Despite falling U.S. auto sales, XM Satellite Radio delivered the highest number of vehicle based subscriptions in satellite radio history, said CEO Nate Davis during yesterday's earnings call.

"Even with the relative softness in the US auto-market, XM delivered the largest number of OEM growth additions in the history of satellite radio," Davis said.

XM had over 800,000 gross OEM additions and roughly a million factory installed XM radios manufactured and delivered to dealers in the quarter, Davis told investors. "That is a 48% year-over-year quarterly increase."

XM ended the quarter 355,000 net subscriber additions from the OEM channel, while Sirius brought in over 321,000 net subscribers from the automotive channel.

Still, XM had a net loss of 51,000 subscribers from the Retail channel, while Sirius squeaked out just over an additional 2,500 subscribers from Retail

Davis explained that while the company had successfully increased direct retail sales to their website and call centers, those increases did not offset "the continuing decline in overall retail sales through the big box retailers."

"However, offsetting this retail weakness... is a continued acceleration of our OEM growth," said the CEO. "XM 2008 installations could well exceed 4 million units close to the long range estimate we provided a number of year's ago."

[Transcript via SeekingAlpha]

I don't think anyone thought we would still be doing this comparison since the merger was announced, I sure didn't, but here we are again. The above chart shows the total cumulative subscribers comparing Sirius and XM.

Total Satellite Radio Subscribers:

• Sirius: 8,644,319
  
• XM: 9,330,000
  

But while the total subscriber numbers are interesting, I think it's the net and gross additions that are most significant.


Above is a chart shows the quarterly net subscriber additions dating back two years. Look at Q1 of this year: Sirius and XM are nearly equal in quarterly net additions. This is a significant shift from prior quarters where Sirius truly dominated.

Quarterly Net Additions:

• Sirius: 322,354
  
• XM: 303,000
  

So let's take a look at gross subscriber additions:
This chart shows a different picture of XM once again dominating gross subscriber additions - albeit, just barely.

Quarterly Gross Additions:

• Sirius: 1,003,422
  
• XM: 1,034,000
  

To their credit, XM did a great job in gaining gross subscribers from the same period last year - the question is whether this trend will continue for future quarters. But that's a question (at least for these Sirius vs. XM comparisons) that may not matter if the FCC actually makes a decision.

"When the only tool you have is a hammer, then every problem begins to look like a nail."

- Abraham Maslow

In the world of statistics and research, methodology is paramount. That's pretty basic. If you're going to draw a conclusion from the polling of a sample, the methods you use to extract those answers had damn well better be solid. Because in the end, the way this data is gathered defines the final outcome.

And this is exactly why I say that the Arbitron ratings for satellite radio listening are wrong. Indeed, they're bullshit.

Maybe that was a bit harsh, I'm sorry. Let's instead say that these ratings are for "information purposes only," because that's how Arbitron refers to them.

Mind you, the criticism that's about to ensue has absolutely nothing to do with terrestrial radio and how its listenership is measured. That's a whole different issue. This is meant to point out the flaws in how Arbitron measures satellite radio listenership and nothing more. So when I say that "Arbitron's ratings are wrong" I mean for Sirius and XM, and not regular radio.

So let's begin.



Reason #1
The Arbitron Diary.

Actually, it's the methodology for terrestrial radio ratings that's screwing it all up. Arbitron's diary is built from the ground up to measure AM/FM. Not Internet Radio. Not Satellite Radio. Not even HD Radio (that is, if anyone was listening to HD Radio). It's meant for good ol' regular radio and nothing else.

Here's a big problem: There is no checkbox for a listener to select "Satellite Radio." None. Nothing for Sirius. Nothing for XM. Nothing. Diarykeepers need to actually physically write in the service and the channel info, in addition to the time they started and stopped listening to the program as well as the location of where they did this. Do you think people will actually write in all that information? Right there, the data becomes tainted.

Follow the jump to keep reading...

XM Canada is likely to outpace the subscriber growth of XM in the U.S., the company said yesterday.

"We believe the Canadian market will surpass the growth predicted for the U.S., given the U.S. is in its sixth year of business and we're still in our early stages of growth cycle here in Canada," Michael Moskowitz, the company's new president and CEO.

XM Canada reached 350,000 subscribers as of the end of their first quarter (ending Nov. 30th), a growth rate of 86% over the same period the prior year.

Moskowitz said XM Canada has benefited from the promotional campaigns and product penetration in the United States. The awareness helped prepare Canadians for the rollout of the service.

"We're really at the infancy stage here," Moskowitz said. "We still have a low percentage of cars that come with XM, so I think there's tremendous opportunity."

"The best years are to come because we're at an earlier stage in the whole development of satellite radio in Canada," he added in an interview after the meeting.

As for the merger, Moskowitz said it's still business as usual up north. "Even if there was a merger it would take several months - upwards to a year - because there's (Canadian) government regulations that would have to come into play as well," he said.

[The Canadian Press]
Thanks Lee!

