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Sirius XM's Bottom Line Could Get a Boost from "Best Of" Programming

by: Tyler Savery October 02, 2008 | about stocks: SIRI    

Tyler Savery

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I write about satellite radio. I have Sirius (SIRI), and have had XM. It sort of comes with the territory when you cover this sector, so when the availability of the BEST OF programming was announced, I found myself compelled to at least give it a try.

Thursday morning I put my investigative cap on and called customer service to not only add the new programming, but to ask a few additional questions as a “curious consumer” so that I could write about my experience.

Tyler - How is the response to BEST OF? Are you getting a lot of calls?

Customer Rep - Actually yes, we are getting a great response so far. I’m surprised by the number of calls adding the service. Did you want to add it month to month or pay for a full year?

Tyler - Well, how much will the service be if I do a full year?

Customer Rep - Your annual plan just lapsed a couple of weeks ago, so you are on a monthly plan right now. It would come to $186.89 if you renewed for one year with the BEST OF. This gives you 1 month free.

Tyler - I see, if I pay month to month it would come out to $203.88 for a year. Do a lot of people take advantage of the annual plan?

Customer Rep - Not everyone, but many do. You can break it up into two payments, so that makes it a bit easier for people.

Tyler- Okay. Give me the full year, and break it up into two payments.

Customer Rep - Great, you have a small credit on your account, so we will apply that first. The balance will then be $177.67. Half will go onto your account now, and the other half next month. Do you want to use the credit card we have on file?

Tyler - That would be fine.

Customer Rep - Great, you are all set. You have a Stiletto 100. When you turn it on you should see a channel update. After the update completes, power the unit off and on again, and you should be all set. If you have any problems you can always call. Can I help you with anything else, or do you want any of the other radios on your account upgraded?

Tyler - No. Thanks.

The conversation gave me a good feeling about what is happening with the BEST OF programming. Seeing that the passionate satellite radio subscribers are reacting well to the initiative is great news. Likely, many people are adding right to their existing plan, and therefore paying in advance. This brings cash in the door. If the reaction is substantial, it could mean millions of additional cash on hand for Sirius XM Radio as they go into Q4. Such cash would not only bolster the company's position, but give them some latitude in marketing expenses to promote not only the BEST OF, but A-La-Carte as well.

With all of the bad news of late, this little conversation gave me a bit of faith in knowing that the wheels of satellite radio are still turning, and that while the economy has many people concerned, they are still opening up their wallets to get the additional programming being offered.

In many ways, Sirius XM announcements lately have fallen victim to the overall bad news of the economy. We now have the potential of seeing the bailout package approved before the weekend, and Sirius XM to have positive things to say on October 6th. For once, the timing seems to work in the favor of satellite radio.

Position - Long SIRI

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This article has 131 comments:

  •  
    Oct 02 02:59 PM
    I have Sirius and don't have the interest to purchase the 'best of xm'. If it had MLB, I would do it for the mlb season. I imagine more xm customers would get the 'best of sirius' because of howard and the NFL. Any reason why mlb wasn't included in the xm package? Were there licensing issues?
    Reply
  •  
    Oct 02 03:02 PM
    I don't think we can really say the "Best of" is a success until Sirius subscribers can add MLB with the Best of XM package. Every day that Sirius delays in resolving the MLB contract issues is a day they are missing out on a lot of cash.
    Reply
  •  
    Oct 02 03:08 PM
    I agree. I need MLB to folk over the $150 to my lifetime radio plan-or at least know what MLB would cost. I was frustrated when I called the other day.
    Reply
  •  
    Oct 02 03:58 PM
    Surged on this news today. Down 9%.
    Reply
  •  
    Oct 02 04:03 PM
    If you count that as due diligence, you're in big trouble.
    Reply
  •  
    Oct 02 04:24 PM
    I'm not a Hockey or NBA Fan myself. The rest of the program offers little to Sirius fans without MLB. Still it is good for XM subscribers. I originally got Sirius because their content was more to my liking. I don't care about O & A, nor Stern for that matter except that he somehow has the draw for a niche of subscribers. I wanted to pick up Best of Both as an investor, for what I get I'll pick up 200 shares of the stock instead.
    Reply
  •  
    Oct 02 04:25 PM
    I agree. XM really doesn't have programming that I would be interested in except for MLB. That is the reason why I bought Siri in the first place. But I can understand that people may be interestested in Oprah and PGA too
    Reply
  •  
    Oct 02 06:37 PM
    Im very curious to see the effect of the two new plans on the bottom line. We will see what Christmas push there was, and 3 full months almost of this alternative packages. Q4 should be interesting. Might even know the first financing results by then.
    Reply
  •  
    Oct 02 06:50 PM
    I know auto sales hurt but i know of plenty of people that have the receviers in there cars, me to. We didnt have to buy a new car for that and i think they should be trying to get the working people aswell, job site radios and so on.
    Reply
  •  
    Oct 02 09:06 PM
    Its good to see that the most prolific supporter is SIRI decided to at least give BEST OF a try. What does that say?

