On the brink: Sirius Satellite Radio struggles to show a profit
Filed under: Company News, Technology, Columns, People, Media
In a classic case of "buy the rumor, sell the news," Sirius XM Radio (SIRI) has seen its stock fall 95 percent since Howard Stern's first satellite radio show. Stern, who reportedly received $500 million over 5 years to join Sirius in late 2005, helped boost subscribers when he joined. His presence hasn't helped the company boost its stock price.
And neither have car sales. With automakers Chrysler and General Motors (GM) mired in bankruptcy proceedings, Sirius finds itself drifting toward failure. Car sales in the U.S. fell 34 percent in April, according to industry research firm Autodata, and Sirius XM has been feeling the impact as fewer vehicles with satellite radios are being sold.
Sirius XM, which broadcasts football and baseball games, has lost more than $300 million in the past two quarters and has lost a net of 404,422 subscribers in the first three months of this year. Mel Karmazin, CEO at the New York-based company, said in its earnings press release on May 7 that "satellite radio is now a cash flow growth story." That story has yet to help Sirius XM equity shares, down 86 percent in the past 12 months.
Since adding Stern to attract customers, Sirius XM has spent loads of cash and issued declining stock to lure celebrities including Martha Stewart, Oprah Winfrey, Jimmy Buffett, Jamie Foxx, Barbara Walters, Willie Nelson, Bob Dylan, and Tom Petty to its airwaves. The lineup of stars has helped it to double its customer base, to 18.6 million. Yet sales have fallen, and Sirius toyed with bankruptcy earlier this year, only to be rescued by John Malone's Liberty Media (LCAPA), which agreed to buy a 40 percent stake in the pay-radio company in exchange for $530 million in loans.
The celebrities have yet to prove satellite radio can be a proven money-maker. "This marks a new beginning, which is an exciting point in my career,'' Stern said during his final show on CBS's (CBS) WXRK-FM in New York. Little did he know it was the beginning of a downward spiral for Sirius XM's shares, which could end up at zero.
"There's a lot less pressure,'' Stern said of his move to satellite radio, during that final show on conventional (and free) radio. Stern received $219 million on his first day on satellite radio -- Sirius had already signed up enough new customers, who wanted to hear Stern -- to trigger the payment under his contract. As it turns out, for those who owned Sirius stock when Stern cashed in on his first day, their best move would have been to cash out.
Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter at hianthony.
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Reader Comments (Page 1 of 2)
6-01-2009 @ 2:32PM
Nancy said...
We signed up for xm radio because we didn't have to listen to inane djs. But now almost all stations have idiots talking instead of playing music. How can they make a profit with the amount of money paid to stern, etc.
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6-04-2009 @ 12:32AM
l said...
agree
6-01-2009 @ 2:32PM
rich said...
Wow, he wrote this 5 days from now. Did he hop into the DeLorean with Doc?
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6-01-2009 @ 2:39PM
AnthonyMassucci said...
I have other "time machine" tricks up my sleeve... stay tuned. I just have to find more garbage to throw into the fuel tank.
6-01-2009 @ 6:28PM
AnthonyMassucci said...
Rich,
Sorry about the dateline being 5 days early.
This Sirius XM story is part of a series of stories that will run on DailyFinance over the next week or so.
This story will "officially" appear on DailyFinance on June 6. Until then, consider yourself fortunate... seeing a sneak peak.
6-01-2009 @ 6:28PM
Eric said...
Howard Stern...old, old , old.
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6-06-2009 @ 6:15PM
Ben said...
I think you guys are all short sellers, and you are just trying to manipulate the stock downwards to offset the push coming on Monday (when they release news of the new iPhone/iPod touch application). This is going to drastically turn around subscriber rate.
Plus, you haven't even mentioned that Sirius and XM have merged. So, everything you said was about Sirius as a company BEFORE the merge, so in essence they are a totally new company. How can you even comment on this, and in this manner no less??
Short for sure.
Position - SIRI Long (wait and see when this app and the new subscriber numbers are released in the months ahead).
Reply
6-06-2009 @ 6:15PM
patrick reilly said...
The company you describe as "drifting toward failure," is now one of the largest radio companies in the world, based on First Quarter revenues. Though it only added its first subscriber in 2002, SIRIUS XM now has approximately 18.6 million subscribers, more than $600 million in revenue in the first quarter of 2009, and expects to deliver more than $350 million in adjusted operating income this year. And the stock has risen 183% YTD. You get the drift here.
