Drop in Satellite Radio Subscribers related to Auto Sales

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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 biggest change is in promotional gross adds, which are largely fromnew car sales (the certified pre-owned promos from marques like Audi and Acuraare not yet major contributors to subscriber numbers).

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.








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View the original Article at Orbitcast or discuss it here.
 

v1ru5

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Oct 24, 2008
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Also drop in radio sales due to Sirius/XM lack of mainstream advertising. Wherever the kids hang out during spring break maybe Sirius/XM should have made a presence there. They could have had a summer contest to win a Block party featuring a Sirius/XM DJ playing or streaming some of the content that can be heard on SatRad. Just a thought.
 

DAB

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Oct 9, 2008
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Also drop in radio sales due to Sirius/XM lack of mainstream advertising. Wherever the kids hang out during spring break maybe Sirius/XM should have made a presence there. They could have had a summer contest to win a Block party featuring a Sirius/XM DJ playing or streaming some of the content that can be heard on SatRad. Just a thought.

I could not agree more I do see a good bit of internet advertising, but how effective is that? Most of the time I block as much of it as I can.

They really do need to be out there in front of folks. If you want an example of a few good marketing machines. Apple, AT&T, Verizon, Sprint, Microsoft. These guys are always, always in your face telling you what they have to offer. Sirius needs to do that as well.
 

Jon

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Dec 16, 2008
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I've seen quite a bit on NHL.com, FoxNews.com and a few other news sites. But almost non-existent on TV.
 

DAB

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Oct 9, 2008
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Yeah, I've seen it on many news, sports and weather sites. However as Jon says nothing whatsoever on TV.
 

IdRatherBeSkiing

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Oct 11, 2008
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Yeah, I've seen it on many news, sports and weather sites. However as Jon says nothing whatsoever on TV.

I see it in the fall on TV up here. But that is Sirius Canada and XM Canada. I have seen print ads for XM up here too. They even had a print ad promotion where listeners of a handful of FM radio stations could call in over the weekend and get free XM radios. I have heard ads for Sirius over FM when in restaurants playing an FM station too. Of course, there is no NAB up here and the Canadian companies have a different business model and no sats to pay for.