Last we reported on Satellite Radio in the MayoSeitz Media Monitor in the fall of 2008, Sirius and XM were merging and were soon heading, hand in hand, to the edge of a financial cliff. Sirius XM ultimately came perilously close to the edge of the cliff, but through outside investment by Liberty Media which took a 40% stake in the company, avoided falling into the financial abyss.
The question for today's Monitor is where is Sirius XM now and where is it heading?
Financially, Sirius XM is in a far better place; its stock which had plummeted to a low of 5 cents per share, and was facing delisting from NASDAQ, is now trading consistently at more than $1 per share which puts it out of delisting jeopardy. Costs have been reduced and there actually appears to be a business model where profit can be made longer term. Their just reported first quarter 2010 results show a 13% revenue increase and a profit.
This doesn’t mean that satellite radio is on its way to dominating the radio industry (it’s not), but that also doesn’t mean it’s an insignificant alternative to traditional/terrestrial radio.
What impact has satellite radio made? Some key facts:
1. There are almost 19 Million subscribers with 3 consecutive quarters of modest subscriber growth (which had been preceded by net subscriber declines in the first half of 2009). Subscribers are affluent --24% have annual income of $150,000+, compared to 9% of the general population, and well educated--56% college vs. 25% general population. So satellite radio has captured a highly desireable demographic.
2. Arbitron says there are 32Million weekly satellite listeners. In a typical day a Sirius XM listener spends 2 hours 45 minutes in their vehicle, and spend 71% of their time listening to Sirius XM vs. only 17% of their time listening to AM/FM radio. So obviously satelitte radio subscription hurts traditional radio listening.
3. Howard Stern’s contract expires in 2011. Stern continues to be the highest profile satellite radio asset, and helped accelerate Sirius growth in 2006 when he first jumped to satellite radio. Though there may be posturing on both sides, our expectation is that a financial solution will be reached for Stern to continue beyond his current contract. Sirius XM can now survive without him, but it would be a step back.
So what does the future hold?
Satellite radio is not going away. It continues to have a subscriber business model and as new car sales rebound, subscribers will increase. It may even have a financially viable business model. However, it exists on the periphery of the traditional radio business, which it has nibbled away at but hardly fully consumed. Interestingly it has not been able to parlay its affluent, educated listeners into significant ad revenue, though the opportunity to do so remain. So the verdict is a draw, satellite radio is still standing, and continues to move forward, but it's hardly the powerhouse it hoped to be.
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