By Brandon Matthews
Recently, Sirius XM Radio (SIRI) CEO Mel Karmazin spoke at Liberty Media’s (LMDIA) 2009 investor conference. Mr. Karmazin made some remarkable announcements despite being limited on subject matter in what he could speak of, due to “blackout” restrictions resulting from Sirius XM’s pending Q3 2009 earnings call. Satwaves will be providing LIVE coverage of the earnings results beginning at 6 am EST on November 5, 2009.
One of the first announcements made by Mr. Karmazin at Liberty’s investor conference was that he had authorized a new press release the morning of October 16th to announce a new certified preowned program. To date, that press release has not yet been distributed leaving many to wonder which automaker this new program applies to. The popular vote seems to be leaning towards Toyota (TYO), but we will have to wait and see.
Mr. Karmazin was very excited about what he called “significant growth” in the used car market and described future reports that will include these subscriber growth statistics separately. He described as an example that 22% of vehicles on CarMax (KMX) lots were already equipped with Satellite Radio and that the company offered incentives on the life of such vehicles as a means to spur growth in this area. He went on to explain that the company was looking into deals with insurance companies as a way of promoting the service in private party used car transactions.
Although handcuffed by SEC regulations, he managed to hint that churn had “ticked up very little” as a result of the recently passed $2.00 royalty surcharge, which many analysts had assumed would have had disastrous effects on overall churn numbers. He also stated that the Cash For Clunkers program had been very successful for the company, which leads me to believe that higher SAC costs may have been offset by low inventories based on statements that followed.
A surprise announcement came regarding the use of unsubscribed radios to be turned on in the future to be used with an advertising based model of Satellite Radio, which would offer a “taste” of what a subscription to Satellite Radio would offer subscribers. The reason I find this surprising is that I had personally proposed this issue more than 2 years ago, and had written about it again earlier this year when Liberty CEO Greg Maffei floated the idea in an interview with CNBC’s Maria Bartiromo. (I’m still waiting for “job site” satellite radios to come to fruition.)
Lastly, it had been extensively reported that Mr. Karmazin claimed there would be no reverse split during this interview. It’s important that investors understand that Mr. Karmazin only stated that there were no plans “right now” and also stated that the board had the authority to implement one at any time. That’s not to say it will or will not happen, but I am concerned that some less than reputable media outlets such as TheStreet.com, which looks to be heading full steam towards its own date with the bankruptcy court as its executives flee in droves amid late missing SEC required filings, will use a statement taken out of context to crucify a man that has already reduced their credibility to zero.
Position: Long SIRI
Nice article again Brandon!
Right on, Brandon. The comments made by Mel Karmazin (which have to be circumspect due to Sarbanes-Oxley requirements) are certainly encouraging and provide insight into the improved sentiment of management within Sirius XM with regard to potential for significant growth into the future. With only five trading days until the release of 3rd Qtr. earnings and guidance, this should reinforce the resilient undertone and buoyancy of SIRI while awaiting this data.
Short interest continues to decline: Figures released last night show the third consecutive bi-weekly decline in short positions, to 82,187,092 as of 10/15 (down 7,107,105 from the previous 89,294,197 as of 9/30). These figures are substantially lower than the prevailing short positions of recent months, shown in these levels along the way: 3/31 181.2 million; 4/30 158.1MM; 5/29 175.7MM; 6/30 194.8MM; 7/31 134.4MM; 8/31 124.7MM.
Throughout the period noted above, the share price of SIRI was rising progressively, indicating the recent reduction in short interest has come at substantial pain to those covering these positions in a rising market. The fact that the “pro’s” continue to pay up to buy in these shorts reflects their growing optimism about the prospects for Sirius XM going forward and their desire to limit exposure on the short side to probable future gains for SIRI over the intermediate to longer term.
This reduction in short interest reinforces the perceptions noted in the article above – that sentiment is now improving across the board for Sirius XM and risk/reward assessments for SIRI favor the long side.
Brandon, as you might be aware of the fact that I too have been making a strong plea to Sirius Xm to fire up the idle radios on what sounds like from Mel’s statement on the same basis I have proposed over the last couple of years. This is great news!!! It’s a low cost marketing strategy that takes advantage of these (idle radios) forgotten future disciples of Sat Radio.
I truly believe if implemented properly it will help educate the public at large about the possible offerings (and what they are missing) of Sirius Xm. We (the people involved on these Sat Radio sites) have to remember that we (in my estimate) take for granted that more people are aware of Sat Radio than there really are. We live to some degree live in our own bubble and can’t see beyond this bubble!
I promise to all that if Sirius Xm fires up the idle radios on a low tier w/ limited content basis it will not only make more people aware of what it has to offer, but also bring in new subs that have a unit in their possession that otherwise might stay idle. NOTHING TO LOSE & EVERYTHING TO GAIN! We all complain of the lack of marketing. This is marketing at its best!!! For those who think this idea will water down the product you will see it will only make it a more substantial product but more of a household brand name. EVEN ICONIC!!! Wait & See.
