Commercials on Sirius XM: Benefit vs. Backlash 92 comments
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Over the years, I have seen many ideas brought to the table regarding satellite radio. Some are business friendly, others are consumer friendly. One idea that has been bandied about a few times over is the idea of having national sponsors for channels.
The concept seems sound, but there are many variables to consider. Would a channel named Pepsi (PEP) infringe on the consumer perception that satellite radio is commercial free? Technically, station bumpers (the voice-over that tells you that you are listening to Sirius XM (SIRI)) and DJ chatter involving information about the BEST OF service, the family plan, etc. are not considered commercials, but do too much of this, and consumers may feel that the promise of commercial free is not being met.
For many, and in particular the investors, the idea of channel sponsorship is not terribly infringing. Some say that the “ad” can simply be displayed on the screen, rather than spoken. There has to be some value in this concept, right?
While I have not seen the music channels employ some of the philosophies, I have seen an entire hour of a Stern replay with an ad on my Stiletto. But there are 69 channels of music that could have a sponsor. Why not do it?
The answer may be as simple as supply and demand. There is an abundant supply of ad space, and demand is on the downside. Advertisers across the media spectrum are cutting back on expenses, and this would also impact satellite radio. Sirius XM still has ad space available on non-music channels. How prudent would it be to implement station sponsorships when there is still advertising real estate elsewhere within the service?
Another issue may be that a channel sponsor would want a certain level of control. Pepsi has had their issues using certain singers in their ads. In fact, they have suffered boycotts. What if Pepsi demanded certain language standards? What if they did not want to allow certain artists or songs to be on a channel they are sponsoring?
Consumer backlash may be another reason the company has not taken this step. With the recent channel shuffle, there were numerouscomplaints. Even with the existence of a similar channel, people were irked at the loss of their favorite. We already see the four Clear Channel (CCO) stations on the XM dial relegated to second class citizen status because they have commercials. Would sponsored channels suffer the same fate? Commercial free music is one of the sole differentiators between terrestrial radio and satellite. if you remove that separation, people may begin to wonder why they need satellite radio.
All of that being said, if the dollars are right, this is an option that the company needs to consider. A lot of careful consideration needs to go into the process though. While every million dollars counts, the benefit vs. the backlash must be weighed.
Should the company explore the idea of sponsored channels? Sure. They already have over the years. XM’s original business model involved commercials. Their initial sales pitch to OEMs was that they would share a bigger piece of the subscription revenue pie than Sirius because they would make up the difference in ad dollars. The ad dollars never rolled in, and ultimately, XM switched to a commercial free format. It could be argued that there was not the critical mass of subscribers at that point that exists today, and likely that thought needs consideration, but is now the time to make the move?
Some feel that with the current situation, the company needs to make bold moves. Still others feel that the merger was too bold a move, and there has been enough change. Early on, Mel Karmazin wanted advertising to make up 10% of revenue. Thus far, the company has never reached that goal. In the current economic conditions, and with ad sales down across the media landscape, perhaps now is not the time to dilute the market further.
The national sponsorship idea has merit, but implementation of it does carry risks. Without having the ability to see the sales stats, it is hard for any investor to grasp the benefit vs. the impact, but rest assured, this concept has been on the radar screen for quite some time. While we may not know the exact reason it has not been done, we can can put forth some educated guesses.
At this point I feel there is plenty of ad space to sell on Sirius XM without impacting the music channels. Only after all of those ad slots are performing as needed should the advertising supply pool be increased. That’s my opinion on the matter. What is yours?
Position: Long Sirius XM
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This article has 92 comments:
I see enough commercial crap all around me, can't even tell what city a race or game is played in anymore. I'd love to know how many dollars I spend a day go to feed the commercial industry.
Scot's Slant
And there is one more thing: It can probably be safely assumed that SiriusXM already has the road map in place where bit by bit, they'll slide a little advertising in here, and a little over there....
On Nov 26 10:08 AM schellem wrote:
> I am a subscriber and stock owner. While I certainly want to see
> the stock move positive, I will drop my subscription in a heartbeat
> if I have to listen to a single commercial.
