Thursday, April 27, 2006
Sirius Vs XM Satellite Radio
Which satellite radio company is winning the war to become dominant? In the past, I would have said that XM's early lead was insurmountable; it's awfully hard to catch up to momentum like that. XM also got the best sports package -- Sirisu got the NFL; XM got the far more valuable MLB baseball, with more games and much more demand. Both can claim big stars working for them. But Howard Stern was a game-changer for Sirius. According to Business Week, in the fourth quarter of 2005, Sirius added more subscribers than XM and Stern is the reason (I should hope so, given the money they spent). BW attributes 1 million subs directly to Stern. Sirius is now at 4 million and XM at 6.5 million. And the bad news is piling up for XM. Its stock dropped on the news that the Feds are investigating them for their marketing practices, their fourth quarter losses were higher than expected and -- depending on who you believe -- Sirius is closing the gap in subscribers. The two companies use different ways of measuring subscribers, with the big debate over how you handle people with "test" or unpaid subscription offers (like someone at a ball game who wins a three month gift subscription). It's unclear who is padding their numbers with this and how many it constitutes. Both companies are increasing their ads (XM even changed its slogan to reflect that). And in what I think is one of the stupider moves, XM is letting Opie & Anthony take its daily show to CBS Radio and the old Howard Stern slot. They insist O&A will be able to plug XM, but surely the biggest draw of satellite radio is exclusive programming, just like HBO's big draw is original shows like "The Sopranos." How would it benefit HBO to let "Sopranos" air on the CBS network? This race is far from over, but what looked like an insurmountable lead by XM has become a real nail-biter.
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2 comments:
Some of the XM investigations that surfaced today will probably also apply to Sirius when they announce their financials next week. Also, the FCC investigation is a joke and the worst that could happen is a recall for some receivers, which aren't even manufactured by XM, but rather Delphi.
As for counting subscribers, both seem to be a bit shady. XM's controversy comes from how they account for promotional subscribers and for how many months of the promotional period is paid for by the auto manufacturers. The baseball promotions that you speak of are completely paid for by MLB, so they are not part of the investigation. Sirius counts subscribers in cars that are unsold. So once a Chrysler, or a car from any other auto partner, rolls off the assembly line, Sirius counts it as one more subscriber. Both questionable if you ask me.
Also, Sirius may never get the chance to catch up to XM because of the magnitude of their spending. For example, the metric SAC, subscriper acquisition cost, was $64 for XM for all of 2005, while Sirius' SAC was $139 for all of 2005. So Sirius was spending over twice as much to acquire each subscriber. XM quickly reduced this metric years ago, but Sirius is having a difficult time. Also, Sirius' losses are widening, and that was before they started paying Howard his $100+ million. Sure, Howard has saved Sirius up to this point, but you have to question at what price?
Speaking of Howard, I think the migration is practically complete. Out of sight, out of mind. He no longer makes headlines and is almost forgotten. Especially now that a respectable replacement has been made with Opie & Anthony. I'm not saying that O&A are better than Howard, but they are an adequate substitute for those casual Howard listeners.
And speaking of Opie & Anthony, XM made a wise choice by syndicating the show. XM learned with O&A, that after 18 months on satellite, it is hard to attract new subscribers. So, now they have a tremendously large audience to which they can promote XM. Not to mention the financial aspect. I wouldn't be surprised if CBS is paying XM a large sum for syndication, but there is also the possibility of splitting advertising revenue from FM. Very few O&A fans, if any, will cancel their XM because of the deal.
I'm sorry if this seems long and drawn out, but it frustrates me to see inaccuracies and a bunch of fanboy BS for Sirius because "they have Howard."
Not too long a posting at all. I'm certainly no fanboy of Howard, having never listened to his radio show for more than ten minutes in my life. CBS helped him by suing because yes, when on satellite he is out of sight and out of mind. The media can't comment on what he's talking about because they aren't listening and can't do so casually as with free radio. I think he has to put himself out more for appearances on Letterman et al to keep himself in the public eye. I didn't have the room to get into their costs of bringing in new subscribers, but of course everything you say is valid. With Bush in the White House, yes a business-friendly FCC is unlikely to do anything harsh, but having them announce the investigation and see your stock drop is never a good thing. Your take on Opie & Anthony is very interesting; hadn't thought of that: XM has already pulled in any new subscribers they might have garnered by signing the duo so now they might as well share them with terrestrial radio. Still, avoiding churn is surely important and if I'm paying $13 a month for XM, I'd be annoyed to see them available for free, just as I'd be annoyed if I paid $7 for HBO and then saw The Sopranos airing on NBC. Do you have an idea of who is cheating more on the subscriber count? If it's about equal, it still means that XM has gone from well over 100% more subscribers to just 50% more -- still a big gap, but a gap that is closing. As for XM claiming profitability in 2008 and Sirius now claiming the end of next year, bollocks. Years away, unless they merge.
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