Sirius XM Radio Conference Call - Five Hidden Gems

Well, in our previous article we said that Sirius XM Radio (SIRI) management team should sprinkle "Buzz Words" throughout the Q1 2008 conference call. While the management team did sparingly utilize buzz words like iPhone, Twitter, and YouTube, they didn't give much needed new or additional details. Also, it’s always more fun for the media to focus on the subscriber decline than the successful cost cutting across the board.

Since at Rad Sat Daily we like to focus on the positive side of satellite radio (at least for the most part) and believe in the long term prospects of the company, let's discuss some of the hidden gems from Thursday’s conference call.

Hidden Gem 1 - 700,000 Subscribers to "Best Of" service
Sirius XM Radio management announced 700,000 subscribers subscribe to the "Best Of" service. This is the first time management has given any subscriber numbers around the "Best Of" service. When you consider that the "Best Of" service has only been in existence since October of last year 700,000 subscribers is a fairly nice growth rate. Based on the current growth rate Sirius XM Radio could probably expect to see anywhere between 1 and 1.2 million "Best Of" subscribers by the end of this year.

Hidden Gem 2 - iPhone Application could have new Channels not currently on Satellite Radio Service
On the call, Scott Greenstein, head of Sirius XM Radio programming based on our interpretation, very briefly mentioned new programming to be available on the Sirius XM Radio iPhone Application. Here is what Scott Greenstein said,

The SIRIUS XM app will deliver an expanded programming lineup that includes SIRIUS XM's exclusive sports talk, news, comedy, and 100% commercial free music channel, as well as new talk, comedy, and music showcase channels.

If we focus on the words "expanded" and "new" in what Greenstein said above then there is a potential for new programming to be available on the Sirius XM Radio iPhone Application or better yet, Sirius XM Internet Radio. Of course, Scott didn't go into much detail on the call.

Hidden Gem 3 - GM Deal Renegotiated
Let's face it, XM Radio previously sold its soul to GM all in the name of competition and gaining subscribers. A renegotiated GM deal extended to 2020 with better economic terms is beneficial long term to the company.

Hidden Gem 4 - Programming Changes and Price Increases Beneficial Long Term
While the programming changes/merging and price increases to multifamily and internet radio stream has been difficult for some subscribers or former subscribers, the long term financial benefits of the move is clearly noticeable. Programming costs were significantly down due to the programming changes. Additionally, the price increases will have a long term benefit to the finances of the company.

Hidden Gem 5 - Renegotiation of Programming Contracts
Some programming providers have decided to renew their contracts with Sirius XM Radio in some cases at reduced rates. Mel Karmazin on the conference call said,

Our programming providers understand the benefits of being on the SIRIUS XM platform with its million of listeners and true nationwide reach. Without exception, they have elected to remain on our platform when contracts are up, often at substantially reduced rates.

Given that Sirius XM Radio has in the past been knocked for how much it spends for programming the fact that programmers are renewing their contracts with the company at substantially reduced rates is great for the satellite radio broadcaster long term.

For now we will stop at five "Hidden Gems" found on the Sirius XM Radio conference call. Can you find anymore "Hidden Gems"?

Let us know.

Disclosure: long SIRI

Comments

[WTHarvey:]

A perfect storm...for the shorts.

May 10 08:29 AM

[Ny_guy:]

Hidden Gem 6: We have our expenses/debt obligations covered for BOTH 2009 and 2010

Hidden Gem 7: Although the revenue decreased and the net additions fell they RAISED the projected EBITDA to over 350 mil for 2009.

Hidden Gem 8: Out of 400,00 "lost subscribers" only 100k were from SIRIXM'S subscriber base the other 300k were from promotional subscribers who never become paying subscribers (reflecting the state of the economy and the decreased car sales - something that won't last forever)

May 10 09:15 AM

[BChargers:]

PEOPLE DON'T WANT IT
LET THAT SINK IN
More adults wear diapers than pay for radio.

May 10 09:25 AM

[hypnorandy:]

One very important Gem is the fact that an untold number of potential subscribers did NOT subscribe because of all the press about them very likely going bankrupt... which of course didn't happen. Why would you subscibe for a year or more with the strong likelihood of your investment becoming zero. You wouldn't. These next couple of quarters will be critical to persuading potential subscribers that their money invested in SIRIXM is solid. Despite them not going bankrupt, they need a campaign that states that they are here for the long haul. The positive subsciber impact will become that hidden gem!

May 10 09:32 AM

[truck_drive...:]

I would think a lot of the sub loss was due also to the massive car Repo's due to the lay off. I think the sub number were descent considering some company didn't even survive to year. All those repo's have sat radios.

May 10 10:23 AM

[Donutcar:]

New car demand, not realized, does not disappear...it accumulates.

May 10 11:32 AM

[Donutcar:]

New car demand, not realized, does not disappear...it accumulates.

May 10 11:33 AM

[relmar2003:]

PEOPLE REALLY DO WANT THIS SERVICE.
LET THAT SINK IN.
People would rather wear diapers than crap all over themselves.