>
> I see enough commercial crap all around me, can't even tell what
> city a race or game is played in anymore. I'd love to know how many
> dollars I spend a day go to feed the commercial industry.
On Nov 26 08:09 AM Chalupacabra wrote:
> When XM had the SBUX channel, I didn't mind at all. In fact I thought
> projected a coffee shop kind of vibe to the music choices and I much
> prefer to see the name Starbucks on my dash over commercial interruptions.
> If it helps to keep the sat radios afloat, I say, "I want my Horizon
> Blue Cross Death Metal station."
On Nov 26 11:37 AM SHARKATT11 wrote:
> Don't understand the crying on here. If you have Sirius there is
> a good chance you listen to Howard Stern. He has almost 10 minutes
> of ads every 50 minutes. Commercials are NEEDED for this company
> to survive. Put 3 minutes of commercials every 15 minutes to bring
> in ad revenue. AOL, Yahoo, etc.. makes its money from ads and is
> free. So if you can get the suscriber fee AND advertising money then
> maybe this company (and stock which i don't own) may survive.
On Nov 26 12:34 PM Konsta wrote:
> sick of being solicited... you make me sick...go move to a communist
> country
I think about 5 minutes per hour is the ceiling of tolerance subs will be willing to listen to on a pay radio ........ and even that is shaky ground ..... but I think Siri could manage a spot or two for some revenue without much collateral damage ........
I am with you both. I have 4 subscriptions and a boat load of shares right now...... put commercials on my music and I am gone, gone, gone.......
Fill the commercial slots on News, Talk, and Entertainment. Ruin the music content and the company is done....... My only concern with allowing even 5 seconds per hour is once you give 'em an inch, they'll screw with the whole thing.
Watch this stock very closely because this kind of volume jump can mean something very bad on the horizon or could be good.
It's just very suspicious and volume jumps like this should always be investigated by the SEC.
Jay
Posted by Timothy Sykes on Wed 26th of Nov, 2008 11:24:30 AM
Sent to TIMalert subscribers early this morning:
Again a ton of potential shorts today, setups are ripe heading into the holidays, a time known for beginner day traders to try their luck, now people are desperate for fast cash so it’s gonna be easy pickings as these fools actually believe message board hype and buy into surging Penny Stocks …hopefully it happens again this year as it’s fun to take $ from dumb people:
BIDZ is a double off its $2ish lows, classic dead cat ounce, will look for signs of reversal to possibly short
RDNT is also nearly a double off its lows
CSUN reported bad earnings, but was probly priced in considering the stock jumped big, no w a double off its lows in just 3 days…I don’t like earnings plays, but I’m watching.
JRCC is also a double off its lows, just a stock that’s gotten wrecked, no other reason, potential short.
SRI was a great short for a 15% gain, $1,700 profit, detailed post coming, now the stock is dead to me.
On Nov 26 07:07 AM relmor wrote:
> My opinion on this is the stock is .14 cents. Thats my opinion on
> this.
Unless your Mr. Tim is an institutional trader, he'll not be shorting any of these stocks because no trader otherwise, is marginable under $5. Meaning no broker will be borrowing him any shares. Sorry to say.
Jay
If I have to listen commercials I'd much rather listen to my local commercials than nationwide ones. As it is the only thing I do miss about listening to local terrestrial's is the local event commercials...bands playing, festivities etc.
There aren't any SEC filings to support your claim. It could have been end of the month selling at close of day by an institution closed on Friday. The S&P downgrade on Credit is long over due, given the company's silence on their progress of refinancing and the existing credit crisis.
I defenitely wouldn't want commercials on any other subject unless it delt with music.
If satellite radio has to pay to play music the record labels should be supporting satellite radio to pay for advertising. Or in general, satellite radio should just not have to pay for music rights to give up these advertising slots to music companies.
also go beyond radio, radio is almost dead, i.e. expand into tv, gps and internet access inside vehicles
disclosure: i hold a small position in sirius at a very low price, it's a speculative stock
On Nov 27 01:42 AM Konsta wrote:
> as far as not being able to short stocks under 5$, not necessarily
> so, e-trade lets you short stocks over 3$ , so it depends on the
> brokerage. as far as the person who is upset with the "move to a
> communist country" comment, this company needs to come up with a
> VIABLE business model iinstead of f--king around like they have been,
> and commericals are such a viable option that works for everyone
> else. so I say, you tried, you failed, and now try something that
> your peers do that actually works.
