By Brandon Matthews
Now that the June 2009 auto sales data has been released, it’s time once again for me to go out on the proverbial limb in keeping with the long standing tradition of estimating Sirius XM’s (SIRI) quarterly subscriber numbers. Despite the fact that the Sirius XM story is that of revenue growth rather than subscriber growth these days, there is a certain aspect of the media that refuses to let go of the past, present company included. The difference is that at Satwaves, we don’t pick and choose which information we publish.
Predicting subscriber numbers has always been especially challenging to me. Years ago several of us would track activation numbers reported by new subscribers in an effort to accurately predict the subscriber count. This worked well until the company discovered the ingenious plan and began using randomly produced activation numbers rather than the sequential version we had become accustomed to.
I’ve always been the kind of person who could spot a pattern, except when it comes to Sirius XM’s subscriber numbers. With SIRI, the game is always changing and therein lies its appeal to me. First quarter 2009 came in far below most peoples expectations. Although most blame the auto industry for Sirius XM’s sub par performance, I take exception to that. I believe the first quarter to have been an anomaly based on a biased media’s attempt to bury Sirius XM Radio in the bankruptcy graveyard. Thousands upon thousands of articles were written telling of the demise of Satellite Radio. Hardly a hundred were written regarding its survival. The newest auto sales reports demonstrate clearly that consumers in general steer clear of companies whose futures are unknown, such as General Motors and Chrysler.
Despite the negative press, Sirius XM lives on. There have been many variables introduced this quarter also. There are auto plant shutdowns to contend with which are actually typical to some extent at this time of the year. The G.M. and Chrysler bankruptcies plague any attempt at predicting accurate results. On the positive side Sirius XM has introduced six new certified preowned programs. Much attention was given to the Volkswagon announcement, yet the more important GM, Honda, BMW and Regional Ford programs have been overlooked by many.
In lieu of such variables, I have instead decided to use historical averages of total auto sales as a guide. With that in mind, I feel comfortable in my estimates that Sirius XM will report approximately 84,608 positive net additions for Q2 on an increase of 259,608 OEM net additions with a loss of 175,000 retail subscribers. More importantly, I believe that Sirius XM will offer an upside earnings surprise based on new incremental iPhone and Internet royalty revenues. (people locking in longer term plans in advance of the 2.00 fee)
For a full break down of auto sales data and historical subscriber reports used in this article, visit us at this Satwaves Forum thread.
Position: Long SIRI
Thanks for the update Brandon. I am looking for positive numbers in the Q2 report as well.
Do you have any figures of additional subs based on the Apple app? Thank you.
Internet royalty revenues? i thought the subscribers were going to get hit with it on July 21, Q3..
When Brandon said internet royalty revenues, I believe he simply meant the premium internet subscription fees, as it relates to those who subscribed to it because of the iPhone app.
Also, this is the first full quarter to consider the rate increase for family plan and internet rate increase.
No. I stated it wrong. If subscribers renew before the date and lock in longer terms, the fee is waived..
Brandon, I have asked several times on several articles (different authors) at SatWaves about the Apple app. The articles always seem extremely positve yet there is no specific numbers to actually backing up the artcles. Is it +100K subs, +500K, more, less? Please provide us with some direction. Thank you.
I am anxiously awaiting your next article talking about the Apple app.
Jay
Bottom line you know what we know.500k in thefirst4 days.
The fact thattheyareadvertising the app means that it is successfully bring in subs
I noticed a new billboard advertising the ipod app on the jersey turnpike close to lincoln tunnel exit and i think this was just put up w/in past couple weeks.
Brandon, My questions are:
1. The 259,608 is for new auto sales only and not certified preowned? My comment on this is that with the many special deals going on with no interest and lower prices in new car sales, I would think that this leaves more disposable income to spend on Sat Radio and therefore a higher take rate than normal.
2. Your numbers do not include any iPhone additions? I still believe that this is where you will see the biggest upside surprise. I think iPhone owners have more disposable income than traditional mobile phone users. While other free apps exist, I still believe that SiriusXM’s unique content other than music lends itself to the demographics of the iPhone user. In addition, the ability to purchase songs through iTunes makes it compelling such that only a single “radio” app is required that combines music, news, financial channels and talk radio.
3. By retail sales losses, you mean that despite potential sales by WalMart and Best Buy, losses are coming from the failure of Circuit City and “service drops” from previous retail subscribers? Hence, your estimate is that there are more retail subscribers dropping the service than can be made up by new retail sales through WalMart and Best Buy. Is this correct? Or is it due to the obsolesence of both Sirius and XM third party radios?
i dont have the numbers to make a prediction for this just past quarter but my common sense guess is that this is the WORST quarter sub wise in sirius history which means negative sub numbers–On the positive side, we have hit bottom with this quarter and we now go positive in the 3rd sub wise and positive cash flow wise too–From here on, things get better with earnings/sub surprises—But, again, this quarter will be pretty bad in the sub dept–One needs to look at costs and break even numbers this past quarter
Good Afternoon Brandon,
How do you figure in the new apple iphone applications subscriptions? I the 175,000 retail subscribers loss net of the apple iphone additions on the retail side??