There, that post is about as useful as BC.
Some of these hidden gems are literally gems for the future. Meaning big savings, and a nice change to bank a profit at some point sooner than we may think(More like Free cash flow). To make a profit, they would need to clear their debt first, which becomes possible when your taking in more money than your paying out. That last line was for BC chargers. So he can understand how it works. Last week wholesalecd/BC/floorhomo learned two new words. Profit, and metrics. Today I will teach them free cash flow. They were 2 million a month over costs, including the Liberty writedown. They are now losing 66 thousand dollars a day. To put that in perspective, at one time this company was probably losing close to 1 million dollars a day. Since the merger, Mel came on board, even with huge debt load, they are now losing only 153k customers worth of income. Thats less if you consider the new contracts, lowered SAC, and raised ARPU. So basically if they had been able to keep every sub they lost this quarter, they would have broke even regardless of the LIberty writedown. See how close they are. This is in the worst economy in our lifetime. Do i need to repeat this more? WORST ECONOMY IN OUR LIFETIMES. IN YOUR DADS LIFETIME. They are still hammering out a better balance sheet quarter after quarter after quarter. Iphone is just the tip of the iceberg. Once it takes Verizon, that will sell 1 million I phones within a year, just because of that.

May 10 12:38 PM

[wholesalecd:]

One thing though is all these DREAMY gems are "HIDDEN"

Few things for sure that's NOT "HIDDEN are:

Lost subs, no profit, huge contracts, sloppy mgnt, and other free services out there.

SELL MONDAY AT .38 AND GET BACK IN AT .30 BY THURSDAY.

THE TRICKLE DOWN IS IN EFFECT.


JAY BOY BILLY

May 10 02:01 PM

[canis major:]

yea, that quarter in a DEPRESSION was'nt bad-i say were at or around a buck by labor day
and PEOPLE DO WANT IT is the new montra

May 10 02:48 PM

[canis major:]

and jay boy, your trippin' if you think you'll see 30 cents in this stock again, those fdays are gone my friend.

May 10 02:53 PM

[User 23816:]

Since the merger, all they have done is extract value from subscribers, which will continue to erode their paying customer base. Customers have noticed the game of three-card monte that's being played with channels and services. Their strategy may be just fine for investors short term, but I wonder how great it will be when nobody's buying it anymore. I've been a paying subscriber for three years but I'm allowing it to lapse this month. Why pay more for less? Besides, one of my iPhone apps gives me 30,000 live radio stations worldwide. I might continue to pay if they offered me a fair sense of value, but they don't, so I won't. I wonder about their model.

May 10 10:59 PM

[wholesalecd:]

You couldn't of said it better buddy....It's a NO WIN situation which isn't gonna help them now or in the long run. It might help with a little more revenue in the short-term though but the lost subs will hurt in the long-run. Liberty is basically letting Mel run the show still with his mis-management and horrible business decisions. Sell now and buy back at .30 on Friday.

JAY BOY BILLY


On May 10 10:59 PM User 23816 wrote:

> Since the merger, all they have done is extract value from subscribers,
> which will continue to erode their paying customer base. Customers
> have noticed the game of three-card monte that's being played with
> channels and services. Their strategy may be just fine for investors
> short term, but I wonder how great it will be when nobody's buying
> it anymore. I've been a paying subscriber for three years but I'm
> allowing it to lapse this month. Why pay more for less? Besides,
> one of my iPhone apps gives me 30,000 live radio stations worldwide.
> I might continue to pay if they offered me a fair sense of value,
> but they don't, so I won't. I wonder about their model.

May 10 11:05 PM

[BigVinnie:]

Your an idiot. You had the option of paying and locking in your rates over a month ago for upto 3 years or a life time. Companies need to grow in even hard economic times. As for me I payed a $230 difference on my account for the $500 lifetime subscription, you could of gotten a deal your self, but your just to slow and pitiful to call the sirius CSR to figure that out.


On May 10 10:59 PM User 23816 wrote:

> Since the merger, all they have done is extract value from subscribers,
> which will continue to erode their paying customer base. Customers
> have noticed the game of three-card monte that's being played with
> channels and services. Their strategy may be just fine for investors
> short term, but I wonder how great it will be when nobody's buying
> it anymore. I've been a paying subscriber for three years but I'm
> allowing it to lapse this month. Why pay more for less? Besides,
> one of my iPhone apps gives me 30,000 live radio stations worldwide.
> I might continue to pay if they offered me a fair sense of value,
> but they don't, so I won't. I wonder about their model.

May 11 01:28 AM

[User 23816:]

Who's the idiot if they're not around in three years, much less a lifetime (terminally stupid doesn't count)? Even if they last that long, they are competing in a world that is placing less and less value on paid media. I have no qualms with any business making a profit in good times or bad. At the same time, it needs to be a viable business to EARN the profit by delivering real and perceived VALUE to its customers. If it makes its numbers by EXTRACTING value from the equation, it doesn't deserve to last very long, except by the good graces of the idiots who continue to pay more for less because they don't know any better. My friend, either you're (notice the correct spelling, it will help you in the future) the idiot, or you're Howard Stern attempting to save what's left of your stock from the toilet.

May 11 10:45 AM