    SIRI should have never merged with XM - huge mistake. If SIRI had saved all that money spent on the merger and concentrated on the business it would be in the black by now and XM would be bleeding to death. When XM died SIRI would have owned it all anyway.

    I'm still bitter at how Mel killed the loyal stockholders the day the merger was consumated. We all got screwed. Every time Mel gives an interview the stock looses 10%.

    So what is BEST OF? It looks like a way to cut the number of licenses that the individual companies would have had in half. People with both services understand that perfectly. BEST OF combined with a la carte for $6 will kill the revenue stream.

    SIRI stock will not rise until the company stops loosing money, which will not be for a year or two- if it survives. If the Dems win the election, and it looks like a lock, the FCC board will be repopulated with Dems loyal to the NAB. Then its over. They will lock subscriber costs for a further 3 years and invent new restrictions in the name of consumer protection.

    Meanwhile there will be tons of better stocks to invest in due the the market crashing as the economy goes further in the toilet. There will be a mass exodus of stockholders driving the stock down further.
    Reply
  •  
    Oct 03 01:16 AM
    Muley101

    1. You mentioned SIRI should have never merged.

    What would happen if Apple, Microsoft, Google would have acquired the dying XM. Note the difference the same thing is going to happen in future whether SIRI is dying or doing well.

    2. BEST OF combined with a la carte for $6 will kill the revenue stream.

    Do you know that more people would buy at such a low price.

    3. Every time Mel gives an interview the stock looses 10%.

    Becuase he always low ball the estimates. Estimate is estimate. The day is not far when he will speak with proof and the stock will rise 100%.

    4. If you are convinced with the business model, management, and see a long term benefit only then you should buy.
    Reply
  •  
    Oct 03 06:47 AM
    The a la carte pricing will get me to buy in not only for my 4 Runner, but mainly for my home. I really just want commercial free radio and will add 2 or 3 premium music channels for just 25 cents each. I beleive this new pricing will bring in many new subscribers like me who will be willing to pay $10.00 or less per month to eliminate the junk that is forced on us when we turn on am or fm. All the people like me that have been waiting for better pricing and is now willing to buy the new radio's will definitely give the revenues a quick boost.Also, I would think that at least half would sign up for 1 year to get a free month and avoid the hassel of paying monthly.
    Reply
  •  
    Oct 03 08:23 AM
    Breaking the health of Sirius as a firm down into its simplest parts (and not the stock price, which is a whole different ballgame) i am trying to itemize all implications and factors here.

    health of financial sector as a whole---> availability of credit

    Industry Penetration, Customer Sentiment, Auto Sales, Competition ---> Amount of Sirius cash and liquid assets ----> availability of credit (or hopefully ability to satisfy debt outright)

    Industry Penetration, Customer Sentiment, Auto Sales, Competition ---> Improvement of Sirius's Cash Flow and Balance Sheet ----> availability of credit

    Assuming the availability of credit or the cash to satisfy the long term debts as they become due is crucial to the survival of the firm as a stand alone company, I am sure there are more correlations and factors to be proposed. Thoughts?
    Reply
  •  
    Oct 03 08:49 AM
    Far Away

    1) What if... What if the Beatles had had a drummer. We will never know.
    2) SIRI is reaching a high penetration point for people who, like us, are willing to pay for radio. The new subscriptions will be offset by people dialing down, from $16 to $6, to a-la-carte subscriptions reducing revenue.
    3) No, its because Mel makes a fool of himself
    4) What? this make no sense
    Reply
  •  
    Oct 03 09:07 AM
    At the rate Siri is sinking you only have a veru few more times left to pump before all that's left of Siri is Savery.
    Reply
  •  
    Oct 03 09:24 AM
    omagod,

    health of financial sector as a whole---> availability of credit

    * The financial sector is in the ER. Many will not survive even if the bailout is passed.

