Raising prices and possible bankruptcy filing

sportboy

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Dec 18, 2008
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All in a span of a few weeks. Wow. What is next! With the massive amount of debt, if Sirius can survive I think it will be under different ownership. I seriously doubt the current ownership could file and come out as a healthy company. I don't have faith in the management. They made some very costly decisions along the way. The gigantic deals with the big names proved to be bad decisions. I love Howard but c'mon 500 milion over 5 years? Who would have offered half of that. Sirius negotiated against themselves. The Howard contract is not the only one, XM was guilty of this as well.

One thing I can't get out of my mind is when the Sirius/XM merger was announced I saw Mel and Parsons(I think it was him) on TV claiming how much money the company would save and how much revenue they would have coming in by the amount of subs.

Little did we know that they would merge but for the most part still operate as two companies.....dumb.

I hope to hell this product doesn't go away completely.
 

ClubSteeler

Member
Oct 16, 2008
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It's all speculation and rumor... Just because priced could go up, they don't have to. If they are relieved of debt and become proftable, I would think prices would be less likely to go up.


And please... Stop with the Howard stuff. Sirius has already reported that his contract paid for itself in 2 years, and have 3 years of gravy on top of that.

Just do the math. Sirius went from 600K subs on the day he signed the contract to 10Million. The conservative estimate is that Howard brought 4M subs, I think it's more.

Now, how much subscriber revenue is 4M subs over 5 years?

Answer: 3.1 BILLION DOLLARS

600% return on investment. Not counting ad revenue he generates. And not counting the fact that Howard got lots of stock, which may end up not getting him a single cent.

And does Sirius haev a cut of Howard TV? I don't know the answer.

Anyway you slice it up, that $500M investment has been an absolute goldmine for sirius. If all of their other contracts had a return like this, Sirius would be loving life and living large. It's tough to prove that he brought in 4M subs. And no, not all 4M were there for all 5 years. But it's tough to dispute the fact that signing Howard has been the most profitable thing Sirius has ever done.
 

sportboy

Member
Dec 18, 2008
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I disagree, Sirius still negotiated against themselves. Nobody would have offered anywhere near 500 million.

The bottom line, the company had made bad decisions. The number jump from 600k to 10 million(assuming this is correct) you act like Howard was responsible for every one of those subs, this is not the case. You mention 3.1 billion, meanwhile the stock is worthless. The overall company is heading in the same direction. If the company goes bankrupt, did Sirius really make 3.1 billion off the Howard deal? The answer is no.
 

JoeTan

Well-Known Member
Oct 14, 2008
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Sportboy. If this wasn't subscription based you would be correct. Howard Stern brings in at least 3 times what it cost to get him.

The only debate is if it's more than this which in reality he's probably responsible for 5-6million subs.
 

ClubSteeler

Member
Oct 16, 2008
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Those 4M subs, just this year alone (not counting the other 4 years), will generate over $600M, more than Howards contract.

Do you think they overpaid him? Yes.
Did their overpayment cause them to lose money? No. In fact they made a ton more thanks to Howard.

Will they make the $3B if they declare bankruptcy? Yes, assumimg they keep Howard onboard, and don't do anything to chase 4M subs away. That's highly unlikely considering that even with the auto market collapsing and people unhappy with the merger, they are still GAINING subs quarter to quarter.

You might argue that they paid too much for NFL or MLB or Nascar...... But the Howard deal has been their #1 moneymaker. You need to see past the FIVE HUNDRED MILLION, and stop assuming that just because that number is so huge, that it is causing Sirius to go into bankruptcy. When in reality, without the Howard deal, Sirius would already be bankrupt, and it would NOT have such a large subscriber base. That subscriber base is exactly the reason why if there is a takeover, the new company will likely want to keep satellite radio and keep 20M subs. 20M subs...

Howard could have gone in another direction. Sirius recognized his potential to bring in BILLIONS. They overpaid to make darn sure noone else outbid them and in turn made those billions instead. Yeah they could have negotiated a better deal, but had they been outbid, I can't see there still being a Sirius around today.