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6-08-2009 @ 10:05PM
words said...
no they don't get it. they only understand manipulation and stealling. should be shot.
6-06-2009 @ 6:18PM
mike said...
Nice hit piece on SIRI. Typical of you "jounalists" who conveniently leave out the fact that SIRI has lowered it's operating costs and is about to open the content to millions of new mobile device owners. Who pays you? The NAB of course.
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6-07-2009 @ 8:49AM
Bill Benson said...
Wow... if you've tried and love Sirius-Xm like almost 20 million have, you know this guy really has no idea what he is talking about. The "overpaid talent argument" has merit, and continues to fester, but it in no way defines the medium today. The superior choice of great entertaining, uncensored programming available 24/7 is nowhere to be matched... either on the internet or regular radio.
6-06-2009 @ 6:27PM
bob said...
So Anthony, why even write this article? A failed company, why should you even care to write about them? And why now? And what did you really say in all those words? They paid too much for stern and are tied to auto industry. Hmm, well auto industry will be back, Liberty Media sees a lot of synergy with sirius xm, paying the stars makes content king for satrad even the black eyed peas wrote that into the current #1 song, iphone release is only the start into moving that top flight content that is not on terrestrial radio onto other avenues of internet based radio. Anyone who is buying what this guy writes, watch the movie stock shock when its released in a few days and you'll see he's a pawn to help in the attack on the stock price because big things are coming for this company.
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6-06-2009 @ 6:47PM
Jon Damm said...
Anthony,
What an incredibly well researched and objective piece! You are a shining example as a journalist. No one could question your journalistic integrity. You must get a lot of temptation to write slanted articles that could potentially benefit certain powerful people, who I am sure you stay way clear of. Good for you! Keep it up.
Jon
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6-06-2009 @ 6:58PM
Bob said...
Jon,
Your sarcasm is likely lost on all but the sirius believers. But of course as with my comment, the dissenting comments are not posted so maybe your way is the only way to get any sort of real comment across.
6-06-2009 @ 7:05PM
bill said...
This is a great article. Never before have I seen it said so well! I'm going to get on my iphone and send everyone I know a link to this article. Oh wait I need to shutdown my sirius app first. Seems that's all I'm using my iphone for these days so I thank you for giving me another reason to use it.
Oh sorry I must have time traveled also. To about a week from now after I've installed the new sirius xm app!
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6-06-2009 @ 7:10PM
Bob said...
Jon,
Your sarcasm is likely lost on all but the sirius believers. But of course as with my comment, the dissenting comments are not posted so maybe your way is the only way to get any sort of real comment across.
Reply
6-06-2009 @ 7:22PM
poor-man said...
I own over 500,000 shares of siri,what should i do
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6-09-2009 @ 4:25PM
Steve Weinberg said...
I am contemplating about buying 3,000-5,000 shares more. I would keep your shares and see what shakes out over the next two years. Unless you really need the $175,000, there was a reason you bought those shares even @ much larger cost.
I know this goes against conventional asset allocation wisdom, but something big is going to happen in this industry and you will be the first to reap the reward or "go down w/ the ship".
6-06-2009 @ 7:21PM
PAUL said...
HOW MUCH DID THEY PAY YOU TO WRITE THIS GARBAGE? SIRIUS AND LIBERTY WILL RULE .YOU WILL SEE AND EVERYBODY KNOWS IT.
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6-06-2009 @ 7:33PM
Jon Damm said...
Massucci wrote: "with fancy satellite radios." Anthony... you are write - those fancy shmancy radios - wow! Can you believe it? There are almost like those fancy shmancy boxes everyone has connected to those magic T.V.'s everyone keeps taking about. I can't believe Satellite almost has a 50% penetration rate on all cars... especially since their radios are so darn fancy! Too bad the car sales will never increase. If there was a chance - I would say that maybe a large enough group of fancy radio loving people would buy subscriptions so that this rotten company that you can't wait to see fail might have a hope. But alas... car sales will never pick up. Especially when they are equipped with such fancy radios. Perhaps if more visionary auto makers installed 8-tracks - which are far less fancy - people would wander back into the dealerships.
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