> also go beyond radio, radio is almost dead, i.e. expand into tv,
> gps and internet access inside vehicles
>
> disclosure: i hold a small position in sirius at a very low price,
> it's a speculative stock
ummmmmmmmmmm......viab... business model? like getting out of the RADIO business?? thank GOD you are not running the company. what would those 19mil subscribers do?? lololololol
On Nov 27 01:42 AM Konsta wrote:
> as far as not being able to short stocks under 5$, not necessarily
> so, e-trade lets you short stocks over 3$ , so it depends on the
> brokerage. as far as the person who is upset with the "move to a
> communist country" comment, this company needs to come up with a
> VIABLE business model iinstead of f--king around like they have been,
> and commericals are such a viable option that works for everyone
> else. so I say, you tried, you failed, and now try something that
> your peers do that actually works.
> also go beyond radio, radio is almost dead, i.e. expand into tv,
> gps and internet access inside vehicles
>
> disclosure: i hold a small position in sirius at a very low price,
> it's a speculative stock
As Shure46 above has said and I agree is this Company's product is the Very Best, Pure, Commercial Free Music Content and Uncensored Talk and Music. As an investor I want to make money on my investment, but I do not want the Company to Compromise the Quality of the Product to achieve this goal. It is, after all, what distinguishes them from all the rest.
Your NATIONAL SPONSORSHIP PROGRAM is available now on all of the stations that currently run commercials, so why not fill those slots first, and stop trying to Diminish The Product of this company by diluting it with this lame sponsorship program. After Terrestrial Radio buys Sirius XM and takes them private, you can try your pitch with them.
Your program idea will eventually cost the company its Content-Is-King crown, because once money can be raised in this manner, they will simply increase the amount of commercial exposure that subscribers will have to put up with. Content is more than just genre diversity and depth, it is also the manner of delivery and focus. Without commercials, music listeners are given a unique opportunity to escape all the BS being thrown at them by all of the media options in their life. Currently this is, other than recording your own music which is time consuming, the only Oasis of Media available, and subscribers have been willing to pay for it. This sponsorship program will cost the company an immediate reduction in subscriber numbers, it will definitely increase churn and hurt the company's ability to bring in new subs in this economy. Your numbers are flawed in that your assumptions are for 24/7 participation by sponsors on all music channels. This plan will devastate this company not Save it. IMHO.
There are many here who feel the need to bash some of us who regularly post here, for leading the poor people astray, influencing people to take more losses, etc....oh yeah...and working for the company...
A good report by Faber hit the air this morning about the RADIO SECTOR. That's right the WHOLE SECTOR. It's depressed folks--and worse for you if you have debt. Some radio companies are FCF and still down significantly. It's not just SIRI. If you want to actually research something for a change...check out these:
CDL - .18 (down from 2.85 52 wk high)
CJR - 10.85 (down from 25)
CMLS - .95 (down from 9.22)
EMMS - .30 (down from 4.74)
CXR - 5.55 (down from 13.09)
BBGI - .85 (down from 9.09)
RC - 5.55 (down from 14.56)
So you see. In reality. Those in this unlucky space this particular year not only ran into a company buzz saw in SIRI, but also a sector saw as well. Decimated. So anyone here who wants to criticize some of us for trying to make sense of it, I suggest you do some research and see that it's not just a SIRI story at all. But then I have to tell you this, so what hope is there for you?
I see today's move as tied to the coming Autos squeeze this week...I still believe, with 270M short as of 11/14, there is potential here for some significant moves both related to Autos loan, meeting, and just locking in profits. 270M is the 3rd highest all year and I think is compounded by many who have been short much of the year and will be looking before EOY to settle up for yearly income statements...
Been thinking about strategy a little, and I think I'm going to leave half of my .20's buy in as a just in case to account for squeeze magnitudes. I mean, we just don't know when this thing is going to take off but it could happen fast. Think I'll take out 1/2 on this move up related to Autos, then redirect that money and some new cash for the pull back into the teens or lower pre meeting. That way, I'll be covered with something in case I miss a day where it just takes off without me. I'm starting to think, at this time, at these levels, it's prudent to keep something in at all times...
