XM financial trouble

[[email protected]]

I just brought my XM service then found this:
http://www.katu.com/stories/83441.html

Any inside scoop?

[Peter R.]

" > wrote:

> I just brought my XM service then found this:
> http://www.katu.com/stories/83441.html
>
> Any inside scoop?

No inside scoop, but as a ten year customer of Dish Network, the satellite
TV provider, I recall several similar articles about Dish back in the late
90s.

Let's hope XM retains or finds the management talent to weather this
short-term storm. Or perhaps Microsoft will step in, buy them out, and
save the day. :)

--
Peter

[ted]

"Peter R." > wrote in message
...
> " > wrote:
>
>> I just brought my XM service then found this:
>> http://www.katu.com/stories/83441.html
>>
>> Any inside scoop?
>
> No inside scoop, but as a ten year customer of Dish Network, the satellite
> TV provider, I recall several similar articles about Dish back in the late
> 90s.
>
> Let's hope XM retains or finds the management talent to weather this
> short-term storm. Or perhaps Microsoft will step in, buy them out, and
> save the day. :)
>
> --
> Peter

XM has six million paying subscribers and I believe the article said that
revenue has doubled from the year before. A hundred percent increase in
revenue per year means that XM is not going anywhere. They are just fine.
What I suspect is happening is that XM knows that when everyone has chosen a
subscription with either Sirius or XM then the market will be saturated and
very few customers will ever change providers so its important to get all
your customers signed up now. Thus they have decided to spend their revenue
signing up new subscribers this year to lock in decades of future profits.
Smart investors know this so they put out articles saying how XM is
operating at a loss driving the price of the stock down so they can buy in
to XM stock cheap this year and then rake in the cash later.

[Roger]

On Sun, 05 Mar 2006 15:30:53 GMT, "ted" > wrote:

>
>"Peter R." > wrote in message
...
>> " > wrote:
>>
>>> I just brought my XM service then found this:
>>> http://www.katu.com/stories/83441.html
>>>
>>> Any inside scoop?
>>
>> No inside scoop, but as a ten year customer of Dish Network, the satellite
>> TV provider, I recall several similar articles about Dish back in the late
>> 90s.
>>
>> Let's hope XM retains or finds the management talent to weather this
>> short-term storm. Or perhaps Microsoft will step in, buy them out, and
>> save the day. :)
>>
>> --
>> Peter
>
>XM has six million paying subscribers and I believe the article said that
>revenue has doubled from the year before. A hundred percent increase in
>revenue per year means that XM is not going anywhere. They are just fine.
>What I suspect is happening is that XM knows that when everyone has chosen a
>subscription with either Sirius or XM then the market will be saturated and
>very few customers will ever change providers so its important to get all
>your customers signed up now. Thus they have decided to spend their revenue
>signing up new subscribers this year to lock in decades of future profits.
>Smart investors know this so they put out articles saying how XM is
>operating at a loss driving the price of the stock down so they can buy in
>to XM stock cheap this year and then rake in the cash later.

If XM were really in trouble my Sirius would have doubled. Instead
it's down about 30% in a lst couple of weeks.

Roger Halstead (K8RI & ARRL life member)
(N833R, S# CD-2 Worlds oldest Debonair)
www.rogerhalstead.com
>

[Jonathan Goodish]

In article >,
Roger > wrote:
> If XM were really in trouble my Sirius would have doubled. Instead
> it's down about 30% in a lst couple of weeks.


Which only goes to prove that Sirius is in even more trouble.

As long as folks are willing to throw money at the satellite radio
ventures, they won't be "in trouble." I do wonder, however, about how
$12/month is going to sustain the contracts for tens or hundreds of
millions of dollars for on-air talent; at some point, there has to be a
line in the sand for the providers. I suspect that, in the end, ad
revenue will be too lucrative to pass up, and the "commercial free"
channels will start to disappear.



