It should come as no surprise to anyone that the moment Sirius XM announced that its total subscriber base had plummeted by 400,000 in a single quarter, its stock began a 33% fall from the high it had achieved just moments before. A closer look at the reality however, reveals that the lost subscribers are anything but lost subscribers.
As I outlined in my article Time For A new Beginning, the pre merger competitiveness of the then separate Sirius Satellite Radio and XM Satellite Radio, created a situation in which the company’s began counting promotional subscribers as regular subscribers. Most long time followers are familiar with this fact, as these “promotional” subscriptions have sometimes been referred to as “parking lot subs.”
The individual company’s justified these as subscribers as these promotional subs were paid for by the auto manufacturers, such as GM, Ford and Chrysler. Once paid for, the company could then report that subscription, even though as yet the cars remained unsold on dealer lots across the country.
In that article I had suggested that it was perhaps time for Sirius XM to do away with this concept, and theorized that the drop in auto sales could have a negative impact on the overall tally.
Taking a closer look at the subscriber totals that were reported by Sirius XM last week, we discover that out of the 400,000 subscribers lost in the first quarter of 2009, 300,000 of these were not truly subscribers at all, but rather “parking lot” subs. Sirius reports that:
“…net subscriber loss of approximately 400,000 since year-end, the company’s first quarter of negative net subscriber additions, was driven by a decline of approximately 300,000 subscriptions in paid promotional trials, reflecting the dramatic fall-off in North American auto sales. Self-pay subscriptions declined less than 1% in the quarter from 15.5 million to 15.4 million.”
Taking into consideration the overall economy in the first quarter of 2009, an actual subscriber loss of less than 1% is much better in fact than anyone could anticipate.
According to Sirius XM, subscriptions in paid promotional trials in Q1 2008 were approximately 3.6 million and peaked at 3.7 million in the second quarter of 2008, and have dropped to 3.2 million at the end of the first quarter of 2009. This would indicate that the bulk of promotional subscription losses has already occurred, and is not likely indicative of a longer term problem.
In fact, year over year results indicate that Sirius XM’s self-paid subscriber base has grown from 14.3 million to 15.4 million, indicating that despite a sluggish economy Satellite Radio continues to gain in popularity.
Position: Long SIRI
The last sentence is quit interesting.
quite
Tell this to the analysts and Wall Street. I don’t think they got the message. Once again proving that they are so blinded by their bias AGAINST this company, that they are incapable of seeing the forest thru the trees.
This sucks for the short term price per share….but just wait. Once Sirius’s growth becomes TOO obvious to ignore….between the shorts scrambling to cover and the analysts scrambling to do a 180…..this stock is gonna FLY.
Until then, it’s gonna be the same old story for us long suffering longs. But we can take it. Thats why they call us longs.
Long and Strong baby. Long and Strong.
Thank you Brandon,
Your write-up makes sense to me.
Between this situation and the ONE TIME accounting charge for the Liberty transaction (.06 cents of the .07 cents loss), I am completely amused at the market’s reaction to the CC. I guess that I am in that oddball camp that thinks the numbers were quite good.
Yes, the transaction did happen but looking at strictly operations of the going concern–the loss was .01 cents per share…..the street consensus was -.02 cents per share….
Now next qtr the numbers may look outragously good in a qtr to qtr comparison….
Go figure…..
Life as a Sirius investor…its it cool?
I saw some place where somebody did a average over the last three quarters on net new subs it worked out to around 23k over that same time period but it is good to see them breakdown numbers more clearly.
Brandon,
Thank you. I knew you would understand where I was going with my posts. The truth needs to be told..and you are doing a great job of it.
it seems to be that the OEMs are starting to do better from their lows–Still not anywhere near a good recovery but sales are inching up, especially for Ford–It will be interesting to see what the market share looks like and sales per company in the 2nd Q–I think Ford may have increased their market share nicely
Brandon, this look at the numbers within the numbers is very revealing, and is much more informative than the anti-Sirius bias contained in the "reports" of the so called "analysts" describing the CC and 1Q results. It is similar to their take on the loss of $.07/per diluted share that Sirius reported; which included the one-time charge for the preferred stock.
As I mentioned in my comments to Demian’s article, for "analysts" to claim they included this one-time $.06 charge in their "calculations" would essentially be an admission that Sirius had a 1Q net operating PROFIT of $.04! Yeh, right, they are going to report something positive about Sirius XM – NOT! If you believe that, then Mel, Jobs, Malone and Selig will be holding hands, singing Kumbaya and announcing the release of the IPhone/Pod app, bundled SXM/DTV and MLB on "Best of XM" at the shareholder meeting later this month! (Actually, I hope they do!)
I believe the "analysts" just blew the call and Sirius actually beat their estimates by 13% ($.07 vs .08)! Beat it by 50% if the one-time charge isn’t considered ($.01 vs .02)! Can’t wait for the 2Q report!
Maybe you can do a piece on this bit of information as well; would be interesting to see how SA headlines that concept!
Good job in focusing attention on the real numbers that drive this stock, Brandon. And, keep reporting on what you feel will be of interest and benefit to us retail shareholders-it all helps!
Long SIRI!
Thanks. More good work. This is the kind of analysis that will continue to elevate this site.
Would be nice if this was picked up on Google news in the same fashion that Demian’s article was.
I don’t know how the articles get picked up but just threw up a blurb in the discussion section. Would like to see this up all weekend and going into Monday morning (In the news section) – Is it a matter of clicks? Some random program that pick’s up key words?
Great job on getting the "real" facts out there Brandon. A lot of regular people do not realize the difference in subs that you stated above. Hopefully this will open a lot of peoples eyes and bring in new interest to SiriusXM.
Brandon,
This is my first post, and I would like to thank you for clarifying the subscriber numbers for me as well as everyone else who regularly checks this site. I have owned shares of Sirius since 2005, and bought alot more in February 2009.
I compare Sirius XM to a heavyweight in boxing, that has just lost a fair amount of weight. The boxer tipped the scales at 280 lbs 4 months ago. To the spectators, he was huge, but he has trimmed down to 245 lbs this month for his upcoming fight. On paper, he is smaller, but in reality he is quicker, leaner, and has more endurance. Just like Sirius XM, those promotional subscribers were nothing more than fat, the self pay subscribers are the lean body mass. Sirius has managed to cut costs, and has made vast improvements towards profitability. The goal of the boxer is to win fights, size matters only when its advantageous and leads to wins. Just like Sirius XM, we need to win, become profitable and not worry about our size unless it is lean mass.