Based on Sirius comments, market studies, and simple math.. I can not see any possible way that the investment in Stern was a bad financial move. There are 130 channels, and his 2 are responsible for 40 to 50% of their income. If they paid him $2BILLION, it still would have been a winning investment for them.
 

lronglien

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Nov 10, 2008
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Technology age

This seems to be the way it goes in the tech world. Capitalists start a venture and have to pay for everything and anything. They overbuild it and sometimes pay too much for various part of the plan. They don't make it, but the infrastructure is still there. Someone (Ergen) comes in an gets the buy-in for dirt cheap and then makes the profits. I don't think Sirius XM is going away by any means. It will just have different people in charge.
 

sportboy

Member
Dec 18, 2008
96
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I'm not debating that he brought on significant amount of subs. He did, no doubt. Still doesn't mean Sirius had to offer him 500 million. Nobody else would have come close to that offer. Fast forward four years from the Howard signing and Sirius is in a big time pinch, fight for their survival. 175 million would come in handy right now. Like I said the Howard deal is not the only one, these two companies pissed money away.

When Arod signed with the Rangers, Hicks the owner of the Rangers signed him to a 250 million dollar contract. Hicks bidded against himself and still finished in last place all for the years they had Arod. I heard Hicks on the radion two days ago, he paid Arod 150 million over 3 years before his departure to the Yankees. Its hard to have sympathy for Hicks.

One good thing that might come from the economy downturn, salaries will get adjusted to more realistic numbers.
 

IdRatherBeSkiing

Sherbet is NOT and NEVER WILL BE ice cream.
Oct 11, 2008
19,650
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Howard probably saved Sirius from bankruptcy. I think overall they may break even on the deal although you could probably work the math to say he made them money (or in Sirius' case caused them not to lose as much money) or lost them (more) money. But I believe the statistic that stuck me about the deal was he only brought over about 12% of his audience. It could have/should have been so much more.
 

no1hedberg

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Oct 13, 2008
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But I believe the statistic that stuck me about the deal was he only brought over about 12% of his audience. It could have/should have been so much more.

That's not a realistic expectation. The reality of getting people to pay for something they are accustomed to getting for free isn't easy. Ask xm and Oprah. No one expected him to bring as many subs as he did. Besides we have no idea how many people are listening for free.
 

kryptonite

Well-Known Member
Oct 21, 2008
9,468
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Howard probably saved Sirius from bankruptcy. I think overall they may break even on the deal although you could probably work the math to say he made them money (or in Sirius' case caused them not to lose as much money) or lost them (more) money. But I believe the statistic that stuck me about the deal was he only brought over about 12% of his audience. It could have/should have been so much more.

Yeah.

Howard's contract isn't responsible for the company's financial state. He certainly brought over enough people. If you want to blame talent, blame Oprah and Martha. How many subscribers did those two bring over COMBINED?

And to expect 60% of "Howard's audience" to come over probably might be a bit high. In his FM ratings, you had at least three groups of people:

1) The hard-core listeners. These guys signed up for Sirius in 2005. They were signed up on the first day. They listened live on the first day. They would listen to Howard on FM radio, then switch on Sirius when his FM show ended that day.

2) The casual listeners. These guys might have listen to Howard on FM sometimes. Maybe they're at SiriusXM, maybe not. If they missed one of Howard's FM shows, it wasn't a big deal. It's probably a safe bet that if these people weren't signed up by summer 2006, they probably weren't going to sign up.

3) The watchdogs. Yes, these people counted in the ratings, believe it or not. Are they going to sign up for Sirius? No. Some of these people might actually have had XM (or maybe still do) because "they don't have Howard." Yes, people actually signed up for XM (and their racy content) because they didn't want Howard's racy content...Anyone remember Hyundai? That's why they have XM.
 

buckeye96

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Dec 1, 2008
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I heard on the news that yearly SXM makes $2 billion in revenue. if you can't make a profit on $2 billion in revenue you need to quit, we are looking at you Mel.
 

MNXMFan

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Oct 24, 2008
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I heard on the news that yearly SXM makes $2 billion in revenue. if you can't make a profit on $2 billion in revenue you need to quit, we are looking at you Mel.

And Howard gets 5% of that revenue. $5 from each and every sub every year goes to Howard. When it was just Sirius, that number was closer to $12. So, regardless of whether you listen or not, $1 a month from each subscription you have goes to pay for Howard. Thats why it is outrageous. Now that number is just under 50 cents, but thats just for ONE person, who works less than half that time.