I started listening to Howard back in '93 when I was living in Los Angeles. All the way back there, the advertisers were junk. I doubt he ever will attract anything more than that. His audience is just to specific for mainstream advertisers to waste money there...
Agreed...I meant mainstream in context with his material. Many mainstream folks listen to Howard but who also enjoy his darker content. That content is what keeps advertisers seeking mainstream consumers away. So though you and others of Howards following might be mainstream also, quality (or broader market) advertisers don't see you in that space because they know they will find you elsewhere where they also get more bang for their buck (roi)...
So as said...I wouldn't be looking for quality ads in that space anytime soon...
A discussion of the revenue generated from the advertising revenue gained vs. the revenue lost from the increased churn of existing subs and the headwind that will be created in generating new subs, (a double negative impact) from commercial based music programming, perceived or actual, needs to be researched. Unintended consequences of any programming action is a very important aspect of this company's future success. Even 5 seconds of nationally sponsored programming will be Exploited by the Competition and Analyst already not in favor of the subscription business model to take the company's only true competitive advantage away. I think Sirius' Program management is already fighting an uphill PR battle in the merged content arena. Customer satisfaction MUST be their primary concern even if it takes the company into bankruptcy. This Business Model is under attack from the Perfect Storm of the Economy as you already accurately pointed out. To throw revenue from commercials into the mix would not be indefensible and further proof to the competition and nay sayers that the business model is a failure. So let the Bilge Pumps run 24/7 during the storm, and when the winds and waves subside, let the pure content product of music stand firm. JMHO
hey guys,
relmor I was feeling like you on Wednesday about next week after looking at the charts and how the price is approaching 13 day and though I would wait until today to take advantage of a weak trading day to take it the price down. I cleared 85 % of my positions in the stock today. The technical indicators are not looking very inviting for next week on the markets in general. If I had a margin account I would short the indexes here, with pre announcements going to be ugly. As far as the Autos go, They will get their money but that presentation isn't until the week of the 8th. Next week I fear could be a week of testing recent lows in the indexes and without any real news on Sirius, we could do the same hear. Next week the shorts (bears) are back to business IMHO.
I follow your posts as well as sl62, relmor, and anyone else who can make a sensible post, be it negative or positive. Good that you were able to get out at a point that you liked today. I've been looking for a point to get out of some of my positions as well. Today looked good, but don't you think we will get a good pop on Tuesday if the Big 3 show up in Town flying in on Ted with their best Sears suit and maybe a little more humble with a plan that makes sense?... ok, maybe just a little more humble and a good plan :-) If they came in with a good to great plan, would that buzz last through the 8th (or whenever it gets decided)? If that happened, would that be enough to get a bunch of shorts to cover (at least short term) and maybe get us up around .40 or so for a short time?
Hope everyone is enjoying their leftovers. Can't believe I read that some of you fellas ventured in to Walmart today. What are you nuts? We had people camped out in front of the Best Buy since 9pm last night... Some in line to save 50 bucks on that "must have" item.. Gotta love it.
On Nov 28 02:57 PM cos1000 wrote:
> geez i hate it when it all just comes out in Gibberish.... relmor,
> I was feeling like you on Wednesday regarding next week's market
> action. After looking at the charts and observing Sirius' and the
> market's price points approaching the 13 DMA, I thought I would wait
> another day, today, to take advantage of a weak trading day, before
> they take the price down again next week. I cleared 85% of my Sirius
> XM position today at .2090 today. I will be looking to get back in
> before the end of the upcoming week.
Appreciate your comments. The lines are what I personally avoid but love to see the enthusiasm. Every since my - Hurry Up and Wait - days of the Air Force as a young recruit, lines have had a different meaning for me.... Any Veterans out there know what I'm talking about. The lines then didn't have the rewards back then that these hopefuls have today.
