As a long-term subscriber and frequent trader/investor in Sirius XM, I am compelled to let my thoughts be known. I consume every bit of information on the subject of radio in all of its forms and in particular when it comes to Sirius XM. I have recently become aware that a thoughtfully worded email has been received by "some" subscribers informing them of the impending 2012 price increase. It appears to be tailored to inform investors as much as subscribers to prevent a Netflix (NFLX)-like debacle. It was sent from the desk of Mel Karmazin and it reads as follows:
Dear Valued Subscriber,
I would like to thank you for being a subscriber and for your continued support. As the Chief Executive Officer of SiriusXM, I spend much of my time focused on satellites, programming and employees, which are all very important, but nothing is more important to me than our subscribers. I understand that the primary reason you subscribe to SiriusXM is the unparalleled choice we offer, and since launching over a decade ago, we have continuously expanded the variety and quality of the programming we provide.
And the best is yet to come. We are building an exciting future that includes even more channels, greater diversity, exclusive subscriber benefits and more flexibility in the ways you can listen to SiriusXM.
I hope you understand that to continue bringing this unbeatable listening experience to our subscribers, there will be a modest rate increase of $1.54 per month — about 5 cents a day — on your SiriusXM Internet Radio subscription. This increase will take effect on your next renewal date that occurs on or after January 1, 2012.
Because we know this increase comes during challenging economic times, we have provided some options below that you may want to consider, including several ways you could save:
— Keep what you have now, and your SiriusXM Internet Radio subscription will continue to offer you incredible value. We've just added over 20 new channels to the lineup, including more music, sports, comedy and entertainment. In the coming months, we also plan to introduce new features that will give you more control as you enjoy SiriusXM on your computer, smartphone, tablet or other device.
— If you're paying invoice fees, save $2.00 per billing cycle simply by changing to credit or debit card billing. It's far more convenient and a great way to save.
— Take advantage of our Annual Plan discount. It's a better value than your current plan because you get a month free (you pay for 11, you get 12). If you switch to an Annual Plan before January 1, 2012, you'll be billed at the current rates for your first year. Installment billing is available for most Annual Plans.
— If you also have a Sirius or XM radio in your home or vehicle, consider switching to the All Access package, which would give you all the channels available for your satellite radio, plus SiriusXM Internet Radio, for a great bundled price. It is our best value.
As we continue to add exciting new content and find more ways for you to enjoy our programming, we will work hard to control costs and create efficiencies to ensure SiriusXM continues to be the best value for your entertainment dollar.
On behalf of everyone at SiriusXM, thank you for your support.
Sincerely,
Mel Karmazin
First things first. "Dear valued subscriber?" Since I have not personally received the email notification and have only seen the email second hand on several occasions, would I be correct to assume that I am not in the "valued" subscriber category? It certainly feels that way. Secondly, the perceived value of a subscription is a completely subjective premise. If you signed up for a subscription in 2001-2006, you will likely agree that both Sirius and XM have each added more variety and exclusive content over the term of your subscription and a price increase can be rationally justified.
If you signed up for Howard Stern, (as I did) the added value proposition becomes a bit flimsy, due to the fact that I am actually getting less value since Howard reduced his "live" weekly contribution by 25% and I have since been charged to use the internet feed, which was originally offered as complimentary, as well as the increased charges for additional subscriptions and new royalty fees. Upon the release of the mobile apps, Stern fans were shocked and dismayed after signing up for the $2.99/mo. service only to find that the "King of All Media" (some media apparently) was not available until his latest contract was negotiated and signed last December. To this day under the Sirius XM Appstore reviews, potential new subscribers are greeted with this horrendous and currently inaccurate 1 star review and rant that is visible by default as the most helpful: "No Howard 100/101?? Are you kidding me?" For a company interested in creating the perception of value on a highly social platform such as the Appstore is, allowing such a review to remain for 2 years is inexcusable. To make the value proposition even worse, the Sirius XM app (available for a charge, NOT free) has a cumulative review rating of 2 stars. The reviews are littered with bad review after worse review. Complaints consisting of: "crackling" "skipping" "looping" "crashing" "logged in elsewhere" "inactivity time out" "loss of signal" "loss of favorites" "loss of album art" "low bit rate streaming." Year after year these issues and complaints have gone unaddressed.