    Industry Penetration, Customer Sentiment, Auto Sales, Competition ---

    * SIRI industry penetration is high, customer sentiment is good for current subscribers, low churn. Auto sales are in the can, look at F and GM 5 year charts, there is a message there

    > Amount of Sirius cash and liquid assets ----> availability of credit (or hopefully ability to satisfy debt outright)

    * bad, really bad. SIRI will not have enough cash to cover debts and credit will be really tight. SIRI can not issue new shares to pay debt at .60 per share.

    Assuming the availability of credit or the cash to satisfy the long term debts as they become due is crucial to the survival of the firm as a stand alone company, I am sure there are more correlations and factors to be proposed

    * Yep, that's important. The Current Ratio and Quick Ratio are both 0.3. They were 0.6 at the end of 2007. The Debt Equity ratio cannot be calculated as there is no shareholder equity. Total Liabilities are about 1.6 times Total Assets. All in all a very bleak picture. I would not loan SIRI any money from my bank, i'd be betting my job on SIRI. Would you bet your job on SIRI?

    .
    Reply
  •  
    Oct 03 09:37 AM
    Muley 101...................... just a thought.......... Do you have a sizable position in Siri xm to the short side?
    Reply
  •  
    Oct 03 09:43 AM
    Everyone ,it seems,keeps forgetting that this stock as it stands is at least a three dollar stock that is being manipulated down for the maximum benefit of the feb. converts. I think people just see a stock sinking and make their whole assumption on that one factor. With the revenue stream they have now they could refinance and possibly have cash on hand to pay back loans. With the million or so new subscribers by years end, plus the extra revenue from existing customers buying the new radio and upgrading their subscriptions, it is very likely to see a profit in 2009.
    Reply
  •  
    Oct 03 09:53 AM
    killer, I understand your paranoria. I suffered from it too. The answer is NO. I have never and will never short this stock.

    Now, I am a day trader and I will do what day traders do. I will look for buying and selling opportunities within cycles and may play a little ping pong with this stock. I suspect that you have been experiencing that from other day traders as you sit and cherr for SIRI to go up and stay up. OMMMMM, OMMMMM. That doesn't work.

    The last 2 years of owning SIRI have been as fun as almost burning to death. I feel for you and understand your pain.
    Reply
  •  
    Oct 03 10:02 AM
    rubbish stock!
    Reply
  •  
    Oct 03 10:28 AM
    Muley101, You said regarding the amount of cash, liquid assets and the availability of credit ( or hopefully ability to satisfy debt outright)

    * bad, really bad. Siri will not have enough cash to cover debts and credit will be really tight........

    Sirius has a GM and a Space Systems/Loral credit lines with zero balances on them currently, which is GM $150M and SS/L $100M. Understanding these lines are meant to finance equipment, if used, they would free up additional capital to pay the Feb. 09 debt.

    Aside from these lines, Sirius XM is will be generating huge amounts of cash in the 4th quarter from Best of Both @ $4/ mo, and 20% participation from existing customers. Using 19M subs, that's an additional $182M per year. At 30% its another $288M from this program alone.

    In addition the retail sales for the new equipment will finally be freed up by selling new equipment capable of ala-carte and Best Of which will surprise folks when reported in February 09

    Additional cash is also being freed up from resetting of subscriptions when the B of B is added to an existing sub with 1 year prepay. All prepays bring cash on hand up. They also do not have to refinance the total $300M in Feb 09 debt. They could easily pay down half and refinance the rest or utilize other facilities above and pay it off.

    The next debt due is in May 09 for a total of$350 M. These are bank facilities that are currently provided by banks who are also invested in the company's success. The facility has always been paid on time and Mel said he was already in talks and would be looking to extend the date of expiration on these facilities 2 or 3 years and was confident that whey would accommodate that request. There hasn't been any news to doubt that he will execute that plan.

    Your assessment my friend is pure conjecture with very little fact to support it.
    Reply
  •  
    Oct 03 10:44 AM
    Muley 101.

    Your argument was "SIRI should have never merged with XM - huge mistake."

    Does anyone agree?

    Hope you are going to be the next Bauren Buffet.
    Reply
  •  
    Oct 03 10:44 AM
    Sorry, I was just looking at the Rueters financial statements for SIRI. Suggest you do the same. The facts are there my friend.

    I think you have a lot of wishful thinking on the revenue side and for any more borrowing given the economy and credit markets. Both Ford and GM are broke although they won't admit it. How else would they have gotten a congressional bailout package? If Ford fails it will put a huge dent in the revenue, and it looks like they will within 6 months. Your best investment now may be a convertable Mustang, which will be worth a lot later and you can use in the mean time.