Just curious on how you are incorporating this new retail channel?
Thanks…
@Isidoro
I’m giving little weight to the app.
I believe it will have contributed to earnings from premium upgrades, but feel it was introduced too late in the quarter to make a real difference in subs.
‘Ast quarter was over300k lost on the retail side…I think 368k. I’m looking some of those losses to begin subsiding postbk scare…
@Gary
Based on what? I’ve shown you the numbers. Weakness in the oems came primarily from oems with the lowest penetration rates. Chrysler plants.restated and gm contract was renegotiated last quarter. What do you base your supposition on?.
Hi Brandon,
Thank you for your reply. I can see that this is a hot issue. Since you have an inside track, I hope you can do an article about the app. prior to the Q2 release. Thanks again.
1. Correct. I’m going the conservative route on the Certified Preowned program as we have no benchmark data to start from.
2. Correct. I do not mean to imply that the iPhone will not add subs. It will. I see the numbers as nominal due to the late introduction. The free trials of potential new apps would have just begun to expire prior to the quarters close. I also see it as a benefit to existing subs which may result in lower churn. Hence my negative 175k vs -225k retail sub estimate.
3. The trend over the last 6 quarters has shown a steady decline in retail subscribers. To begin with more cars on the road are equipped with Satellite radios, which reduces the potential market for retail aftermarket radios.
The second quarter also boasted high unemployment. The initial hardware costs associated with a new subscription would have kept away many would be subscribers. Job losses will have contributed to a high retail drop in subs, yet not as bad as in Q1…imho…
The BIG question is what will the mainstream media focus on this time? Will they focus on the slight loss in subs as usual? Or will they focus on the “upside” surprise Brandon is alluding to? If past actions are any indication, they’ll cherry pick from the negative again in an effort to bash the price back down. But will that be as effective this time around? After all, it appears the sentiment about Sirius since the debt refinancing and other good news has improved. Slowly yes, but there appears to be a shift in attitude towards the more positive when it comes to Sirius as of late. Again, will that be enough to offset the bashers who will undoubtedly pounce on ANY news about loss of subs two quarters in a row? I don’t know.
It should be VERY interesting tho, especially IF Sirius does come out with some very positive news despite the lower sub numbers. This could be a MAJOR turning point. A great test. Will the bashers and shorts win and be able to knock Sirius down once more? Or will they lose the stranglehold? Again, this is going to be THE test of where the stock price goes for the last half of the year.
If Sirius can continue to improve or even maintain it’s positive outlook despite the car industry numbers, then all bets are off. The shift towards the positive will truly become obvious, and Wall Street will have no other choice but to jump on the bandwagon and the rise to a $1 and more will begin in earnest IMHO.
Of course as a long suffering long, it’s hard to get TOO excited when it comes to this stock. ANYTHING can and usually does happen. But I’ve been encouraged as of late, and although I am guarded….I am more optimistic than usual. Cautiously optimistic….but optimistic.
I guess we will find out soon enough.
And I feel the silver lining is that EVEN if the shorts are able to bash the stock down one last time, that they won’t be able to keep it down too long. I believe the positive news going forward will begin to outweigh the shorts usual power advantage. So if the price DOES get bashed down into the .30s again for a brief period, I will look at it as a HUGE buying opportunity. But if Sirius can weather the negative bashing thats sure to come from the bashers and bounce up on the good news going forward instead…then I’ll just ride the shares I already do own up. I look at it as a win win. And that feels good. I really think the doom and gloomers who have held this stock down for so long are losing the battle….and that is why WHAT happens with Q2 results and how Wall Street reacts this time will be so interesting.
Good luck to all longs.
Well done.
Tyler wrote an article this weekend and insists again in a post he created about 2Q subs that they will be negative, not as bad as 1st Q, but negative.
How could we have 2 people on complete ends of the spectrum here ?
Brandon you are a nut case if you think they have positive sub growth this quarter. Now while it is a fact because of the subsidies they pay out and GM being one of the worst they should have a good quarter on almost all other mertrics, not to mention the fact that they will have alot of extra revenue coming in from the rest of the rate increases. The question that remains is how do investors take the bad sub numbers along with the other good and greatly improving metrics. I also would not get to ahead of myself on predicting such a up side like a GAAP profit. Lets face it Mel knew full well what was coming down the pike as far as increases. The only question there is how much did he underestimate this time.
@sxminvestor
One is going way off the reservation and the other is staying well on it. I would listen to Tyler on this one. I have said before that it would be in the 300,000 range that might be a little high. Taking into account the OEM numbers there is no way they are positive this quarter though.
@sxminvestor
Because one is wrong and one is write. There is no way that Sirius XM will have positive subs.