Auto Sales Continue to Spell Trouble for Satellite Radio

The bad news is that auto sales are still terrible. The really bad news is that the year over year comparisons should have been getting easier, but we are still seeing large percentage drops in sales. General Motors (GM) was off by 53%, Ford (F) did only slightly better with a 48% decline, and Chrysler reported a drop in sales of 44%. Even Kia, which saw sales rise last month (due to a promotion where they would buy back your car if you got laid off) saw a decline this month. For their part, Toyota (TM) and Nissan (NSANY) were in the mid 30’s for a decline.

For satellite radio investors, the continued downturn in auto sales translates to less gross installations, which means fewer subscribers. The OEM channel is an integral part of satellite radio’s growth story. Sirius’s (SIRI) CEO at one point became very conservative in anticipating annual auto sales at 12,000,000 units. With the current pace of car sales, that number would seem to be an overestimate now, and thus, there still exists a gray cloud over the satellite radio sector.

On the more positive side, the auto sales can not stay down forever. Additionally, the OEM deals tend to be expensive for Sirius XM. Less installations means less cash burn, which could help the company in terms of cash flow. However, that type of thinking is short term, as the sector needs auto sales to facilitate growth and gain more subscribers. Perhaps the auto companies will consider a new advertising platform, and get some ads on Sirius XM Radio.

Position: Long Sirius XM Radio

Comments

[User 370014:]

Yes, car sales are done, however the percentage of vehicles going out with satellite radio are much higher. I am a dealer and shareholder. Every car goes out with Sirius. Last year it was less than half. That never gets mentioned and it is a fact

Mar 05 06:53 AM

[User 252443:]

Everyone is focusing on GROWTH, how many co's are growing in the current environment. Sirius needs COST CONTROL, at 13 cents PS, I really don't think anyone is expecting anything good, any increase would be welcome in this environment, more important would be the churn rate. If they could keep their costs down, which I can't understand why they wouldn't be able to, at this point, they should become CFP this year, they generate a huge amount of cash, they just need to keep more of it. Renegotiations of their contracts would be next on the list, I haven't heard one major talent support the co's efforts, you know if I was HOWARD or MARTHA or anyone who would do just fine if they never received another check, I think I would try and help the co I work for, even if it meant forgoing my pay for a few months or a year, I understand it's not their fault the co is in this situation, maybe I'm just crazy.

Mar 05 07:47 AM

[ScroogeMcduck:]

Tyler why is bradon such a homo?

Mar 05 08:00 AM

[ScroogeMcduck:]

sorry i ment brandon

Mar 05 08:01 AM

[ARI D K:]

Why no mention of the used car (pre-owned) model that already have radios installed. ? Fact is with this economy car prices still remains high, car cost has to drop at least 30-40 % for people to start buying new cars.

Mar 05 08:10 AM

[ZenInvestor:]

The future is over the Internet, not autos. Although Satellites work well for autos, because you don't have the issue of signal loss when traveling, most music is listened to at home, or on portable devices that increasingly (think IPhone) are 3G and 4G compatible, so you can listen anywhere. The Internet delivery involves no subsidies for hardware, no payments to car companies, and allows for INTERNATIONAL access to the content. The 'focus' on autos is not where the 'next' 20MM subscribers are coming from, it is the Internet delivery systems.

No worries, both delivery systems currently have their place, but in ten years (the life of the satellites themselves) we will have WiMax and 5G or 6G systems in the cars as well. The short term has some challenges, no doubt, but but the future for SiriusXM is much brighter than that of the auto industry itself, and the Internet is 'green'.

Mar 05 08:51 AM

[burnout:]

Most music is listened to at home? When I am home I am either busy in the kitchen or my workshop. When I have time to relax I watch a movie or TV. On the other hand my radio is on every second I am in the car and not so I am a captive audience for advertising. I think this is the norm for most people.

Mar 05 09:31 AM

[burnout:]

In addition to my above comment when at home if I am going to listen to music I have what I want at my disposal and my favorite ball culb on TV or the radio. That is no the case in my car so SiriusXM is about my only choice for the content I want.

Mar 05 09:37 AM

[ZenInvestor:]

Yes, but you can leave your home with your IPhone, Blackberry, or Internet enabled device (a Kindle could do it too), and listen.

The sales of portable devices for SiriusXM almost always come with a home dock, and you see 'docks' for IPhones, IPods, etc., in every Best Buy. Yes, a lot of listening is done at home, that is why music stations are bundled with almost every cable and dish provider.