JKG

[Scott D]

On Wed, 08 Mar 2006 08:39:48 -0500, Jonathan Goodish
> wrote:

>In article >,
> Roger > wrote:
>> If XM were really in trouble my Sirius would have doubled. Instead
>> it's down about 30% in a lst couple of weeks.
>
>
>Which only goes to prove that Sirius is in even more trouble.
>
>As long as folks are willing to throw money at the satellite radio
>ventures, they won't be "in trouble." I do wonder, however, about how
>$12/month is going to sustain the contracts for tens or hundreds of
>millions of dollars for on-air talent; at some point, there has to be a
>line in the sand for the providers. I suspect that, in the end, ad
>revenue will be too lucrative to pass up, and the "commercial free"
>channels will start to disappear.
>
Well, I for one hope that Sat Radio sticks around. I have one, along
with about 5 other friends and we all like it much better than local
stations. When they first came out, I was like you. I thought, who
would buy this technology? They would have to be crazy to pay for
radio. After going on a flight with a buddy that had one, I was very
much thrilled to have a good time radio while going cross country. I
liked the fact that I could listen to what ever I chose and not loose
reception.

I somehow got stuck in the 80's as far as music is concerned and I
like being able to select just the 80's music or talk radio. What ever
your pleasure, its there in full abundance. To me its like paying for
Cable or Sat TV. You pay to have the availability of options. I bet
there were people saying the same thing about cable ventures when they
first started popping up. They figured that why should they pay for TV
as long as they can get it for free with the antenna that they have
sticking 30 feet in the air off the back of the house. That's fine if
you want to watch the same 2 or 3 stations all the time, but if you
want other options, you pay for it. Its just that simple.

As far as the commercial free stations are concerned, that is not
what drew me to Sat Radio so its not a big deal if they play a few
commercials every once in a while.


Scott D.

take out the obvious to email me

[Mortimer Schnerd, RN]

Scott D wrote:
> As far as the commercial free stations are concerned, that is not
> what drew me to Sat Radio so its not a big deal if they play a few
> commercials every once in a while.


Well, it is to me. When the commercials hit the airwaves on satellite, I'll be
seriously rethinking whether I want it or not. Right now there are two big
advantages to me: I can drive incredible distances and never lose the station,
and the fact that it's commercial free. When they start playing commercials I'd
have to ask why do they need my $12.95 each month.

You know, I love TIVO for essentially the same reason: I can blow past the
commercials on recorded shows. Typically I prefer recorded stuff to live for
exactly that reason. If TIVO ever interfered with my ability to fast forward,
I'd have to rethink whether I needed them or not in the future.

Opinions vary, I guess.



--
Mortimer Schnerd, RN

[Jonathan Goodish]

In article >,
"Mortimer Schnerd, RN" > wrote:
> Well, it is to me. When the commercials hit the airwaves on satellite, I'll
> be
> seriously rethinking whether I want it or not. Right now there are two big
> advantages to me: I can drive incredible distances and never lose the
> station,
> and the fact that it's commercial free. When they start playing commercials
> I'd
> have to ask why do they need my $12.95 each month.

I agree. While satellite radio does provide some benefits other than
commercial-free, the commercial-free aspect to the music station is a
big draw.

My wife and I are planning to cancel our cable television service soon
because of the incessant commercials and the fact that there's rarely
anything worth watching on the cable channels. It just isn't worth the
$50/month that we pay for basic cable to watch "World Poker Tour" all
weekend on the Travel Channel (explain what poker has to do with travel.)

The problem with commercials is that there are way, way too many of
them, both on television and radio. The money is too easy. I don't
want to listen to a commercial every 2 songs, or endure 20 minutes of
commercials every hour because the station plays "more songs in a row
than any other station." XM already runs commercials on some channels,
albeit their own commercials, which are annoying enough. And of course,
the news and talk stations (some just a simulcast with television) have
commercials. However, the first time I get an ad banner that pops up
along side the weather on my Garmin 396, satellite radio is going into
the dumper.