I agree and have been a proponent of News induced rallies for this stock, but just feel that their is way to much Hype in the market in general that has created a short term overbought situation. With the Shorts still hovering as always, and taking a break this week to enjoy the Holiday and let the Market recover, I just feel that their coming back in force in the early to middle part of the week. A lot of opposition will be very vocal about the auto bail out and in the end the money will be given. IMHO. This just becomes an opportunity for the shorts to make money taking it down and then rebounding on a positive decision. The auto stock are already ahead of themselves in price and will suffer early also. Well that's my take and now we will all have to see how it unfolds. I think that s162's strategy of moving in halves is a good one. I am just trying to recover more in less time.
My strategy may be foolish, but look where the SP is while I am employing it. I still believe that before the meeting and with the positive news on the autos the stock will move off and out of this range until after the meeting. The low .40's are possible, and I am hoping that it goes their. I just think it will go down before it gets there. If on Monday it closes over .26, then I probably was wrong and I have a longer wait before I get back in.
I averaged down to .2050 and made very little.... just wanted to come out clean. When I bought shares at .24 and .25, I hadn't thought .14 was possible. I now know it is and don't want to be in during the early part of next week. My take is more technical in nature than based on company performance or any possible news. From watching level ll trading, this week was easy action, without any real incentive to take it down. The charts and level ll are being interpreted by me to mean the shorts took a break and welcome the stock going up a bit. I think the short side of the trades are making money on smaller moves now and the action we are seeing up or down is orderly and without any panic at all. Absent any real surprise in debt financing, the shorts will make money whenever they want. I think s162's short squeeze will only occur if the company announces bank financing without a lot of dilution for the Feb and May debt. It all boils down to what the chances of that happening are. I think they are low....
My Dad was in the Air Force. Early on in SEA with S&R on HH-43s. Color blindness kept me out years ago (no tech jobs). My hat is off to all you veterans then and now.
I wish I had had the discipline (or knowledge/experience) to get out of this stock way back when. Who, among us mere mortals, could have seen exactly how bad it would get with this stock. I had gotten burned a few years back by getting out of a stock at the bottom only to have it go back up. I swore I wouldn't do that again, so averaged down and averaged down. For a while I could keep my loss at 50%, but then these violent legs down just killed me, but continued to hold. Bought more in the 30's, mid 20's, and .15 with my next highest at .95 and then other buys higher.
Your strategy makes the most sense, and come Monday/Tuesday, I may be kicking myself... obviously not the first time I've done that. Just seems like lately the Big 3 problems have been weighing heavily on Sirius. So, it would seem that with some good news the opposite effect should happen and possibly there would be a couple of other good follow ons. Love to get out of all my positions up to .95 and take a little breather. My only worry is the killjoy from GS chiming in after some perceived good news to bring rain to the parade. Next week is going to be fun.
Good luck to everyone. Whatever strategy you pursue, I hope it is a winning one.
On Nov 28 04:12 PM cos1000 wrote:
> cygnus...
>
> Appreciate your comments. The lines are what I personally avoid but
> love to see the enthusiasm. Every since my - Hurry Up and Wait -
> days of the Air Force as a young recruit, lines have had a different
> meaning for me.... Any Veterans out there know what I'm talking about.
> The lines then didn't have the rewards back then that these hopefuls
> have today.
>
> I agree and have been a proponent of News induced rallies for this
> stock, but just feel that their is way to much Hype in the market
> in general that has created a short term overbought situation. With
> the Shorts still hovering as always, and taking a break this week
> to enjoy the Holiday and let the Market recover, I just feel that
> their coming back in force in the early to middle part of the week.
> A lot of opposition will be very vocal about the auto bail out and
> in the end the money will be given. IMHO. This just becomes an opportunity
> for the shorts to make money taking it down and then rebounding on
> a positive decision. The auto stock are already ahead of themselves
> in price and will suffer early also. Well that's my take and now
> we will all have to see how it unfolds. I think that s162's strategy
> of moving in halves is a good one. I am just trying to recover more
> in less time.
>
> My strategy may be foolish, but look where the SP is while I am employing
> it. I still believe that before the meeting and with the positive
> news on the autos the stock will move off and out of this range until
> after the meeting. The low .40's are possible, and I am hoping that
> it goes their. I just think it will go down before it gets there.