I have all of the toys, notebook computer, MP3 player, Blackberry, and my XM portable goes with me everywhere. It all works, and people pay for all the modes to listen to the 'content' which is the real 'product' that SiriusXM provides, with or without a satellite.

Mar 05 09:54 AM

[Sirius Savior:]

The sales model for sirius is wrong. They are relying too much on car sales for new subscribers. They need to take a page from cell phone companies. While all phones have different prices, AT&T doesnt care about the cost of the phones. they just want you in a contract paying the monthly fee.

As the universal receivers are coming out They need to offer them free with 3 year reduced price contracts of offer the older receivers free with premium receivers i.e ones that have HD Radios, DVD players, GPS built in at a subsidized cost with a 3 year contract.

Personally Im not going to pay out 150 dollars for a sterios then spend 15-18 dollars a month on service.

Also they need to continue their attempt for an Iphone/pda app. They need to make modification to get it past but that will be essential. Then they can market internet streams by itself. I mean if you can get sirius xm on your iphone for 7 a month minus sports due to contractual obligations, I feel iphone user would relish it and with car adapters get it in their car, home, gym.

This could make them millions of dollars. Just a thought

Mar 05 10:38 AM

[Not all tha...:]

Most of the Sirius radios come with a CAR dock. I discovered this at Christmastime when my mother wanted a satellite radio so she could sit and listen at home in her kitchen. My brother got her the radio and I got her a home kit so she could connect it to her Tivoli radio. I got an XM home kit for my Roady when I swapped my old in-dash unit for one that had XM built in, and I had to call to find the right thing to buy. Their focus is still on cars, except for the Stiletto/Inno and a very few products that can take integrated satrad tuners.

Mar 05 01:25 PM

[ZenInvestor:]

Most of the portable units come with a HOME dock:
www.tss-radio.com/xmp3...

But if you buy one of the low end car units it only cost about 20 bucks to get a home dock for it also. In either case it is simple and cheap to have it both car or dock.

Mar 05 02:26 PM

[itsjust$:]

Just a comment on our illustrious President:

His economic policy looks like it was dreamed up by a Radical
Community Organizer...oh wait...it was.

But you people heed his words " that the Stock Market is just a Poll"
not a real indicator....So I guess we are just getting polled.
oh well, the bright side- my Ameritrade account has the prettiest color
of Red in the Pie Chart.
Take care Y'all

Mar 05 03:54 PM

[Free thinker:]

If satellite radio was joined at the hip with the Automotive industry all of this Doom and gloom would be appropriate... However Sirius Satellite Radio and TV are available to any vehicle. No matter what be it Train Plane or Automobile heavy Truck even golf carts ...yes golf carts .

The problem seems to be a type of "Functional Fixedness" that has been nurtured by the early Pioneers of the service... New cars is our lifeline mentality. Early cell phones were dubbed car phones but somehow that technology morphed into what is common today.

The fact that There are dedicated satellites in orbit than can deliver Radio...TV and all other type of informational services that is available for less than a third of the bundled music ..TV and Information packages available now through The cell services. When Sirius Radio/TV understands its full potential and acts aggressively to fulfill it then all of this gloom will out out the window...

Mar 05 05:36 PM

[User 321:]

This guy never writes anything good about Siri.

Mar 05 07:49 PM

[still sirius:]

SiriusXM is avidly pursuing multiple avenues to increase revenue. Deal with DTV, portable devices, best of, GPS for marine/airplanes, internet stream(multiple formats). Just need time. When auto market turns around, with penetration rates upto 65-75%, the skys the limit. Must be able to navigate through this current dismal economic market.

Slam

He/They(Pelosi/Reed) has had his 45 days...He is absolutely destroying this country and flaunting it in our faces. Hope you never have kids or grandkids. Because they do not deserve the trillions upon trillions of debt that my grandkids will have to pay.


On Mar 05 04:37 PM Slam wrote:

> dude your account looked like that way before our "illustrious President"
> took office. How about giving the guy a chance.

Mar 05 09:36 PM

[TitusHooker:]

IMHO I think that the money going out now may in fact help this situation for a short time. And if SIRI can hold up then so much the better.

However, In your comment about your grandkids, I suggest that your children should have more grandkids and mine too so that there will be more of them to help pay this rediclously hugh dept that O is putting upon us.


Hope you never have kids
> or grandkids. Because they do not deserve the trillions upon trillions
> of debt that my grandkids will have to pay.

Mar 06 12:11 PM