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Old 11-24-2003, 06:34 PM   #1
PMuller
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I helped a high-school senior recently with some information on a report that he was doing on Sirius. He sent me a copy of it and I thought I'd share it with you all. There are a few mistakes and errors that I noticed, but it came out pretty well-written in my opinion.
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SIRIUS, which launched its service on February 14, 2002, is an innovative company transforming and creating the way we listen to music, news, sports, children's programming, entertainment and talk shows. The SIRIUS satellite digital audio system is composed of three components: their satellite radios, both separate units and vehicle installations; satellites and terrestrial repeaters; and a national broadcast studio located in New York City's Rockefeller Center. Their ultimate goal "is to make sure that everyone in America gets the opportunity to enjoy music the SIRIUS way, without commercials."
Using three satellites and numerous ground repeaters, SIRIUS is able to provide high quality digital sound that can be received all over America, and even offshore for 200 miles. SIRIUS is the only company that provides 60 streams (channels) of 100% commercial-free music and 40 streams that provide additional programming 24 hours per day. For an activation fee ($5.00 online) and monthly fee of $12.95, customers may access the service from a SIRIUS-ready AM/FM/SAT radio, including a new Plug & Play unit, or a high-end touch display screen unit purchased at any major retailer. SIRIUS has captured the automobile market through exclusive agreements with five model automobiles, which feature factory built-in SIRIUS AM/FM/SAT radios. Satellite radio is an explosive new industry, and SIRIUS has only one competitor, XM Satellite Radio Holdings Inc., the first in the business, which currently is showing a slight market edge. But with all major capital expenditures completed, a recapitalization completed in March, 2003, $479 million in cash and very little debt, a 42% increase in subscribers over last quarter, and an upturn in their stock value, SIRIUS is in a competitive market position to expand rapidly and successfully. It will be an exciting company to watch.
SIRIUS has developed ways to set itself apart from its competitor. SIRIUS is committed to make 100% commercial-free music available to everyone. Though the monthly fee for XM Radio service is $9.99, about three dollars less than SIRIUS, most of XM's music channels have commercials. As XM Radio states on its website, "…many are commercial free…" Another business strategy which sets SIRIUS apart from its competitor is its commitment to a wide range of programming including unique Hispanic programming, live sporting events, and public radio options. The company also has invested in three satellites, whereas XM has two. This makes both the investor and the customer more confident in uninterrupted service and receiving service in more areas of the country, including offshore. SIRIUS, unlike XM, is committed to reach every potential listener, and therefore has arrangements with recreational vehicle manufacturers as well as boat and yacht manufacturers.
To reach its goals, SIRIUS' strategic plan has been to develop four types of partnerships—hardware partners, content partners, vehicle partners and marketing partners. SIRIUS has partnered with six established producers of radios such as Kenwood and Audiovox. These companies manufacture their radios to be SIRIUS compatible and are national and world suppliers. The distribution as well as the marketing and selling of these radios is already in place through those companies. "On December 21, 2002, SIRIUS radios were available at approximately 5,500 retail locations…sold over ten million car radios."
Content partners refers to music agreements with copyright holders in music and sound recordings, so that Sirius pays royalty payments. The 40 streams of non-music content generate income for the company through commercial advertising. Arrangements have been made with such companies as ABC, A&E, CNN, Discovery Channel, ESPN, NPR, E!Entertainment Radio, Hispanic Radio Network and the educational American Academy of Achievement.
SIRIUS has wide-ranging vehicle partnerships that form the core of their sales strategy. The more cars that have satellite radios in them, the more potential subscribers SIRIUS has. They have agreements for installing "AM/FM/SAT radios in Ford, Chrysler, BMW, Mercedes-Benz, Jaguar, Volvo, Mazda, Land Rover, Dodge Jeep, MINI, Wolkswagen, Audi, Nissan, and Infiniti vehicles, along with trucks from Freightliner and Sterling." In addition, the radios are in some recreational vehicles, boats and John Deere agricultural equipment. Hertz Corporation has agreed to make SIRIUS radios an option on many of its car rentals for a daily fee, which is shared with SIRIUS.
