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Old 01-08-2007, 06:43 PM   #16
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Quote:
Originally Posted by garypl
Very interesting post--Thank you--Is it possible to put an "estimate" total of potential OEM for Xm and Sirius----and compare to last year(example--OEM total for xm could be 4 million etc which is 1 million more then 2006.)
-----------------

For 2007 Honda and GM plan on loading 2.5 million units of XM. I believe this is a 600K increase over 2006. In 2006 XM had about a 52% retention rate, so this year's increase from a majority of their OEM contracts will be an abysmal 312,000 If their churn doesn't increase.

I am not aware of Sirius OEM numbers historically being published YOY or by car maker. To that end, I don't suspect Sirius's OEM performance to be too radically different from 2006.... with two wild card caveats.

1. NASCAR may detract from XM OEM and boost Sirius OEM .
2. It appears that DCX's/Sirius load rate is substantially higher than 2006.

In 2006 I believe that the Domestic OEM total load rate was near 25-29 % and that it's expected to go to 50-55% by 2010. There are approximately 16.8 million cars sold in North America.

Lastly, consider that the opinion of today is that as the load rate increases, the retention rate decreases. The theory ( unproven ) being that cheaper cars = poorer drivers less likely to want satellite. IMHO this will be more an issue with age demographics than income per se. E.G. a 18 year old buying a 17K car will want an ipod but not Satrad.
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Old 01-11-2007, 09:12 AM   #17
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Quote:
Originally Posted by CorporateSlave
Dont forget Nav Traffic helps them push their crap Caddilacs.

Plus everyone has forgotten the WCS Wireless deal and future expanded bandwith. Oh yeah... Stern I forgot.

I see no reason GM will go with Sirius.

Especially since they still have a stake in XM.
Your "rolling eyes" smiley doesn't diminish the fact that Stern has been a great influence in subscriptions and market awareness since he signed up.
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Old 01-11-2007, 09:53 AM   #18
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Your "rolling eyes" smiley doesn't diminish the fact that Stern has been a great influence in subscriptions and market awareness since he signed up.
This is, of course, true -- Stern was the biggest name in radio. But he wasn't worth $800 Million or more, which is what the tab will end up being. And that is before you count the OTHER costs to support those subscribers. But what could SIRI have done with a $300 Million ad campaign?

Just yesterday, we had Karmazin telling us that "NASCAR" was the "next leg" of SIRI's retail "dominance". So, for that $800 Million, Stern is finished? That's all we get?

The point here isn't to bash Stern. The point is that you cannot acquire subscribers AT ANY COST and expect the business to make money. McDonalds could sell quarterpounders for 16 cents and really sell "billions and billions". But it sure as hell wouldn't help them financially.

Sirius' life, at least since I began following (in '00, I think) as been one stupid mis-step after another. From choosing the wrong codec, choosing the wrong satellite orbits, choosing the wrong CEO, to starting from scratch on the chipsets, to farming out the engineering, to choosing to go with FM-styled music content, it just goes on, one after another.

The first thing they got right was hiring Mel. They needed a strong leader who could turn the ship around. And he has made a valiant effort, IMO. But it was a huge job. And coming back from the nightmare decision that was Howard Stern is going to take years.
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Old 01-11-2007, 10:19 AM   #19
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Howard Stern was a great decision. Before he came on, it was doom and gloom for Sirius. Not a lot of subscribers, no name recognition, etc. Between 3Q05 and now, Sirius has not only held back subscriber losses to XM, they have diminished XM's sub lead by 1.4 million. My guess is we'd be looking at a 4 million sub gap if Sirius didn't sign Stern. They wouldn't have had the strong 4th quarter 2004, and then 4Q05 until now. If we were strictly looking at people joining Sirius *for* Stern, then you would be right, he is the biggest mistake Sirius could make. If you are looking at people joining *because of* Stern, his promoting, his bringing Sirius into the national spotlight, giving Sirius preferential name recognition over XM, then he was absolutely worth it. People like JML put Sirius' long term marketshare in the mid-upper 30s before Stern, right now they are at 44% and climbing. Right now, he looks like a good pick, but I think we need another year or two of numbers to see how good he really was.

Stern isn't 'finished'. Directly, sure, spare a late night talk show gig. Indirectly, he is still a good ancillary draw, plus there is the larger base of subs that help with attracting subscribers. Cannot forget the name recognition part; more people know of Sirius now mostly because he joined.
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Old 01-11-2007, 11:14 AM   #20
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Quote:
Originally Posted by BenDee
Howard Stern was a great decision. Before he came on, it was doom and gloom for Sirius.
Stern hurt XM more than he helped Sirius. Sure Sirius has closed the gap but shareholders have not really benefited. If you are a long term holder of Sirius shares you have seen the stock go straight down since Stern went on the air.
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Old 01-11-2007, 11:44 AM   #21
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BenDee

I don't think we'll ever put a value on the publicity Stern brought; it was obviously huge. And I don't discount it all -- I totally agree with what you seem to be saying, which is that Stern put Sirius on the map.