By way of comparison, I listen to The Adam Carolla Podcast through Itunes. Adam recently released an app specifically designed for his fans and he made it available to download for free. He hyped the release of the app on his show and tens of thousands downloaded it and reviewed it. Adam Carolla, within days of the release had mentioned on his show that while personally reading the reviews he discovered that many loved the app but were complaining that it was not able to be played in the background for multitasking. The very next day the app was updated to allow multitasking. Done and done. The lack of curiosity on the part of Mel Karmazin, who apparently does not use the mobile app and does not read the reviews is a case study in corporate apathy. If however the app was made available for free, it could be concluded that you get what you pay for, but alas, it is not free. The mobile app has infinite potential and the ability to blow away its competitors, yet it languishes in app purgatory along side other notable 2 star apps, the only difference being many of those apps were specifically designed to make "fart noises."
Satellite radio 2.0 has not actually been released nor has it been fully explained. As of this moment, a single new Sirius XM branded radio has been released with features similar to many of the previously released Sirius and XM devices. X-tra channels have been made available for this new "Edge" radio as well as for internet listeners and the mobile app subscribers. So where is the true value of 2.0? It is in the yet to be released personalized channels, play-lists and on-demand functionality that should be released (as the email states) over the coming months. Now, as for parsing the superficial vagary of the "coming months" language, we can only be assured that Mr. Karmazin has essentially said "not in November." As you know, November is a critical month for introducing a product, marketing it, and making it available in time for it to be gifted or personally acquired, and realistically, November 2012 can also be considered a coming month, can it not?
The "Edge" radio is a much appreciated upgrade for most of the long-time users of the still adequate yet unattractive and functionally limited older retail radios. However as a potential buyer, I am not interested. I would have been interested except for one enormous blunder. Best Buy (BBY), by way of an ill-timed tease, revealed the superior Sirius XM "Lynx" radio on its website, and has since removed the listing. I am therefore waiting for the still unknown release date for this product. I only hope that my Christmas funds have not been exhausted before it is finally available. It leaves me to wonder if other Sirius XM super fans are doing the same.
Even now Sirius XM itself has placed the "Edge" radio in the second banana position on its own website. If you click the "shop" tab on Sirius XM's website you are directed to an image of the XM "onyx" radio with the inexplicable declaration to "shop early." It is ponderous to me why a company could be aware of the necessity to shop early yet can still simultaneously delay the release of a progressively essential and potentially revolutionary device such as the "Lynx" with impunity.
After reading this, It may surprise you to know that I am still long Sirius XM and am adding to my position. Why? Because I remain confident that once the quantifiable value inherent to the features of 2.0 are released Sirius XM will indeed be reborn and will have reestablished itself as a force to be reckoned with, as these 2.0 features will most likely be very popular for all age groups.
I highlight the notable shortcomings of this company, to draw attention to the overly simplistic and shortsighted folly of controlling costs to add value, and the arrogance of confusing the finesse of gently informing a consumer with the required clarity of demonstrable justification. Value is not exclusively measured in terms of cost cutting, it can also be measured in the quality of the service, and products offered, the hands on nature and sincere curiosity of its chief executive. Value is ultimately defined as the perceived "win" that consumers feel once it is believed that they have received more than what they paid for. Reduced costs can sometimes lead to reduced efforts from a devalued and therefore unmotivated contributor. I see a situation developing where a once gifted CEO has misdirected his talent and attention away from pleasing consumers to being singularly focused on cutting costs, eliminating jobs and creating efficiencies. This has created an environment where speaking truth to power may cost you your job, and most likely why Mel Karmazin is unaware of the public perception of his company.
Lastly, it is nearly impossible to ask to be paid more for a product/service based simply on a promise to add value at a later date while not fully expecting the righteous blowback of dissatisfaction. The Value needs to be added now, and not after a price increase. I am holding my position with sweaty palms, as Christmas day draws near. I am cautiously optimistic that my stocking will be filled with added value.
Disclosure: I am long SIRI.