Now factor in all the rest of the programming, costs to keep the satelites maintained, customer service, interest payments, administrative costs, etc.

Did Howard get alot of subscribers? Sure, he might have gotten 3 million or so. Given that number, $33 a year from every sub that listens to him goes to pay for him, which means that Sirius only makes money on those subs the other 9 months of the year, as long as they keep the same exact hardware (every time you buy a reciever it costs Sirius), never call customer service, and don't listen to anything else.
 

joe2k4

Member
Nov 12, 2008
187
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Lets all blame Sirius. Because XM made no mistakes at all? What about Oprah? ANd how about MLB? GM anyone? I mean come on!
 

Jgatie

Banned
Oct 14, 2008
1,402
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Did Howard get alot of subscribers? Sure, he might have gotten 3 million or so. Given that number, $33 a year from every sub that listens to him goes to pay for him, which means that Sirius only makes money on those subs the other 9 months of the year, as long as they keep the same exact hardware (every time you buy a reciever it costs Sirius), never call customer service, and don't listen to anything else.

So by your numbers, Sirius is making a 200% profit on Howard. Fill me in - Are you arguing for or against Howard's contract? Because let's face it, your facts aren't doing the "against" side any good.
 

MNXMFan

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Oct 24, 2008
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So by your numbers, Sirius is making a 200% profit on Howard. Fill me in - Are you arguing for or against Howard's contract? Because let's face it, your facts aren't doing the "against" side any good.

How has Howard made Sirius any profit? Neither company has yet made a dime.

What I was saying is that 25% of the "cost" for providing that revenue, was tied up in Stern. There are many other costs associated with doing business.

For example, in the 5 year contract, each subscriber costs Sirius an average of $100 just for the radio, since they are subsidized. So, the first year, just for the radio and Howard, it cost $133, or a LOSS of $13 (average made per sub being $10/Month, per Sirius).

Each additional year, other costs excluded, these subscriptions made Sirius $87. Considering the other costs associated with keeping those subscribers happy, it has been a net negative.

I'm not really expecting you to understand, I'm just saying thats alot to pay one person. For that same price, Sirius could have just flat out given almost 1.7 million radios away (probably more) with a free 6 month subscription, and instead convinced those people of OTHER reasons to pay for their service. This way, if ONE of those reasons goes away, it doesn't cost Sirius 3 million subscriptions, and it builds up Sirius' word of mouth marketing.

If Howard dies tomorrow, all of a sudden Sirius finds itself with 3 million subscriptions that need to be replaced. That can get expensive.
 

MNXMFan

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Oct 24, 2008
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Lets all blame Sirius. Because XM made no mistakes at all? What about Oprah? ANd how about MLB? GM anyone? I mean come on!

Oprah, and MLB, were overpriced because of the irresponsible content war started by the former CEO of Sirius, by overpaying for Stern and NFL. I DO blame XM for being stupid. They should have ignored Sirius' attempts to get them to overspend for content.

Had they done that, they could have "rescued" Sirius when it ran out of money. Instead, they ventured away from their sucessful model of providing diverse music and quality audio. Before they did that, they were forcasted to start making money in 2006.

The GM deal was stupid, but alone it was manageable. I certainly won't put all the blame on Sirius. BOTH companies were and ARE being very poorly run.
 

Jgatie

Banned
Oct 14, 2008
1,402
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How has Howard made Sirius any profit? Neither company has yet made a dime.

What I was saying is that 25% of the "cost" for providing that revenue, was tied up in Stern. There are many other costs associated with doing business.

For example, in the 5 year contract, each subscriber costs Sirius an average of $100 just for the radio, since they are subsidized. So, the first year, just for the radio and Howard, it cost $133, or a LOSS of $13 (average made per sub being $10/Month, per Sirius).

Each additional year, other costs excluded, these subscriptions made Sirius $87. Considering the other costs associated with keeping those subscribers happy, it has been a net negative.

I'm not really expecting you to understand, I'm just saying thats alot to pay one person. For that same price, Sirius could have just flat out given almost 1.7 million radios away (probably more) with a free 6 month subscription, and instead convinced those people of OTHER reasons to pay for their service. This way, if ONE of those reasons goes away, it doesn't cost Sirius 3 million subscriptions, and it builds up Sirius' word of mouth marketing.

If Howard dies tomorrow, all of a sudden Sirius finds itself with 3 million subscriptions that need to be replaced. That can get expensive.