SIRIUS has a diverse and aggressive marketing strategy. It promotes its product through magazine, newspaper, radio and television advertisements, direct mailings and retail brochures. It also has a wide range of marketing partners, which provide a buffer if one area does not work out. The company sponsors a NASCAR race car and thus has high visibility to racetrack fans and television viewers during the races. SIRIUS does "on-hold" music for companies, sponsors Radio City Music Hall, Madison Square Garden, and House of Blues events. The marketing is aggressive with the Plug & Plays now reaching all the major retailers, deals signed with major automobile manufacturers, and agreements in the works with Winnebago, Formula Boats as Avionics Innovations. Part of its marketing strategy is embedded in the type of programming it provides. For example, all styles of music are offered, both through programming and through live performances in the SIRIUS studios. Also, they have a gay/lesbian channel, Spanish language streams, children's programming, comedy, weather, exclusive contracts with National Public Radio and Public Radio International, and left-wing/right-wing talk show, and live sports broadcasts. They are creative and innovative. For example, they are working with the Hispanic Radio Network to develop special women's, youth, and news and talk programming in both Spanish and English. They are offering such diverse choices that everyone can find many channels of their liking. Their target sales audience is broad: everyone who listens to the radio, but particularly those who listen in their cars. With a 55% increase in the subscriber base in the second quarter of 2003, and a 42% increase in the third quarter, their sales and marketing strategy is beginning to pay off.
However, the 5-year stock market track record of SIRIUS appears less than encouraging. A share was valued at about $35 in 1999, reached a peak of over $60 in early 2000, only to dip to mere cents in early 2003. But this was the trend of its competitor and the NASDAQ telecommunications index also. (See attached graphs.) SIRIUS is working with its sole competitor, XM Radio, to come into compliance with FCC license requirements for a "unified standard for satellite radios" so people can buy units that are compatible with both systems. The two companies have licensed their "intellectual property to one another" and one day the two companies will not be strong competitors, or so it seems. With less competition, and with undoubtedly a continuing growing demand for the product, the stock value of both companies should continue to rise.
The major capital expenditures for SIRIUS, all of which have been completed, include the three orbiting satellites (a fourth is in storage as a backup unit) and 98 terrestrial repeater stations. The repeaters allow the signal to be accessed in urban areas where tall buildings and tunnels would normally be an impediment to reception.
The headquarters and broadcast studio in New York City contain the music programming equipment, music studio for live performances, transmission and satellite control equipment. The company has 304 employees, none of which is represented by a labor union.
The Annual Report for 2002 states some risk factors for investors. They include possible equipment problems with the satellites, additional funding of up to $100 million will probably be needed after the second quarter of 2004 to reach a breakeven cash flow situation, the subscriber base will need to continue to grow, revenues must be sufficient to pay the interest on debts and license agreements and the annual rent of $4.6 million, problems could arise with the corporate partners who may be unable to hold up their end of the deals, and competition from XM Radio. In addition, NASDAQ requires a stock to be listed at a minimum of $1.00, or the stock may be dropped. If this happens, SIRIUS will be called a penny stock (a derogatory term), and it will be difficult for the company to continue to raise the money it needs to stay in business. Currently there is a class action lawsuit against the company, which claims SIRIUS misstated when its service would be available which artificially inflated its stock. SIRIUS has filed a motion for dismissal stating that the allegations are clearly false.
The management team of SIRIUS is composed of twelve directors and officers. The current President and CEO, Joseph P. Clayton came to SIRIUS in November 2001 after serving as Vice Chairman of Global Crossing, a company that filed for bankruptcy two months later. Mr. Clayton has an extensive background in the communications industry. The Vice President of Sales and Marketing was a senior vice president of sales and product management for a leading electronics company, Thomson S.A. The Vice President for Marketing was vice president for worldwide marketing of IMAX, Ltd., and before that she was vice president of marketing and programming for a major satellite broadcasting company later acquired by DirectTV. The Chief Financial Officer resigned this year, but will be a consultant for another year. The Vice President,, General Counsel is an attorney and the Vice President, Engineering has had an extensive background working with Ford and Qualcomm developing "telematics," wireless vehicle applications and other technologies. The Chairman of the Board was nominated as Entrepreneur of the Year, 1999, by Harvard Business School and is in NASA's Space Technology Hall of Fame, among other accomplishments.
SIRIUS has a knowledgeable team, innovative and diverse collaborative strategies for developing their programming, aggressive and broad sales and marketing strategies, and a product that most people eventually will access, either at home or in their car. If the company can weather the initial financial problems of a new, nationwide company, it will surely be a great success.
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Old 11-24-2003, 06:39 PM   #2
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wow.... now THAT'S a long quote!

I don't have the time now, but that'll for sure be a good read later! thanks!
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Old 11-24-2003, 06:50 PM   #3
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Pete Muller - mentor to today's youth.

That's a nicely written piece, always good to start recruiting potential Sirius activists while they are young.

By the way, thanks for the reminder that my 20 pg technical writing report on Internet Marketing and Sirius is due next week.

Jeff
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