# More Questions Than Answers with Satellite Radio



## Chris Blount (Jun 22, 2001)

More Questions Than Answers with Satellite Radio

The country's top two competing satellite radio providers announced third quarter subscriber additions this week and reaction to the news has been somewhat expected: satellite radio, with all of its potential, is still creating more questions than answers. Industry analysts recognize that both companies continue to expand their subscriber bases, but the question of supply vs. demand continues to weaken the industry as a whole.

At first glance, it appears both XM and Sirius are chugging along well. XM added 285,000 subscribers during the period which is slightly above some Wall Street estimates. But - and its a big BUT - that number represents a 54 percent drop from the same quarter last year and a 12 percent decrease in gross adds (844,000) after applying last quarter's churn rate of 2.7 percent.

Sirius, on the other hand, easily gained share exceeding analyst estimates with 441,000 net additions. With the company's second quarter churn rate of 2 percent, Sirius appears to have grossed 722,000 adds - a 55 percent increase over the same period last year, but still 14 percent lower than its rival XM.

"Sirius' dramatic market share gains are almost entirely a consequence of its smaller base; what we described a year ago as the 'gravitational pull of parity market share,'" said Bernstein Research's Craig Moffett. "By virtue of its smaller size, Sirius loses fewer customers to churn (and) its share of net adds will always be higher than its gross adds, at least until it 'catches up' to XM in sheer size."

Moffett goes on to say the industry's weakness is reflected in XM's well-documented product shortages during the quarter - thanks to FCC non-compliance issues - which undoubtedly constrained sales and led to a sharp pullback in consumer marketing. Sirius had similar problems, but the analyst said they were less significant and likely had a smaller impact on quarterly sales.

Weak sales via U.S. automakers didn't help either company, Moffett said, compounded by the fact that many OEM additions will soon be exiting their promotional period. These satellite radio listeners - but non-subscribers - will contribute to higher churn rates across the board, he said.

http://www.skyreport.com (Used with permission)


----------



## georgecostanza (Jan 11, 2005)

What a BS article, Sirius is doing better because it's smaller? Sirius is doing better, mainly because of Howard. When Sirius surpasses XM, according to this theory, XM will start outselling Sirius, doubtful.


----------

