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  • How Sirius Could Grow Its Bottom Line [View article]

    "Probably half the cars I sold left with a premium care warranty, and I didn't get ONE PENNY extra for selling the warranties. "

    You don't say whether the warranty is from the manufacturer, the dealer or a third party, but I am assuming it is from the OEM. Although that makes a difference in customer perception of value, there is a far more important factor at work in this example. My understanding of warranties is that the dealer makes money on the warranty done by its service department, and the service department is a fairly large portion of the dealership profits. So, whether you got any money or not was not the issue. The dealer in all likelihood was going to make money, not only from the OEM for selling the extended warranty, but also from performing the warranty work.

    "The marketing costs would be next to nothing versus Sirius courting "retail" one at a time potential subs."

    In the case of selling the lifetime subscription, the dealer would need to be motivated. That means there will be a cost to the transaction for Sirius unless you honestly think the dealer will do this out of the goodness of their heart or that telling a potential customer they will have to pay to listen to the radio in their car will help close the sale.

    Right now, the number one reason people don't subscribe is that they won't pay for radio. If that's the case, why would someone buy the service BEFORE experiencing it through the free trial. And, if they were going to buy it anyway because they were already familiar with the service, you are now selling a lifetime sub at less profit.

    I just don't get it.
    Oct 16 11:20 AM | 1 Like Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "I will take a WAG and say 50% of the people that could actually subscribe have never heard of SiriusXM."

    Uhmmm... And how big is the number of "people that could actually subscribe"? Everyone over the age of 18 with a credit card and a US billing address?
    Oct 16 10:13 AM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "I meant SAAR increasing until at least 2017."

    There is no evidence to support an uninterrupted increase in new car sales through 2017. And, even if were true, that alone would not support any meaningful increase in subscribers.

    As to ARPU, we will have to see how much impact the current price increase on ARPU. If retention discounts continue to increase, we will most likely see far less of an impact than might have been expected.
    Oct 16 10:07 AM | Likes Like |Link to Comment
  • A $3 Billion Share Buyback Program From Sirius XM? [View article]

    "I think that it is the recovery of the money (even if they sell less shares) that is the priority for Liberty."

    If it is, then it is inconsistent with the statement about not spinning out full value shares - at least if one still is looking for a spin as the ultimate objective. And, if a spin is not the objective, Liberty would not need to participate in a buyback.
    Oct 16 09:14 AM | Likes Like |Link to Comment
  • A $3 Billion Share Buyback Program From Sirius XM? [View article]

    "The main reason for this is that it is a stated goal from Liberty that it would like to get back some $1.5 billion it invested into about 700 million shares of SIRI common stock. "

    A lot of the numbers that Liberty has spoken about don't fit together very neatly. First, as of the end of the month, they will have settled the second forward and have purchased about 611 million shares and spent nearly $1.4 billion. They won't get to 700 million shares without spending closer to $1.6 billion - assuming they stop there...

    If they take control of the board, the change of control kicks in on the 7% note. If the buyback of shares puts Liberty at majority, the change of control kicks in on the 7% note. So, Liberty may need to go well over 700 million shares.

    But, even if it is only 611 million shares that need to be sold back to Sirius, that would mean that Liberty would be selling these back at about $3 and it would cost Sirius more than $1.8 billion (there is no way that Liberty will take less than market price for the shares they purchased, even if it only costs them $1.4 billion for the 611 million), and if Sirius is also buying non-Liberty shares to keep the change of control from kicking in too soon, that drives the buyback over $3.6 billion. If the shares cost $3.25 in a buyback, the cost just went up to $4 billion. And, if it's 700 million shares, the cost at $3 goes to $4.2 billion and at $3.25 it goes to $4.55 billion. That means a lot of incremental debt.

    At the Investor conference Malone said that he thought leverage of 4x was okay. Maffei talked of a $3 billion buyback to keep Liberty percentage constant. It's hard to see how all this plays out with those kind of leverage numbers, debt, cost of the buyback, and a reasonable price for the shares over the next 24 months.
    Oct 16 03:50 AM | Likes Like |Link to Comment
  • How Sirius Could Grow Its Bottom Line [View article]
    James Stocklasar Thomas Jr.-

    "accounting issues aren't a reason for addressing why you can't improve the retention rate. "

    The question from raltnjz was about helping the bottom line. Part of the answer to that question is about how this affects the income statement and is most definitely an accounting issue.

    If you want to address whether it's a good idea or a bad idea, it's a different issue. If you want to address whether there is an impact on retention, that's another issue.

