Sirius in trouble....

http://www.thestreet.com/_yahoo/markets/activetraderupdate/10325932.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Merger Watch for Sirius

By Jim Cramer

It was bound to happen sometime: Last night, Sirius (SIRI - commentary - Cramer's Take) under Mel Karmazin became, well, less serious. This revision downward in Sirius sales comes at a really bad time: more than 10 trading days before Christmas.

I know for a fact that this management team was not going to make a call on sales until closer to Christmas. But the downward revision in subscribers, to a range of 5.9 million to 6.1 million instead of the targeted 6.3 million, is the first big miss for the Karmazin team. It remains to be seen whether the miss was telegraphed in the stock or whether the equity now has to drop below the $4 level. To me, the latter seems more likely.

(snip)

I have to tell you, I thought that without a merger with XM (XMSR - commentary - Cramer's Take), these two companies might not create a lot of wealth in the next few years. Mel convinced me I was wrong. I wasn't. I blew it. I should have stuck to my guns. I feel embarrassed. And I don't like it.

Mel had been money in the bank. Everyone deserves one strike. But in my league, two strikes and you're out.

Even a half-strike more and you're out in this satellite game. If Mel hits the low end of the range or doesn't hit it at all -- both entirely possible if sales don't pick up in the next two weeks -- this one's done for, without a merger.

would translate to big numbers of subscribers and they lost.

Seriously. Sirius is doing fine.

have wiped out the increased revenue. Sirius is not doing fine, they (apparently) have missed their subscriber target buy 400,000 or so subs. 400,000 x $12.95/mo = $5.2 million/mo in revenue.

was up around $35.00/month! Silly me.

XM is 12.95/mo for the 1st, $6.99/month for each additional

personalities like Stern. Stern himself is getting one big paycheck, that's one big expense. Stern's former FM audience was probably 3X what is now on satellite radio. Lots of people liked to listen to Stern but apparently not enough to by the signal receiving unit or the monthly subscription.
You may remember that not too long after Stern started on Sirius when it was clear his show was not going to snag the kind of audience he had on FM, he went on an on-air tirade about all of the "a-holes" that didn't follow him to satellite radio and how cheap and stupid they were. Not a good way to build a fan base.

Sure they may have doubled subscribership, but is it enough to pay for Stern and whoever else they hired? Looks as if it is not likely.

.. and then add Martha, and not only outbidding XM for NASCAR but BUYING OUT the last year of XM's contract..

in less than a year. Not bad! LOL, "Oooh, Mel had to revise his estimate down a whopping 200,000 subscribers! They're failing!!!!"

Reeelax, kids. Sirius is doing well!

:shrug:

the two.

a combined iPod/XM to-go unit.

Macworld is just a month away :)

iPhone. Several patents point to them building a phone, and some leaks from the fabricators seem to fuel the leaks. Let's see if it is just wishful thinking. The Zune has dropped from 2 to 5, and that could be in part due to the iPhone rumors. would you put a bunch of money down on a cell phone if you knew Apple was going to launch their own phone in a month or three?

I have read a few bits here and there but some of it is contradictory. One article says XM is doing fine while others say XM isn't doing much better than Sirius. If the later is the case, I don't see XM trying to finance a buyout of Sirius.

They are not doing fine and if any one does the buying it will be Serius. Serius is going to show a profit this year ahead of schedule and looking for huge profit next year. This whole story is hype. Serius has almost doubled it's subscription rate in the last eighteen months..

.. it would almost be a no brainer.

I think Sirius was just too ambitious.

I've known of and follow Mel for over 30 years...when he helped build up Metromedia and then onto Infinity. Yep, he was money in the bank in a game where he wheel and deal and get the most out of his stations. He did it too well for Viacom who bought into his big money projections for the radio division only to see those numbers fall short...a major reason why he and Stern ended up at Sirius. It was a "divorce" that has hurt both...and, most importantly, Stern listeners.

Sirius was in deep doo-doo before Mel arrived and, as you've stated, all the money he threw at the high profile names all but wiped out any fiancial benefit a surge in subscribers had brought in...not a good thing when you were already in a deep hole. The real difficulty is the turn-over in subscribers as I've seen figures as high as 40% of people not renewing their contracts and that payment defaults were also high...and that new subscribers aren't coming in fast enough and with enough cash to offset the loss of the old business.

A lot of the problems XM and Sirius are having today weren't unknown. Various surveys and analists in the late 90's ptedicted pay radio service would attract a small segment of the listening audience...around 10-15% (which is about where Sirius & XM numbers are) and that the high expense of the start-ups for both companies would eventually lead to one going under or merging or being bought out by the other. That part appears to be on the horizon.

While many pundits think the FCC won't approve such a merger, I don't agree as the health of satellite radio relies on at least one healthy service and a downsized one at that. 2007 is going to be quite a year in the radio biz.

It doesn't matter whether it's AM, FM, or Satellite. Radio is a Duplex medium: there's a human on one end of the transmission and a human on the other end. However the response time may lag, there is interaction between the Sender and the Listener. When a Certain Corporation bought up every station it could get its hands on, it did what Bean-Counter-Driven entities always do: started cutting costs. This resulted in voice-tracking, whereby one DJ in East Bumfuck Somewhere could do "shows" on perhaps three additional stations--but at a much lower cost to the corporation than having three more DJs on the payroll.

Trouble is, the shows are recorded--CANNED. And no matter how good the DJ is, listeners will soon figure out that there's nobody there. There's really no DJ in the control room of their favorite station; they can't call up and talk to a Live Human about their favorite song or any of the thousand other reason that make people want to talk to DJs.

Couple this voice-tracking with the tightly-controlled, narrowly-focused and MADDENINGLY repetitious music rotations on corporate-owned stations and you have Problem One. Every ounce of Soul has been sucked out of the medium because it costs less this way.

Problem Two has to do with the fact that Radio, since the demise of the big networks after WWII, has been a CHEAP medium. In order to compete for advertising dollars with TV and print, Radio has had to position itself as THE lowest-cost medium. Three or four generations of advertisers have come to EXPECT and depend on this. Most hometown stations have always operated just one or two client cancellations away from bankruptcy. While it may get better in the bigger markets, Radio when done properly is a labor-intensive Medium.

The more stations an entity owns, the more each individual station has to produce per month to make the nut. Even when costs are slashed to the bone, it's an uphill battle. This is part of the reason why there are no Country stations in New York City or Los Angeles: there are simply not enough advertising dollars available to the format in these markets to allow the individual stations to meet their obligations to the corporate structure. And the bigger the corporation becomes, the worse the problem gets. This is neatly borne out by the recent sales of a shitload of radio stations by that Certain Corporation.

Problem Three is utterly devastating in its simplicity: people don't like the idea of paying for Radio. They may flirt with it, but it is, in the end, a novelty. A frill.

These are lessons that Sirius, XM and Karmazin could have learned along the way IF they had spent any appreciable time in the foxholes of Radio. Too bad.

:shrug:
dbt
On the air since 1969

This is the same old song and dance we've been hearing for 30 years, and it's why a handful of large corporations control the entire economy.

If a company is poorly managed, it should not be allowed to create monopolies to survive.