JKG

[Matt Barrow]

"Jonathan Goodish" > wrote in message ...
>
> My wife and I are planning to cancel our cable television service soon
> because of the incessant commercials and the fact that there's rarely
> anything worth watching on the cable channels.

Welcome aboard...we (family) did it four years ago and I can count on one
hand the times we missed it (most notably during the Iraq invasion).

> The problem with commercials is that there are way, way too many of
> them, both on television and radio.

Worse is how utterly annoying (dare I say 'insulting' ?) the vast majority
are.

Instead of cable, each month we put the money into adding towards our very
nice collection of DVD's. We have about 200 now.

[Andrew Gideon]

On Wed, 08 Mar 2006 08:39:48 -0500, Jonathan Goodish wrote:

> I do wonder, however, about how
> $12/month is going to sustain the contracts for tens or hundreds of
> millions of dollars for on-air talent; at some point, there has to be a
> line in the sand for the providers.

Keep in mind that, aside from acquisition costs, new customers cost
nothing. That is, the infrastructure is the same for one customer or one
trillion customers. There *is* a number of customers where $12/month
covers that infrastructure.

I've no idea whether or not they can reach that number, mind you. I don't
even know if the number is greater or lessor than the number of people on
the planet <grin>.

I hope they succeed. I haven't purchased their service (I don't listen to
much music), but (1) I like having the option and (2) I like the aviation
products and I hope at least to purchase that at some point.

- Andrew

[Jonathan Goodish]

In article >,
Andrew Gideon > wrote:
> > I do wonder, however, about how
> > $12/month is going to sustain the contracts for tens or hundreds of
> > millions of dollars for on-air talent; at some point, there has to be a
> > line in the sand for the providers.
>
> Keep in mind that, aside from acquisition costs, new customers cost
> nothing. That is, the infrastructure is the same for one customer or one
> trillion customers. There *is* a number of customers where $12/month
> covers that infrastructure.

This isn't true. New customers do not represent zero cost. While the
broadcast infrastructure may be able to serve "trillions" of customers,
the customer service, billing, maintenance, etc. all have costs that
increase as subscriber count goes up. In addition, the infrastructure
will require periodic capital improvements, both as subscriber count
grows and as technology changes.

That being said, it appears that both XM and Sirius are focused on
market share and not profit at this point. Of those two goals, only
profit is required to sustain a company, so there must be some long-term
objective that would benefit from market share position--such as
advertising sales.




JKG

[Newps]

XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.
The same goes for any business.

Andrew Gideon wrote:
> On Wed, 08 Mar 2006 08:39:48 -0500, Jonathan Goodish wrote:
>
>
>>I do wonder, however, about how
>>$12/month is going to sustain the contracts for tens or hundreds of
>>millions of dollars for on-air talent; at some point, there has to be a
>>line in the sand for the providers.
>
>
> Keep in mind that, aside from acquisition costs, new customers cost
> nothing. That is, the infrastructure is the same for one customer or one
> trillion customers. There *is* a number of customers where $12/month
> covers that infrastructure.
>
> I've no idea whether or not they can reach that number, mind you. I don't
> even know if the number is greater or lessor than the number of people on
> the planet <grin>.
>
> I hope they succeed. I haven't purchased their service (I don't listen to
> much music), but (1) I like having the option and (2) I like the aviation
> products and I hope at least to purchase that at some point.
>
> - Andrew
>

[Jim Macklin]

XM radio, like magazine publishing depends more on
advertising revenue than subscription customers. But
advertising rates will vary with the number of subscribers
who are feed the ads.


