"Sirius" Problems for Satellite Radio

Sirius Satellite Radio Inc. (SIRI) isn't growing quite as fast as it thought just a month ago. In fact, it's 200,000 subscribers short of an estimate it gave a few weeks ago. It announced that by the year end 5.9 million to 6.1 million listeners would be tuning in. That was down from 6.3 million forecasted in August of this year. Three weeks ago, the company said it was on track to hit that number. But it won't. Growth isn't happening as quickly as anticipated.

It's not like listeners are going to the competition. XM Satellite Radio (XMSR) revised its subscriber forecast down several times this year. It's looking for year end subscribers to be between 7.7 million and 7.9 million. That's down from the 9 million it expected at the beginning of the year. Both companies agree there's a softness in the retail market.

That's because listeners have more options than they did even 2 years ago. Now they can plug in their iPods or listen to HD [High Definition] Radio while they're driving. Of course, it doesn't help that complaints of transmission problems have increased, as well as others. New subscribers don't see those as selling points.

What seems to be happening here is a limited universe for a market, one that only has so many subscribers. While Satellite and XM are battling it out for those listeners, neither is making money, and both are spending freely for new content or stealing content from the other. As an example, Sirius recently signed Nascar which will move from XM in January. That's not new content.

Howard Stern was signed last year with a lot of fanfare. Sirius hoped it would make all the difference. There's no question many new listeners signed up to hear an unfettered Howard Stern titillate his followers. But that wasn't enough to put profits on the bottom line. And unless these two giants merge [which would have real anti-trust problems], the promise to investors
of profits within some reasonable time frame seems more and more remote. And if the two were to merge, beware of the cost of a subscription because there would be no competition.

Sirius and XM have serious problems, and Howard Stern, NASCAR and college football aren't the fix. It looks like a lot of money was spent wooing a market that is now showing itself to be relatively small. Unless the universe of listeners expands, these two radio giants will continue to battle over the subscribers who are simply looking to get the best deal for listening to commercial free radio.

SARI/XMSR 1-yr comparison