18 MILLION IDLE RADIOS AND GROWING!
RAF dammit, why don’t you write and submit an article to me…
Neal…could not agree more…just imagine the opportunities in advertising just the sirius xm service alone. Something like Rosie Radio or Hannah Montana being advertised as available to subscribers only would spur sub growth.
Brandon – Nice article – What was the total dollar amount for retiring the Liberty loan this quarter? 120 Mil? Thanks!
I am already imagining street.com article as soon as SIRIXM introduces free adverstised version of SATRAD. They will come out with the article saying “Subscription model failed sooooo SIRIXM is out with free advertised SATRAD model”.
Good article Brandon. Turning on unsubscribed radios has huge potential and glad to see they are finally going to do that. Also, I found very interesting and NEW that SIRIUS may be working with insurance companies on private auto sales…think this has some potential. Finally, I’m glad to see that you recognize what the media bashers and their MM partners will do to Mel and his management team if they should do a R/S any time soon.
How come Mel’s pictures always look like he is taking a dump ?
There’s alot that, hasn’t been said by Mel! Mel and Sirius/Xm has been really tight lipped about this new partnership with Apple. Not even a press release for their new Skydock and other new products!
Turning on idle radios will be perfect! Clear Channel has got some serious debt issues to face in the begining of 2010. Clear Channel has had 2 recent credit downgrades this year from S&P and Moodys. They both cited a possible bankruptcy filing by Clear Channel in early 2010. Sirius/Xm can take right over the Clear Channel business model and make alot of money doing it! There’s got to be about 20 million idle radio’s out there and it’s getting bigger by the day. Sirius/Xm will be able to offer targeted advertisement for their customers. This could generate big revenues.
Like Mel said earlier this year, ” We are aware of Clear Channels revenue and upcoming debt problems”. Mel assured investers that, Sirius/Xm will be there to capitalize on Clear Channel’s demize!
Good positive comments from Mel during this speech. I look forward to more detail at the conference call.
JMS, there’s no press release because there’s no partnership with Apple. I thought Mel’s comments were truthful about Apple. Something along the lines of…”We’ve got the Apple app, of course, there are 75,000 of those so that’s not a big deal.” It’s time to realize Sirius is on its own to grow out of its issues. And I totally believe they will grow into powerful media company. Again Mel’s words, “As long as we don’t screw anything up.” It won’t happen over night, but over time we’ll all be paid back tremendously for the hell we’ve been through with this investment.
“There’s alot that, hasn’t been said by Mel! Not even a press release for their new Skydock and other new products!”
I understand there isnt a partnership with Apple but a simply press release announcing the debut of the Skydock would seem to make common sense–Are they waiting to get massive product out before announcing? Of all the things to be dissappointed with, Sirius/XM own PR/marketing dept is worseless
Fuzzy, you have to run a company on the basis of what is best for the company, not what the critics will say. They don’t run the company and are not beholding to the stockholders etc. Mel & company has to look at the data and marketing strategies and base their decision on numbers, not possible critisizimes. Strong leadership is what the critics are complaining about or I should say the lack of. So this move could be done in a way were you present it to the public as a opportunity to educate & show off what you are so proud of which is the CONTENT. Business 101, if it’s out of sight it’s out of mind. If people like us that follow Sat Rad think for a second that this Sirius Xm product is well understood by the public then shame on them! IT IS NOT!! Its a wonderful but very complex product that it’s understanding by the general public is vauge at best. Action needs to be taken as these idle radios they out number the sub radios. It’s time has come! What till the media jumps on the fact that there are more idle radios than subs by 2 to 1, because that time is coming if some program is not implimented. It’s a low cost marketing campiagn with a powerful wollop. It will also put a strong hurt on Terrestial radio too.@fuzzy
IMO: there is still NOT enough inventory yet.
JMS, there’s no press release because there’s no partnership with Apple. I thought Mel’s comments were truthful about Apple. Something along the lines of…”We’ve got the Apple app, of course, there are 75,000 of those so that’s not a big deal.” It’s time to realize Sirius is on its own to grow out of its issues. And I totally believe they will grow into powerful media company. Again Mel’s words, “As long as we don’t screw anything up.” It won’t happen over night, but over time we’ll all be paid back tremendously for the hell we’ve been through with this investment.
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Brad, Apple is selling the Skydock in their stores now. Apple has the highest customer traffic per square foot than any other store ever! Having a descent display in Apple’s stores will be huge! Sirius/Xm is generating revenues for Apple through Itunes tag for purchase later feature. I’m sure there will be advertisement for Apple ’s products to Sirius/Xm listeners!
Wouldn’t these type of actions be considered a partnership?
No, otherwise Apple would have “partnerships” with hundreds of other companies too. In fact, everyone that develops a product based on a Apple product would be considered in partnership. Sirius is capitalizing on Apple, yes, partnering, no. @jmssvnnhdsprs
The deal is every tech company is going to realize sooner than later what a cash cow this thing is!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!