Excerpted from Business Week, “Sirius XM’s Dual Concerns: Debt, Delisting”, December 12, 2008
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Sirius XM is racing to get its financial house in order … The company’s shares have plunged more than 85%, to 14¢,and risk being delisted from the Nasdaq stock market in the coming months.
The biggest hurdle for cash-strapped Sirius XM will be refinancing $1 billion in debt that’s coming due in 2009.
The company is also under pressure to reduce operating costs. Sirius XM may need to negotiate for a lower price on some of its programming agreements. The company pays $60 million a year to broadcast Major League Baseball through 2012, for instance.
Analysts question plans to expand the company’s constellation of costly satellites … the company is due to pay $31.2 million for the construction and launch of a new satellite in 2009.
In the long run, the company may have to make changes to its whole method for distributing content. “There are lots of ways to distribute programming, and satellites may not prove to be the ideal way.” Engel says. The company could expand its network of terrestrial repeaters, towers similar to those traditional radio stations use to relay signals, and rely on costly satellites less.
A more aggressive push online and onto wireless networks and devices like the Apple iPhone may help expand Sirius’ customer base, currently about 19 million. “Sirius may be artificially limiting its scope by relying on satellite technology as a delivery vehicle.” A push online or through a wireless network could help Sirius round out its packages of channels, selling for $6.99 to $16.99 a month, with more personalized content.
A greater variety of personalized options may help calm longtime XM subscribers who have grown frustrated in recent months as Sirius consolidated some of its programming and some beloved shows went away… many are considering canceling the service after losing favorite channels.
Word of disgruntled existing users may keep new subscribers from signing up. “That kind of move has a ripple effect beyond the existing subscriber base.”
By starting to distribute its content differently, for instance via the iPhone, Sirius may be able to offer what some of its rivals already offer, and allow users to pay to listen to specific interviews or a particular concert. It may even allow subscribers to purchase song tracks and audio books from its Web site or through its radio receivers.
“If they are going to remain tied to a pure subscription model, they are probably not going to succeed in the long run.” After all, rivals like Web radio, HD radio, and music services like Apple’s iTunes are making inroads.
Automakers like Ford are building more support for Apple iPod music players into their cars.
According to IDC’s fall survey of nearly 2,000 people, 58% of Americans own portable media players, and while only 16.5% subscribe to satellite radio service, many of them are die-hards.
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