But they have committed in the area of $800 Million (or more) to him, and that is a lot of money that could have been spent in other ways.

If Stern gets them to profitability, great. But that doesn't appear to be happening (they've already committed another $100M to NASCAR, and THEN WHAT?). So, SIRI has effectively taken on this $800 Million expenditure, and it has not solved the basic problem, i.e., getting them to a position where they will be able to continue on.

They simply were not in a position to spend $800 Million and NOT have it solve their problem. Which is why they are the financial train wreck they are today. As a "content item", Stern obviously wasn't worth the money. As a "publicity getter", he was worth more than as a "content item", but that much more? I don't think so.

If you're going to spend $800 Million to get, let's say, 2.5 Million subscribers, that's $320 per subscriber, and there is simply no way to recover that money. Even if you allocate $300 Million of that to some kind of permanent brand improvement, you're still spending $200 per subscriber to this single content item, which cannot be recovered.

Ultimately, the measuring stick is what it does to your cumulative losses. And you and I both know that the $1.2 Billion (or more) loss Sirius will report next month would have been a fraction of that without Stern. You said:

Quote:
My guess is we'd be looking at a 4 million sub gap if Sirius didn't sign Stern.
If that is the case, would not Sirius be in a better position, financially, today with 4M subs and without Stern consuming massive amounts of corporate cash and shareholders' equity? Would not Sirius have begun to receive some amount of recognition with this growth? I think clearly, the answer to both questions is, "Yes, they would."

As I see it, it leaves two questions:

a) Will Sirius be able to recover the increased losses in '05, '06, and '07 caused by Stern with reduced losses in '08, '09, and '10? And,

b) Will the publicity, or brand improvement value, contributed by Stern, persist sufficiently to have made it worthwhile?

My view is that the answers to both questions is likely to end up being "No".

Which does not alter my view that Sirius was in very deep trouble and needed to do SOMETHING. I believe that. But it doesn't automatically mean that giving Stern a huge percentage of the company was a good business decision. At the very least it bought them some time, I'll agree. But it has also left them in a hole that could take years to dig out of.

I realize I'm a lone voice claiming Stern to have been an overall negative for Sirius. But nothing about the numbers suggests otherwise.

Adding subscribers at massive cost is not what these two companies need to be doing, and frankly, Stern's hiring can more rationally be viewed as little more than increasing SACs by $800 Million over five years.
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Old 01-11-2007, 12:13 PM   #22
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Quote:
I realize I'm a lone voice claiming Stern to have been an overall negative for Sirius.

No, you're not the 'lone voice'. I've said many times Stern or no Stern, no business can spend $200 to make $100.. It's business 101.

Yes, Stern has put Sirius on the map, no sane person can argue that point. But at what cost? If XM and Sirius didn't go on this spending spree 2-3 years ago of course both companies would have many less subs.. But I still believe both would be in much better shape financially, maybe even profitable by now.
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Old 01-11-2007, 01:42 PM   #23
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Quote:
Originally Posted by lunafan
Stern hurt XM more than he helped Sirius. Sure Sirius has closed the gap but shareholders have not really benefited. If you are a long term holder of Sirius shares you have seen the stock go straight down since Stern went on the air.
------------------


Haven't thought about it said this way, but I think you are surely right. I've manufactured products over the years and i can tell you that if 50% of your selling price is in the raw materials, you have a problem.

Stern is getting about 60-65% of what he's drawing IMHO. I'm nearing if not past the " excessive " camp. Mostly considering his 3.5 day a week schedule.
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Old 01-11-2007, 03:10 PM   #24
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Stern is getting about 60-65% of what he's drawing IMHO.
I don't know what the number is, but it is absolutely essential that his cost be viewed in part as a payment, not for content, but for something equivalent to advertising. Otherwise, you absolutely cannot make any sense out of his hiring.

But when you pay for intangibles like publicity, in these dollar amounts, you have to be concerned about the longevity of the publicity gains (as well as any negatives and potential negatives that may be associated with it).

If, a couple years from now, Sirius is still hammering XM at retail, making the pro-Stern case will be much easier than if retail has returned to parity (which is what you would more-or-less expect them to have accomplished at some point, without Stern). Even though retail isn't where the real battle for SDARS will be fought in won (IMO), it does have SOME value.

Just imagine if Sirius had invested some of that Stern money in their engineering, so that they could have won a piece of the Nissan and Toyota contracts which XM's engineering single-handedly took away from Sirius?
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