Yes, from now on Sirius should use the irrefutable logic that "they could die tomorrow" when contemplating what people to hire. :rolleyes:

Think about it, what would they have gotten if they had given away millions of radios? Possible permanent subs in 6 months time. In that time with Stern, they paid 50 million got back 150 million. Your free radios and subs would've cost 100 million, and got back $0.

The simple fact is, Stern put Sirius on the map. Without Stern, XM would have beat Sirius seven ways from Sunday. You may think he was paid too much, but you can't argue that Sirius would be here today without him. Whether it is actually better to "be here today" in this mess is another story.
 

MNXMFan

Member
Oct 24, 2008
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Yes, from now on Sirius should use the irrefutable logic that "they could die tomorrow" when contemplating what people to hire. :rolleyes:

Think about it, what would they have gotten if they had given away millions of radios? Possible permanent subs in 6 months time. In that time with Stern, they paid 50 million got back 150 million. Your free radios and subs would've cost 100 million, and got back $0.

The simple fact is, Stern put Sirius on the map. Without Stern, XM would have beat Sirius seven ways from Sunday. You may think he was paid too much, but you can't argue that Sirius would be here today without him. Whether it is actually better to "be here today" in this mess is another story.

You're right, the Stern deal put Sirius on the map. Without the Stern deal, Sirius wouldn't have gotten the psychological leverage needed to convince XM they needed a merger.

But, had XM not agreed to the merger, Sirius would have died a slow and painful death in the years to come. Because subscriber growth was drying up, and XM controls the car market, which is what was REALLY needed to gain traction. Now, when Stern leaves, it only affects 25% of the base instead of 50%.

The reason people will blame Stern for the failure of Satelite Radio for years to come is because he started a content bidding war that eventually resulted in both companies giving away the farm for listeners. Stern was a risky bet who both helped, and hurt, Sirius and XM as they both completed the content race.

And when your a company that has the debtload that Sirius had, and no prospects of making money for 10 years, you don't go overspend like they did on Stern. Just like if your barely living paycheck to paycheck, you don't go buy a $200,000 house.
 

Jgatie

Banned
Oct 14, 2008
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You're right, the Stern deal put Sirius on the map. Without the Stern deal, Sirius wouldn't have gotten the psychological leverage needed to convince XM they needed a merger.

But, had XM not agreed to the merger, Sirius would have died a slow and painful death in the years to come. Because subscriber growth was drying up, and XM controls the car market, which is what was REALLY needed to gain traction. Now, when Stern leaves, it only affects 25% of the base instead of 50%.

The reason people will blame Stern for the failure of Satelite Radio for years to come is because he started a content bidding war that eventually resulted in both companies giving away the farm for listeners. Stern was a risky bet who both helped, and hurt, Sirius and XM as they both completed the content race.

And when your a company that has the debtload that Sirius had, and no prospects of making money for 10 years, you don't go overspend like they did on Stern. Just like if your barely living paycheck to paycheck, you don't go buy a $200,000 house.

XM would have died a quicker death. Even with the Stern costs Sirius was in better shape, because XM was wallowing in debt. As far as Stern starting the bidding war, XM didn't have to get into the war, and both companies overspent on personalities (Oprah, Martha, Foxx, O&A, etc.) who didn't generate 1/10,000 the amount of subs Stern did. It isn't Stern's fault they didn't perform up to their hype, he delivered on his contract just fine.
 

MNXMFan

Member
Oct 24, 2008
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XM would have died a quicker death. Even with the Stern costs Sirius was in better shape, because XM was wallowing in debt. As far as Stern starting the bidding war, XM didn't have to get into the war, and both companies overspent on personalities (Oprah, Martha, Foxx, O&A, etc.) who didn't generate 1/10,000 the amount of subs Stern did. It isn't Stern's fault they didn't perform up to their hype, he delivered on his contract just fine.

Actually, Sirius was expecting quite a bit more. And Sirius had about the same amount of debt.

It doesn't matter anymore anyways, as the merger has killed both companies. The one hope we have left is that someone comes in who knows how to responsibly run the company before the birds need to be replaced again.

We can go back and forth for days on whether ANY of the decisions the companies made were good after we actually start seeing someone with experience in running a satelite delivered company come in and play for a while.