    You wrote: "Suddenly, the excited buyer is faced with a new bill! Most likely, many car buyers have already stretched their budgets. " And yet, you want to make the price higher at the time of the sale? Is that logical? Then, consider this: Who is most likely to be willing to take that option? Is it someone with a stretched budget or someone that has the money to pay for it? And if they have the money to pay for it, then conversion would not be an affordability issue, would it?

    You wrote: "If Sirius can afford to offer new car buyers three months free, "

    For used car buyers, Sirius is offering three months for free. Sirius can "afford" to do this because the cost is relatively low, and, in return, they are able to get timely info about the purchaser so they can send out those promo letters you discussed. It could be argued that used car buyers are more stretched financially than new car buyers, and if that's the case, are they going to want to shell out the cost for a lifetime subscription? How much do you suppose that adds to the cost of the purchase? Does the dealer get a mark-up?

    For new car buyers, it is the OEM that is paying for the "free trial." The OEMs have different arrangements with Sirius and their cost varies. Some may share in the revenue, others may get subsidies for the parts (this is the SAC) and others may get a combination of incentives from Sirius. In return for these incentives, Sirius gets money from the OEM for each trial -- you see this in the category called "Paid promotional subscribers." In other instances, I believe, that the OEM may buy all the parts without a subsidy and in return, Sirius allows the OEM to offer the new car buyer a free trial.

    What you are proposing would likely result in a significant increase in the price of the new car and would seem to be inconsistent with offering trials. If you are the car dealer, do you want the salesman to be sitting down with a customer trying to sell them the right to listen to radio in addition to the financing or lease plans, extended warranties, tinted glass, anti-theft options, undercoating, door guards and dozens of other options? If you are the dealer, it seems to me you would want to get a cut of that radio option...

    So, sure, you wind up with a higher rate of retention. Those subs never cancel. On the other hand, you also are likely to wind up with much lower penetration rates and fewer subs.

    And, my guess is that Sirius winds up with a lot less money.
    Oct 15 11:59 PM | Likes Like |Link to Comment
  • How Sirius Could Grow Its Bottom Line [View article]

    "Not sure how well this would actually help their bottom line. "

    I'm not sure either. The answer lies in accounting for revenue, and if this represents a commitment to provide service for the life of the car. In that case, it may require that the payment be put onto the balance sheet and as both a current and long term liability, with a PORTION of the payment recognized each quarter and moving over to the income statement (revenue, cogs, net income) and off the balance sheet.

    Then there is the marketing issue, where you would probably be required to disclose to the customer that their favorite station could be cancelled at any time.

    And then there are the music royalty issues...

    Mel recently said the number one reason people don't subscribe is they won't pay for radio. I would think this idea just made that sale a whole lot more difficult than the concept of the monthly fee being less than the cost of a cup of coffee a day.
    Oct 15 05:35 PM | 1 Like Like |Link to Comment
  • B&G Foods - Recent Price Weakness May Provide Buying Opportunity [View article]

    "Respectfully disagree. "

    I am not sure what you disagree with. An increased level of risk? The company has made many divergences from their strategy since you purchased it. First, they picked up a couple of household product brands, moving away from "shelf stable food" products. Second, they made a larger entry into Canada. Third, the Chipita acquisition has them picking up a manufacturing facility and 250 employees - increasing headcount by about one third. Fourth, they had a share offering that diluted equity by about 8% (you now own 8% less of the company) and used those funds for the acquisition rather than using debt. Fifth, as a result of the share offering, the cost of dividends has increased by $4.5 million/year and also made dividend increases more expensive.

    It is certainly possible that this acquisition will go smoothly, but it is a departure from their recent past when they used debt to make acquisitions and then used the incremental free cash flow from the acquisitions to increase dividends and pay down the debt. To me, it seems like a change in strategy, especially after hearing Wenner continually talk about using leverage and debt to make accretive acquisitions. Recently Wenner talked about being comfortable going to 5x leverage to make acquisitions. They are currently at about 4x. Now he's changing course and using equity.

    "I am playing on house money as I got in at $9.71 and $12.00."

    I cringe when I hear an investor use this phrase.

    RANT ON:
    In a casino, when you have started winning and you take your initial stake off the table and continue gambling with what's left, you are playing with house money. I have done this and consider what is left on the table as an entertainment expense, so if it's all lost, I'm back where I started and have enjoyed the challenge of trying to beat the house.

