This is a guest post from satellite radio fan Levi Ramsey. Do you like this article and want to see more from Levi? Sound off in the comments.
The headline numbers from Sirius XM's earnings release earlier today were covered by Ryan in his post. There are a few figures that aren't directly stated in the earnings release that shed light on how the business (and by extension, the service as a whole) is doing.
When performing that analysis, it is clear that the decline in subs is almost solely attributable to the decline in auto sales over the past year.
In 2009, we have been treated to the most detailed subscriber countbreakdowns this industry has ever seen. Perhaps this is because thereis no longer the issue of a rival satellite radio company that performsbetter on a given metric (e.g. Sirius' historical refusal to discloseexactly how many subs are in promotional periods or XM's historicalrefusal to put a fully-loaded churn rate in writing).
One of the fringebenefits is that it is now possible to calculate the promotional vs.self-paying splits on gross adds.
At the risk of turning this into a math class, I'll go step bystep through the process of calculating these breakdowns (largely tosave the trouble of having to go through it every three months in thefuture). These figures do have a margin of error of plus-or-minus 50thousand or so and ignore the effects of rental car subscriptions(which account for about one four-hundredth of the sub base: they're arounding error and can safely be ignored at this point).
The firstfigure is self-pay deactivations and is based on the self-pay churn rate and the average number of self-pay subs; it works out to about 926 thousand over the three months. Since every sub is either self-paying or promotional, then this implies that there were 640 thousand failed promotional subs.
From the number of promotional deactivations and the conversion rate of 44.4%, 511 thousand subs moved from promo to self-paying. In order for this figure to square with the net loss of 15 thousand self-paying subs, there would have to be 400 thousand self-paying gross adds. The remaining 1.38 million gross adds were thus promotional.
Applying the same process to the 2nd quarter of 2008 gives the following comparisons:
- Self-pay deactivations: increased from 743 thousand to 926 thousand
- Failed promotions: decreased from 766 thousand to 640 thousand
- Conversions from promo to self-pay: decreased from 785 thousand to 511 thousand
- Self-paying gross adds: decreased from 474 thousand to 400 thousand
- Promotional gross adds: decreased from 1.638 million to 980 thousand
The decreasefrom last year dwarfs the net loss of subscribers in this quarter.Indeed, if the auto market was only slightly worse than it was lastyear, there would be more than 400 thousand net additions.
The important thing to remember is that OEM promo additionshave nothing to do with the content offering: the net loss ofsubscribers is not a reflection of dissatisfaction with post-mergerchanges.
The increase in average subscription rates further indicatesthat there hasn't been an increase in retention discounts. The changeshave not displeased subscribers to the extent that they are hittingSirius XM where it hurts.
View the original Article at Orbitcast or discuss it here.