    Has it occured to anyone else that Mel totally and intentionally screwed all of us who had risked a lot of money on the merger getting approved, and even bought more stock just before it. All of our analysis on the merger was right, except the Mel factor. He anticipated our selling on news of the merger and beat us all to the punch by issuing new shares to pay the debt at our expense. All that crap about doing it quickly because he was afraid of a suit to block the merger was crap. You can not trust him. He will screw you again.
    Reply
  •  
    Oct 03 10:50 AM
    More conjecture from a very bitter investor who lost a lot of money because he sold his position. As far as wishful thinking, I supported my position with numbers, what about you?
    Reply
  •  
    Oct 03 10:59 AM
    You just looked at the financial statements on Reuters. They only have information that is filed with the FCC from June 30, 2008 for a stand alone company, filed on August 7, 2008. Great Research to back up your conjecture. We just closed what we all know will be a bad 3rd Qtr and soon to be reported. The 4 th Qtr is going to be the first full quarter of the new merged company. We shall see.
    Reply
  •  
    Oct 03 11:00 AM
    Muley, you're absolutely right about mel. He has screwed the shareholers. And has continued to screw us, with his sandbagged estimates and his lukewarm appearance on Cramer and his eerie silence. If you are holding down a stock it means that the stock wants to go up, and you can only hold it down for so long. I'm not saying it's going to $20, but nowhere in this universe is siriusxm a penny stock.
    Reply
  •  
    Oct 03 11:03 AM
    Far away, I do not agree that the company should not have merged. I do agree that shareholder got screwed by Mel, and for that matter, the FCC in getting the deal done. XM would have gone into bankruptcy or would have been purchased if the merger didn't go through. Sirius could then have been faced with a much fiercer competitor with no debt. The merger was necessary to keep this from happening IMHO.
    Reply
  •  
    Oct 03 11:25 AM
    The stock will go down quickly before closing, let's wait!
    Reply
  •  
    Oct 03 12:06 PM
    learn to think, don't forget mel's statement that he hoped thet he did not have to loan the company any money. What a buffool. Do you think the lenders will remember that when SIRI tries to refinance?
    Reply
  •  
    Oct 03 12:24 PM
    An off the cuff (stupid) remark like that should have no bearing on big financial transaction like that. Is it only me or does it seem like Mel is acting like someone that wants his team to win but doesn't want them to cover the spread?
    Reply
  •  
    Oct 03 01:10 PM
    Is it just me or does it seem like muley is pulling every bit of bad news he can just to prove himself right..... AND all the news he has brought up is already months old and have been baked into the price and we have already discussed these facts on these posts so many damn times it make my head spin??
    Reply
  •  
    Oct 03 01:29 PM
    Let's now bash people Well This Might Be SIRIUS? and stick to talking about SIRI Thank You In Advance
    Reply
  •  
    Oct 03 01:30 PM
    Falling, falling,falling, rubbish stock should go down!
    Reply
  •  
    Oct 03 01:51 PM
    MEL... please give us good news on the financing now that the 700bil package has passed. Now is the time to step up to plate and bring the share prices higher..
    Reply
  •  
    Oct 03 02:21 PM
    Oh yes, please Mel save us. He has done such a great job running this company into the toilet
    Reply
  •  
    Oct 03 03:26 PM
    what the hell is ths? Reverse Stock Splits.

    someone could explain me this? I'm going crazy now
    Reply
  •  
    Oct 03 03:46 PM
    Reverse Split is when a company converts the amount of outstanding shares it has to price. let's say you have 10,000 shares at 5 dollars a share (to make this easy). The company enacts a 1/2 split. That means for every 2 shares you own, you now only own 1. But the stock price will double. So, now back to the numbers. If you had 10,000 shares you now only have 5,000 shares.BUT, instead of being at $5/share the are at $10 a share.
    Reply
  •  
    Oct 03 03:48 PM
    You don't lose money... sometimes a company will do this to make the stock look better to investors.
    Reply
  •  
    Oct 03 04:32 PM
    Good plan - reverse split & get the stock price higher so SIRI can issue new shares to get you guys to pay for some more of the debt, dilluting your shares further. Excellent!
    Reply
  •  
    Oct 03 04:36 PM
    I didn't say that's what SIRI should do... I was explaining what it was to Jamei
    Reply
  •  
    Oct 03 04:39 PM
    I know , but if there is a reverse split, bend over.
    Reply
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