"Jonathan Goodish" > wrote in message
...
| In article >,
| Andrew Gideon > wrote:
| > > I do wonder, however, about how
| > > $12/month is going to sustain the contracts for tens
or hundreds of
| > > millions of dollars for on-air talent; at some point,
there has to be a
| > > line in the sand for the providers.
| >
| > Keep in mind that, aside from acquisition costs, new
customers cost
| > nothing. That is, the infrastructure is the same for
one customer or one
| > trillion customers. There *is* a number of customers
where $12/month
| > covers that infrastructure.
|
| This isn't true. New customers do not represent zero
cost. While the
| broadcast infrastructure may be able to serve "trillions"
of customers,
| the customer service, billing, maintenance, etc. all have
costs that
| increase as subscriber count goes up. In addition, the
infrastructure
| will require periodic capital improvements, both as
subscriber count
| grows and as technology changes.
|
| That being said, it appears that both XM and Sirius are
focused on
| market share and not profit at this point. Of those two
goals, only
| profit is required to sustain a company, so there must be
some long-term
| objective that would benefit from market share
position--such as
| advertising sales.
|
|
|
|
| JKG

[Jonathan Goodish]

In article <xDgTf.118102$QW2.27122@dukeread08>,
"Jim Macklin" > wrote:
> XM radio, like magazine publishing depends more on
> advertising revenue than subscription customers. But
> advertising rates will vary with the number of subscribers
> who are feed the ads.


Most of XM's music channels are "ad free." It is my suspicion that this
will not be a sustainable business model for them (nor Sirius) long term.



JKG

[Matt Barrow]

"Newps" > wrote in message
. ..
> XM knows exactly what it costs to attain each new subscriber and it is
> much more than the $12 a month they are getting from existing customers.

$144 a year for a two year contract?

> The same goes for any business.
>
(A few thoughts)

I heard consumer pundit Clark Howard state to the effect that the
overwhelming majority of companies spend about 15 times as much acquiring
new customers as they do servicing existing customers.

Call some company and see how fast their phone menu system kicks in for
SALES as it does for Customer or Tech Support. Likewise, name a CEO that
came from Tech Support instead of Sales and Marketing. :~(

[Jim Carter]

Having been a Sirius subscriber, and having had to put up with
short-cycle replays, very old programs, and incompetent customer
service, I found it no surprise when I cancelled my subscription upon
expiration (they automatically re-bill and you have to actively cancel)
it was tremendously difficult. After spending 3 months trying to get the
unauthorized payment back from Sirius, and spending 47 minutes
(measured) on the phone on hold the last contact, I filed a complaint
with the credit card company. Imagine my lack of surprise when the CC
company rep immediately refunded the money and commented that "this
happens a lot with this company".

I then started asking other folks I knew with Sirius only to find that
most are converting to XM even though we have to buy new equipment.

Looking at it from a purely economic point of view, the direct costs of
adding subscribers will decrease as the subscriber count rises. Since
all accounting and most customer service functions are automated, until
the process scales beyond system capacity each new subscriber represents
almost no new cost.


> -----Original Message-----
> From: Jonathan Goodish ]
> Posted At: Sunday, March 19, 2006 3:31 PM
> Posted To: rec.aviation.ifr
> Conversation: XM financial trouble
> Subject: Re: XM financial trouble
>
> In article <xDgTf.118102$QW2.27122@dukeread08>,
> "Jim Macklin" > wrote:
> > XM radio, like magazine publishing depends more on
> > advertising revenue than subscription customers. But
> > advertising rates will vary with the number of subscribers
> > who are feed the ads.
>
>
> Most of XM's music channels are "ad free." It is my suspicion that
this
> will not be a sustainable business model for them (nor Sirius) long
term.
>
>
>
> JKG

[Matt Barrow]

"Newps" > wrote in message
. ..
> XM knows exactly what it costs to attain each new subscriber and it is
> much more than the $12 a month they are getting from existing customers.
> The same goes for any business.

Vast majority of those costs are fixed (advertising, CS staff, data
processing).

[Newps]

Matt Barrow wrote:
> "Newps" > wrote in message
> . ..
>
>>XM knows exactly what it costs to attain each new subscriber and it is
>>much more than the $12 a month they are getting from existing customers.
>>The same goes for any business.
>
>
> Vast majority of those costs are fixed (advertising, CS staff, data
> processing).

