ARTICLE: Is Sirius XM Being Too Cheap to Succeed?

DoublEE

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Oct 11, 2008
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Is Sirius XM Being Too Cheap to Succeed?

Rick Aristotle Munarriz
January 13, 2009

Satellite radio fans who warmed to Bubba the Love Sponge's gritty radio antics cheered when Sirius XM Radio (Nasdaq: SIRI) inked a new deal with the Howard Stern channel favorite last month, extending Bubba's stay on satellite radio for a few more years. But now that cheering is turning into jeering.

The new arrangement isn't exactly ideal for satellite radio subscribers. Instead of live "no holds barred" afternoon shows from Monday through Thursday, Sirius listeners are actually hearing broadcasts that aired through Cox Radio (NYSE: CXR) terrestrial stations earlier in the day. Friday presents the only live, unchecked show on Sirius.

"A little bit of Bubba is better than no Bubba at all," Stern may say, but the content subtraction is not what premium radio is supposed to be about.

Sirius XM ruffled a few feathers when it consolidated many of its commercial-free music channels in a cost-saving move two months ago, but that's old news. If folks haven't cancelled since the November swap, it's either an immaterial move, or one that they actually agree with. However, you will be hard-pressed to find a chorus of satellite radio subscribers who feel that they are getting the appropriate bang for their buck with terrestrial-radio reruns.

"This is what we could agree upon," Todd "Bubba" Clem told FMQB last week. "It's what they could financially afford at this point, so this is what we came up with at this juncture."

It's true that Clem's show isn't as big a draw as Stern on Sirius or Oprah Winfrey on XM. Sirius XM needs to prioritize. Losing Bubba would be bad. Losing Stern -- which signaled the turning point for Sirius as it began to close the market-share gap with XM -- would be catastrophic. However, the cutbacks aren't easy for subscribers who wonder why content is being scaled back, even as they still pay the same rates.

If anything, as a scalable model, Sirius XM should actually have greater flexibility to spend more as its subscriber base grows. And, yes, its accountholder rolls have grown every quarter, even with the economic swoon.

With any luck, this is only a short-term tactical pullback. Sirius XM has a lot of debt to repay this year. If and when it's able to shore up its financial position, this potentially cash-flow-positive company could achieve so much.

Let's hope it does -- the competition isn't holding back. Between terrestrial radio's HD Radio, digital media players like Apple's (Nasdaq: AAPL) iPhone and SanDisk's (Nasdaq: SNDK) Sansa, and Web-radio players like Pandora, CBS' (NYSE: CBS) Last.fm, and Time Warner's (NYSE: TWX) AOL Music -- all of which can be streamed into cars via smartphone apps -- Sirius XM can't afford to fall asleep at the wheel.

There are only so many corners the company can cut before subscribers do some cutting of their own. Still, I trust Sirius XM to ultimately do the right thing, once its creditors give it a little more breathing room.
 

Biaviian

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Nov 17, 2008
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Well, I for one canceled all but one of my subscriptions. I had to keep the one in my car because it is either CDs or FM as I don't want to change the stock radio (or add on another device). I still listen to Bubba some of the time but I listen to the show when it is live, via the Internet feed. To me, it is an insult to the subscribers to replay his FM show.
 

TSS Taylor

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Oct 9, 2008
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These "Articles" are always funny to me. As if the person writing them has any more insight or knowledge than someone who is a big fan.

It does seem like Bubbas contract has had horrible timing. Bubba did just a one year contract last year and he has said that once the company was merged things would get better. But that really wasn't the point of a merger, to spend more money on content. How much did Bubba want? We will likely never know that. The era of the big contract is totally long gone. Even with Maddog which is the most recent that was when the stock price was far higher.

When Martha and Oprah re-up SIRIUS XM will have the negotiating power then. I can't imagine those old contracts will be re-signed at nearly the same amount as they were. Because things are different. Plus Bubba was expecting a lot more affiliates than came out. It's not just Satellite that has cut back on content costs.
 

almaniac27

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Nov 12, 2008
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These "Articles" are always funny to me. As if the person writing them has any more insight or knowledge than someone who is a big fan.

It does seem like Bubbas contract has had horrible timing. Bubba did just a one year contract last year and he has said that once the company was merged things would get better. But that really wasn't the point of a merger, to spend more money on content. How much did Bubba want? We will likely never know that. The era of the big contract is totally long gone. Even with Maddog which is the most recent that was when the stock price was far higher.

When Martha and Oprah re-up SIRIUS XM will have the negotiating power then. I can't imagine those old contracts will be re-signed at nearly the same amount as they were. Because things are different. Plus Bubba was expecting a lot more affiliates than came out. It's not just Satellite that has cut back on content costs.

But isn't it cheaper for a radio station to have syndicated programming?
 

GoodDog

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Oct 13, 2008
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Good article, thanks for posting it.

Over the holidays I listened to AOL radio and frankly I was surprised how good it sounded and pleased with the features (song skip) and the selection. Hell, they even have a shuffle channel (rip super shuffle) and a Springsteen channel. Its free too. I am seriously considering dropping my Sirius premium online upgrade sub.

I am not dropping my subscriptions to Sat radio but it is clear that the competition is doing online music better than SirXm and for a home SirXM user who listens primarily to music they may think twice about paying SirXM.

Content and portability are king.
 

TheScionicMan

Last non-Hating Stern Fan
Oct 11, 2008
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IMO, it comes back to the merger drag-out. The stock markets want to jump at things quickly based on news and potential interest. When it sat and lingered for 18 months, they lost the pop they should have got from the deal. I'm hoping that their next reporting will show some improvement on the bottom line and maybe get some interest going again...
 

Jleimer

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Oct 30, 2008
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Good read there , and I wont cancel my subscription to Sirius XM , but with Slacker and the Iphone app out today along with the other apps out for internet radio Sirius XM needs to step up to the plate big time.
 

Ifandorbut

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Oct 12, 2008
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IMO, it comes back to the merger drag-out. The stock markets want to jump at things quickly based on news and potential interest. When it sat and lingered for 18 months, they lost the pop they should have got from the deal. I'm hoping that their next reporting will show some improvement on the bottom line and maybe get some interest going again...

They have to make it through February when the first set of payments are due...something in the neighborhood of $3.4 billion if I'm not mistaken.
 

Jleimer

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Oct 30, 2008
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They have to make it through February when the first set of payments are due...something in the neighborhood of $3.4 billion if I'm not mistaken.

Here is my prediction if the company makes the payment they will be ok , if not then they may file bankruptcy soon after.