> If on Monday it closes over .26, then I probably was wrong and I
> have a longer wait before I get back in.
I agree that all revenue stream ideas should be run through some third party assessment of viability. You however have not given me your thoughts on how important the uniqueness of the company's product is and how you feel that it would impact their ability to bring in additional subs after running commercials on their music channels.
On your second post, my feeling is no the stock will not keep going up in price next week, but I have been wrong many time before. I stated above why I feel this way in looking at the charts and level ll action this Holiday week.
PS: Some of the new formats have some DJ's that just ramble on about nothing. If there isn't a mass exodis from that then what I'm proposing is a slam dunk! Cos, Love this discussion. Thanks, Neal
i noticed your postings on this before the article ever came out , great insight !
the " sub. side" of my brain would'ent bother a bit , a quick 8 second , this hour sponsored by ...
reasearch on this could be done to select appealing sponsors that pertain to the demographics of each station.
most likely well established , popular products or services would be best. personaly, i would like to hear one of my faviroites mentioned.
the investor side of my brain also see a great positive from this.
Any idea when we would be knowing whether RS and Dilution is approved or not?
and the com.free diehards just stay at current rate.
it would cut a little off the revenue but the lower sub.rate may offset with some new subs. generated by lower monthly rates.
techenicaly , i dont know how or if that would work , somehow they would have to fill in that empty 8 second space with a station identification.
everyone wins , the diehards stay comerical free, and the rest save a little cash on the rate.
just some thoughts.
stupid idea, oh well !
Satellite radio's advantage is that it IS everywhere. As you are driving, especially on a longer road trip through perhaps remote areas, you don't want to lose your reception. This is the nice thing about satellites. They need to deliver more video and monetize the size of their audience though unobtrusive channel or time sponsorships.
3 times are a charm.... LOL
Shure46
I agree with you that the RS and share dilution are going to be a done deal at the annual meeting. I still think that shareholders will be surprised when the final financing arrangement is announced. Shares as warrants against the risk, say B preferred standing in front of the common on a default, are still attractive to a bank with a good payer as Sirius Xm has been. Cash on hand to pay of the remaining Feb 09 is very possible and a new Bank deal on the May debt is a reasonable expectation with more strings, such as the warrants, and a higher rate. To burn the shorts this could be announced after the meeting and RS and Dilution approvals.... Wouldn't that shake things up??
It is still completely possible that Mel will not issue most of these newly authorized shares. The incredible dilution authorized could be necessary to facilitate the split, even if the reverse was a 1 for 20 resulting in 400 M authorized and 175 M issued as the company is now configured. If the Feb and May 09 debt is taken care of without issuing new Convertible Bonds and instead announce using the COH to take out the Feb debt, I think the stock price would go to .6 to .9 / share on the announcement. Now, if additionally they pre announce good FCF in the 4Q, the stock could easily go back over a buck before any RS would even take place. So much for my Christmas wish......LOL
I think your right on the timing of announcing the feb debt being resolved. And yes, that would certainly shake things up considerably. I also feel that the shares will be authorized, but I am not so sure they will all be issued. With each passing day, bankruptcy talk is ending and brighter days are certainly ahead. After all, it really can't get much worse.
By the way, your insight is quite remarkable and appreciated. I enjoy the objectivity that you employ on your posts.
Long Sirius
you are too kind...... and thanks...
To be clear, I'm not saying that I don't believe there will be refinancing deal, and possibly well before February at that . . . I just don't think it will be announced before the shareholder meeting. I of course hope I'm wrong.
I hope your laughing when you say that...... about Public Schools that is.
A long time ago, I read some suggestions on-line for how the sat-rad model might be improved. Recently, there have been many more of these. Lots of people writing with lots of good, free ideas, but Ol' Mel ain't listening. How about "advertising" your OWN product, Mel, and not other peoples' products? Now, there's an idea! How about free streaming internet of a handful of stations WITH commercials to get people introduced to the (formerly) high quality line-up of sat-rad?
If you can't tell, I'm a "former" XM subscriber (now a "Sirius-XM subscriber", not by choice) who's not too pleased about the way the XM line-up was DECIMATED.