Sirius XM reports record earnings, lowers guidance, raises rates

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Issue Date: 
Oct 25 2013 - 11:45am

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From the department of mixed messages, Sirius XM reported record earnings on yesterday’s quarterly call, predicted disappointing earnings for 2014, and handed a rate increase to subscribers. SIRI stock is down over six percent on Friday, as of this post.

The third quarter was positive for the satellite broadcaster, showing year-over-year revenue growth of 11 percent, and subscriber growth of 9 percent over Q3 2012. Good wind for sailing forward? Well … the company shaved nearly $200-million off the average $4.17-billion revenue estimate Wall Street predicted for 2014, and handed a price increase of six dollars per year to its 26.5-million subscribers. The street isn’t over the moon about the lowered forecast, but favors Sirius XM’s confidence in hiking rates for only the second time since 2008.

Satellite radio faces the future with enviable advantages, and strengthening competitive headwind -- especially in the car. Most new cars have factory-installed satellite receivers, and offer months-long trial subscriptions designed to addict new listeners to the Sirius XM service. That distribution tactic plays out to a 45-percent conversion from trial to paid subscription. Historically, satellite’s increasingly entrenched position in the dashboard has disrupted AM/FM’s traditional reign in the car, forcing it to share built-in dash territory.

Going forward, Internet-connected dashboards offer an expanded suite of built-in listening choices. Even disconnected head units that permit smartphone plugs insert a competitive wedge between the driver and what comes through the car speakers. Pandora is the leading IP-delivered alternative to both AM/FM and satellite in the car, and many other options (including iPod playlists) cater to fine-tuned user customization better than one-to-many broadcast models.

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More for XM ? No way !

I have been an XM customer since almost day one. I have not seen this price hike yet, but for me this is likely the last straw. The audio quality of XM is now so bad it huts my ears. I am mostly listening to Internet radio stations over my iPhone in the car now.If I could get CNN & MSNBC over my phone I would drop XM today.

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