Whatever. Any competent business can tell you what it costs to add a
new customer. It is always much more than retaining an existing
customer. Things like advertising and staff are expensive. It's a cost
well worth taking as it pays off in the long run.

[Matt Barrow]

"Newps" > wrote in message
...
>
>
> Matt Barrow wrote:
>> "Newps" > wrote in message
>> . ..
>>
>>>XM knows exactly what it costs to attain each new subscriber and it is
>>>much more than the $12 a month they are getting from existing customers.
>>>The same goes for any business.
>>
>>
>> Vast majority of those costs are fixed (advertising, CS staff, data
>> processing).
>
> Whatever. Any competent business can tell you what it costs to add a new
> customer. It is always much more than retaining an existing customer.

It's where more resources are directed, but actually holding a customer is
harder (according to studies I've heard) which is a point missed by so many
executives and why there is such derision for (purported) Customer
Dis-Service.

In sum, in some industries, yes; not so in others. In industries with costly
FIXED infrastructure, for example.

>Things like advertising and staff are expensive. It's a cost well worth
>taking as it pays off in the long run.

So is customer service, but we all know horror stories about abysmal CS.


--
Matt
---------------------
Matthew W. Barrow
Site-Fill Homes, LLC.
Montrose, CO

[Jonathan Goodish]

In article >,
"Matt Barrow" > wrote:
> In sum, in some industries, yes; not so in others. In industries with costly
> FIXED infrastructure, for example.

The bottom line is that new customer acquisition does not cost "next to
nothing" for any business. Neither does customer retention.

A few years ago, I read an article that analyzed the costs involved in
producing an Apple iMac. While the iMac sold for around $1000 at the
time, the analysis concluded that Apple was making a windfall profit
because parts costs were only around $250. The analysis completely
ignored the costs of doing business: marketing, R&D, manufacturing,
distribution, etc. In reality, Apple's profit was much smaller on a
per-unit basis than the article suggested.



JKG

[Matt Barrow]

"Jonathan Goodish" > wrote in message
...
> In article >,
> "Matt Barrow" > wrote:
>> In sum, in some industries, yes; not so in others. In industries with
>> costly
>> FIXED infrastructure, for example.
>
> The bottom line is that new customer acquisition does not cost "next to
> nothing" for any business. Neither does customer retention.
>
> A few years ago, I read an article that analyzed the costs involved in
> producing an Apple iMac. While the iMac sold for around $1000 at the
> time, the analysis concluded that Apple was making a windfall profit
> because parts costs were only around $250. The analysis completely
> ignored the costs of doing business: marketing, R&D, manufacturing,
> distribution, etc. In reality, Apple's profit was much smaller on a
> per-unit basis than the article suggested.

Those articles are common, evidently written by "journalists" rather than
anyone who's ever run a company. Another similar version is the 50 cents of
chemicals it takes to produce major pharmacuticals. Yeah, like they just
materialize in the right combination...

[Matt Barrow]

"Matt Barrow" > wrote in message
...
>
> "Jonathan Goodish" > wrote in message
> ...

>>
>> A few years ago, I read an article that analyzed the costs involved in
>> producing an Apple iMac. While the iMac sold for around $1000 at the
>> time, the analysis concluded that Apple was making a windfall profit
>> because parts costs were only around $250. The analysis completely
>> ignored the costs of doing business: marketing, R&D, manufacturing,
>> distribution, etc. In reality, Apple's profit was much smaller on a
>> per-unit basis than the article suggested.
>
> Those articles are common, evidently written by "journalists" rather than
> anyone who's ever run a company. Another similar version is the 50 cents
> of chemicals it takes to produce major pharmacuticals. Yeah, like they
> just materialize in the right combination...
>
I might add that selling to individual customers DIRECTLY is very different
than (generally) placing ads and having sales reps wait for calls so they
can sign up new customers.