    The point is, unless you sold enough to cover your initial investment, you are NOT playing with house money. You are, at best, playing with a mix of your own and house money. But that's not the worst part. The fact is that you are likely investing for a different reason than if you are going into a casino and gambling. With a casino, you know the odds are stacked against you.

    In investing, one hopes that due diligence and a consistent strategy will result in some combination of long term capital appreciation and current income. And, unless you are very unusual, you aren't considering the investment a gamble. It's your money, even the gains, and you should treat it with the same care and respect that you have for the crisp $100 dollar bills you keep in your wallet. It would really suck to lose your wallet and the cash, and it should hurt to lose money on an investment.

    (For certain speculative investments, one may argue that it is gambling and that if you have sold your initial investment, it's the same as playing with house money... You are looking for the thrill of making a killing and having something to brag about to your buddies.)

    Oct 15 05:16 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "But a sub is a sub is a sub... and every sub is cash.."

    Thanks for the comment. Yes, a sub is a sub and all of them generate cash, but if growth is coming more from the current customers rather than adding new customers and expanding the base, it might indicate that it is not getting any easier to get the other households to pay for radio.

    There is nothing inherently wrong with that, but it could alter how the growth prospects of the company are evaluated.
    Oct 15 01:18 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    Thanks for the kind words.
    Oct 15 02:10 AM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "Simple stuff."

    I agree, but it's info I don't recall seeing or hearing about before the last 5 or 6 weeks. What I would really like to know is how this has changed over time... In other words, is the popularity of Sirius - as measured by the number of subscriptions - growing in terms of increasing households or are the subscriber counts growing because households are adding more subscriptions.
    Oct 14 09:53 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]
    Joe Figucia-

    Oct 14 09:48 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "You implied Mel was playing loose with the facts and attempting to wrongly lead investors into believing radio home growth would be comparable to television. "

    I never implied Mel was "attempting to wrongly lead investors into believing radio home growth would be comparable to television." nor do I know why you would infer that. The major points I was trying to make is that (a) subscribers are more concentrated than I had previously thought (with an average of more than 1.5 subscriptions per customer (or household)) and (b) that a lot of people had rejected paying for radio. At the ML - B of A conference Mel also stated that the number one reason people don't subscribe is that they won't pay for radio. That results in a staggering number of terminated subscriptions.
    Oct 14 09:45 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "It seems like they should be able to derive a conservative growth factor based on the number of new addresses they get from new car sales as well as used car sales and applying the conversion rate. "

    It would seem so, but there has been an issue with getting the info from the dealers on a timely basis. Then again, maybee the info is so depressing, they just don't bother to releases it.
    Oct 14 04:37 PM | Likes Like |Link to Comment
  • Sirius XM CEO Discusses Household Penetration Rates [View article]

    "Your use of households in your calculations indicates that you believe there is NO other category of sat user since you divide TOTAL subs by number of households to reach your 1.63 sub per household."

    Thanks, I appreciate the comment, but I'm not sure what you mean by this statement. Mel said that some subscriber-households have more than one subscription. So, we have total subs and we have households. What other sat users or subs did you have in mind? And, does it matter what the delivery method the sub uses or if some subs are IP only?

    " we have been having this disagreement for almodt 3 years as to the effect that the statistics you cite have on the effectiveness of the business model. "

    It just seems like it was three years, but I think I've only been commenting for a little more than 2 years... ;-)

    "the numbers you cite have dramatically increased but at the same time so has the sp. "

    Which numbers that I cite? The deactivations? It was anticipated, and so was the increase in the number of subs and the FCF, and as a result the share price... None of which means the share price currently reflects fair value. As long as new car production increases and OEM penetration rises, the Gross Adds will rise - and if conversion holds constant - the rise in the Gross Adda will offset the the deactivations and, for a while, the rising churn. Used cars have added to the sub growth this year, and it will be very interesting to see if there is a gradual increase in churn or retention discounts or... Is there another new revenue stream coming? We'll see...

    "What is driving both is the increase in the AAPU which will continue to increase at least into 2017."

    Why will ARPU continue to increase into 2017? Are you forecasting ongoing price increases or a dramatic increase in advertising or something else? Q2 ARPU is a scant 3.8% higher than it was a year ago. ARPU may rise if paid promos drop as a percent trials, or if self-pay subs become a greater percentage of the total, or if the MRF needs to increase, but the jury is still out on this issue, and it's not even clear if that would be a good thing.

    By the way, I'm working on an update to my second article and we can all have some fun with that. .
    Oct 14 04:30 PM | Likes Like |Link to Comment