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Another Look At Sirius XM's Subscriber Numbers

|Includes: F, GM, Sirius XM Holdings Inc. (SIRI)


It should come as no surprise to anyone that the moment Sirius XM announced that its total subscriber base had plummeted by 400,000 in a single quarter, its stock began a 33% fall from the high it had achieved just moments before. A closer look at the reality however, reveals that the lost subscribers are anything but lost subscribers.

As I outlined in my article Time For A new Beginning, the pre merger competitiveness of the then separate Sirius Satellite Radio and XM Satellite Radio, created a situation in which the company's began counting promotional subscribers as regular subscribers. Most long time followers are familiar with this fact, as these "promotional" subscriptions have sometimes been referred to as "parking lot subs."

The individual company's justified these as subscribers as these promotional subs were paid for by the auto manufacturers, such as GM, Ford and Chrysler. Once paid for, the company could then report that subscription, even though as yet the cars remained unsold on dealer lots across the country.

In that article I had suggested that it was perhaps time for Sirius XM to do away with this concept, and theorized that the drop in auto sales could have a negative impact on the overall tally.

Taking a closer look at the subscriber totals that were reported by Sirius XM last week, we discover that out of the 400,000 subscribers lost in the first quarter of 2009, 300,000 of these were not truly subscribers at all, but rather "parking lot" subs. Sirius reports that:

" subscriber loss of approximately 400,000 since year-end, the company’s first quarter of negative net subscriber additions, was driven by a decline of approximately 300,000 subscriptions in paid promotional trials, reflecting the dramatic fall-off in North American auto sales. Self-pay subscriptions declined less than 1% in the quarter from 15.5 million to 15.4 million."

Taking into consideration the overall economy in the first quarter of 2009, an actual subscriber loss of less than 1% is much better in fact than anyone could anticipate.

According to Sirius XM, subscriptions in paid promotional trials in Q1 2008 were approximately 3.6 million and peaked at 3.7 million in the second quarter of 2008, and have dropped to 3.2 million at the end of the first quarter of 2009. This would indicate that the bulk of promotional subscription losses has already occurred, and is not likely indicative of a longer term problem.

In fact, year over year results indicate that Sirius XM's self-paid subscriber base has grown from 14.3 million to 15.4 million, indicating that despite a sluggish economy Satellite Radio continues to gain in popularity.

Position: Long SIRI