yoyoYO

Sirius/XM Merger: What Happens if It Doesn’t Happen?

appreciate the comments, cos...

i brought up contra-revenue to highlight that it was THE ONLY way an auto mfr's revenue share deal could possible affect a carrier's ARPU calc.

i haven't seen anything in the 10-Q that leads me to believe XM calculates ARPU after taking away "costs" associated with the deals with its automotive partners (be it either as an expense - which wouldn't be ARPU, by definition or as a contra-revenue).

in fact, on pp 39 of the Q1 10-Q, XM lays out the components of revenue by subscriber type as well as ancillary revenue by paying subscriber.

"subscription revenue" tells me it's the total amount of $ received from paying users...it's not footnoted to say it's net of any contra-revenue movement in the period. as such, i have to assume that $ spent in rev share agreements with auto mfrs is not included in the metric. whether you're required to disclose it or not, using a term like 'subscription revenue' carries a certain denotation that would, i'd expect, require clarification if used in conjunction reductions from contra-revenue actions.

further, on pp 24 is the following statement: "The Company has relied upon certain related parties for technical, marketing and other services. The Company has incurred the following <<costs>> in transactions with the related parties described above (in thousands):..." (emphasis mine)

it then goes on to describe the rev share to GM and honda as $32.5M and $.70M, respectively in Q1 2008.

so, i think XM's being consistent in its representation of these costs...they're treated as such & not contra-revenue and not affective of its ARPU calc.

all that said, i agree with your second point, too...ARPU is a great operational metric but isn't designed to provide the full story on profitability. when you're operating a business, you have to turn a lot of dials and pull a lot of levers...revenue is an important one, but not the whole story.