm much better than either were alone. Thanks and keep the improvments comming.
“However, if you are an investor, such news would be welcomed with open arms. 8,000 cancellations at a cost of less than $1,000,000 to realize substantial savings in duplicate content, duplicate program directors, duplicate dj’s, and duplicate supporting staff.”
Substantial savings??? I don’t think so. If there were any savings at all, it was just ‘pocket change.’ There aren’t going to be any real savings in programming ’till expensive (Cough***Oprah***Cough) contracts come up for renewal.
The management is fooling around with the nickel & dime programming when they should be spending time on the real synergy of combining the technical systems. Every day that they put this off the problems grow greater & greater.
No one is this bad at management. They must have goals in mind other than the success of the company.
pinball….
The Oprah deal cost $55,000,000 for three years. She is part of the “Best Of” line-up, which gives potential that the deal will be better than some anticipate.
Candice is gone, Maxim is gone, etc. Things are happening, it’s just that many are not even aware
The trimmings of duplicate work forces is more substantial than many may think. Not only are salaries saved, but workers comp, health insurance, etc. are saved as well
Tyler asks:
“Now you raise an issue of taking the company private at a fraction of what an above-board deal would be. What do you feel is a reasonable offer for Sirius XM Radio at this point in time?”
Provided that a new CEO is brought with the deal, I’d put a price tag for Sirius/XM Radio at a 20% premium above the MV on the day the Merger was announced by Melvin.
Since that day was essentially the last day that an independent Sirius existed, and, taking into account the massive short selling instituted by opponents of the combination and monopolization of Satellite Radio, a fair market value and buyout target price for me is one that recognizes the value of the company prior to the total destruction of the current PPS brought on by the decision of this CEO, its BOD and staff to go ahead with the Merger.
The 20% should be enough to retire most of the current outstanding debt which is the by-product of the “Content Race” instituted by Melvin and his XM Counterpart.
On the Oprah theme, in addition to cutting or trimming the fat off of the expense side of the newly merged companies, look what else could use the same:
Max….
An odd basis for your valuation.
So you would be happy with $4.44 for the company. At least we know where you stand
Your “Melvin” stuff is now an annoyance to me. Consider our conversations closed
$4.44 AND a new Management team. The Street has spoken.