June 2008 Auto Sales And SDARS Relationships
Auto sales are down. This has been the month after month news item for most auto manufacturers. With the exception of a few bright spots, the entire auto industry is in a slump. With high gas prices, many companies are offering clearance price on what are now considered gas guzzling trucks and SUV’s. Four cylinder cars are now the hot commodity, and even many of these simply are not selling at the needed pace.
For satellite radio sector watchers, the slumping sales in the OEM channel is an undertone that, coupled with the lack of a merger decision, makes many investors have pause in the sector. In an environment where good news seems to always be followed with a pause and then bad news, it is hard for the satellite radio equities to see any momentum.
The chart below outlines auto sales, SDARS partners and estimated installation rates. We caution readers that this is merely a guide, and not representative of actual installations. Readers who seek more detail can refer to previous months and/or years sales here at Sirius Buzz to draw better comparisons.
Many analysts started off 2008 seeing the OEM channel as a driver for satellite radio subscriptions. Most used some base assumptions projecting subscriber numbers based on a certain level of car sales happening combined with a bigger ramp-up in the rate at which SDARS receivers are installed. Now with half of 2008 gone, and car sales still slumping, there could well be some adjustments in the models that analysts use.
Historically, the take rate for SDARS on OEM installations has hovered in the 50% range. This metric has remained virtually unchanged during the sales slump of cars. For SDARS, that represents a small silver lining, but at the end of the day, installations need to happen, and cars need to sell.
I project that upon a merger decision, additional guidance will be given by Sirius and XM. Until that time, we need to rely on the assumptions of analysts, or our own research into the sector to determine what the subscriber picture will look like at the end of the year.
Position – Long Sirius, XM. No Position OEM’s.
Remember the movie “Misery” where Kathy Bates “Hobbles” James Caan so that she can keep him incapacitate just enough to enjoy his company, but to never see him become healthy enough to leave or defend himself?
Every time the poor bastard would start to heal, here comes Kathy with a sledgehammer to crush his ankles.
See an analogy here?
The FCC five are not stupid people, in fact, if you look at their writings you’ll discover that they are highly intelligent and articulate people. I’ve read most of their individual works and rulings. However, apparently something is horribly amiss as past history has shown that the average merger processes in less than 9 months .. So why are we here nearing 18 months with two quickly fading companies whose stock is valued by the leading financial house in the ENTIRE world as being worth less than a Big Mac or a quart and a half of gasoline?
Why … Because the FCC knows very well that this merger is necessary for the proliferation … no, existance of satrad. They know these companies are deeply in dept and can’t sustain themselves for another half year, they know people love the service, they know the NAB has had a monopoly for years treating consumers like sheep…. and YOU know all these things are true!
But as Mr. Addlestein notes (and I like him as a person and Commissioner … he’d make a great future Chairman IMO) the FCC has allowed itself to be controlled by Congress… and Congress has allowed itself to be controlled by the NAB… and the NAB’s intent is to destroy Satrad for their own financial benefit.
The FCC has fully relinquished its autonomy under Kevin Martin.
So what is a puppet FCC organization to do? Torn by the dictates of their puppet masters yet intelligent and moral people who realize that they are not doing their duty to consumers by nixing this arrangement.
They “Hobble” Sirius and XM very much like Kathy did. They take XM and Sirius within inches of their lives. This way, they can have it as close to “both ways” as possible. Please their puppet masters and the public.
This is exactly what they have done!
Let’s hope it’s not too late.
Go Jimmy Go!
Well COCKY DOODIE that SUCKS!
Good “analogy” tho.
But doesn’t James Caan’s character smash Kathy Bates in the face with an typewriter at the end?
Something to look forward to I guess. 🙂
Maybe it’s me but I don’t get counting Toyota as a “both” when factory installs are 100% XM. If you adjust this, XM has 60% and Sirius 40% share +/-.
Further… if you adjust these numbers debiting DCX, Ford, and GM market share and credit Toyota and Honda you’ll come up with a number closer to XM having 65-67% share and Siri at 35-32% share.
Disclosure: I own 100% XMSR stock… and this is one of the reasons why I reallocated.
Matt….
Toyota has deals with both companies. XM units are factory installed, and Sirius units are port installed. Many components on Toyota are installed at the port. Air conditioners, seats, steros, etc.
You can refer to the corporate Toyota website and see that Toyota offers both systems. From a consumer standpoint you will not be able to tell the diff. between the two installs. I would suggest visiting some dealerships and seeing what they put on the lot.
http://www.toyota.com/camry/op.....tions.html
Discount Ford, GM, and DCX? Why
The other part of the equation is how fast the company can recoup the money inveted into an installation. GM is the most expensive deal out there. We get a lot of installs from GM, but don’t make much money on them.
You can see the company filings on the OEM contributions to each company. The numbers are pretty close.
In the end, the subsciber numbers do not matter as much as how much money you make, and the cash flow. From a financial perspective making $10 off of one subscriber is the same as making $10 from 10 subscribers.