This might very well be the last quarter that we will be comparing XM and Sirius subscriber numbers, as two separate companies at least. So, let's get to it before time runs out and we're forced to hold hands and sing Kumbaya together.

And because pictures are much easier to look at than a matrix of mind-numbing digits, here's some charts to help us along.

Total Satellite Radio Subscribers

• Sirius Satellite Radio: 7,667,476
• XM Satellite Radio: 8,570,000

Here we see the total cumulative subscribers starting from the fourth quarter of 2001. Now the interesting thing to note is that in the past two quarters, Sirius has been consistently three-quarters behind XM.

In other words, Sirius is currently where XM was in 4Q06 (~7.6M). In the 2nd-quarter of this year, Sirius was where XM was in 3Q06 (~7.1M).

Remember, there's a seasonality in retail which historically sees a spike in Q4. So this may not be a fair comparison. The killer question is whether either company has the momentum to have a stellar holiday season this year to make a difference. So far, the signs have not been encouraging.

Quarterly Net Subscribers

• Sirius Satellite Radio: 524,938
• XM Satellite Radio: 315,000

Here there can be no question that Sirius is out pacing XM. For nearly two years, Sirius has had more net subscriber additions than XM has. The most notable being in 4Q06 where Sirius simply destroyed XM in net additions.

Quarterly Gross Subscribers

• Sirius Satellite Radio: 999,284
• XM Satellite Radio: 952,000

Gross subscriber additions shows something different. Here we see near parity when it comes to quarterly subscriber growth.

Since gross subscribers scrubs out the effects of churn, and evens out other factors like including together promotional/non-promotional subscribers, here we can gather a better sense of market penetration. So I really do like to look at gross subscribers over net subscribers when looking at how both are performing.

Again, we see that in 4Q06, there was a tipping point where Sirius now leads XM consistently in gross subscriber additions.

Sirius Canada has surpassed more than 500,000 paying subscribers, adding more than 200,000 since February. The company was the first to surpass the key 500,000 subscriber milestone in the 22 months since the category was first introduced.

Sirius Canada captured 82% of retail sales year-to-date according to figures released by The NPD Group. During the Father’s Day buying period Sirius bagged an incredible 88% market share of satellite radios sold.

The company’s automotive partners also, by their claim, make up nearly 60% of vehicle sales in Canada and since January 2007 have built more than 100,000 vehicles with factory-installed Sirius.

[Press Release]

XM Canada has said that they've more than doubled their subscriber base since 2006 for their fiscal fourth quarter ending August 31st

XM Canada ended their fiscal year with 306,000 subscribers. Note that back in March, XM Canada changed how they are reporting subscribers in an effort to align subscriber numbers "more closely with industry norms." XM Canada's subscriber numbers now include vehicles factory-activated when automakers have agreed to pay for a portion or all of the trial period service.

Sirius Canada announced they broke 300,000 subscribers over seven months ago.

[Press Release]

Oh sure, there's a merger going on so everyone's one big happy family right? Not exactly. Everyone still wants to see how Sirius' and XM's satellite radio subscribers are stacking up against each other.

So here's some charts and numbers using the latest subscriber information to break it all down for you.

Total Satellite Radio Subscribers:

Sirius Satellite Radio: 7,142,538
XM Satellite Radio: 8,250,000

The above chart shows the total cumulative subscribers starting from the fourth quarter of 2001 and how both Sirius and XM subscribers have grown comparative to each other.

Quarterly Net Subscribers

Sirius Satellite Radio: 561,493
XM Satellite Radio: 338,000

Here you can see how Sirius and XM have added NET subscribers on a quarterly basis, going back to 2005. For the seventh consecutive quarter, Sirius has beaten out XM in net satellite radio subscriber additions.

Quarterly Gross Subscribers:

Sirius Satellite Radio: 1,002,145
XM Satellite Radio: 942,000

This chart shows the quarterly GROSS subscriber additions between XM and Sirius. I find that gross subscribers are a very important metric to track, because it eliminates variables (like churn) and shows the true market penetration. For the third consecutive quarter, Sirius has outpaced XM in gross subscriber additions. This even beats out the "Stern Effect" from last year.

 

Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR) are scheduled to release their 2Q results within the next two weeks, and analysts are offering up their predictions of what's to come.

And the news ain't that bad. (surprised?)

Bear Stearns analyst Robert Peck projects that Sirius will add 920,000 gross subscribers, while net subscriber additions will come in at 477,000. For XM, Bear Stearns projects gross additions of 950,000 and net additions of 323,000 subscribers.

Bank of America's Jonathan Jacoby is a bit more bullish on subscriber additions, stating that Sirius "will easily top" BofA's estimates of 441,000 net subscriber additions, "and could beat the Street consensus estimate of 470K by as much as 25K." Jacoby also estimates that XM will also "easily top" the Street consensus of 310k net subscribers, and may even best his more aggressive estimate of 345,000 net subscribers.

The comps are hard though. For the same period last year, XM came in at 398,012 net subscribers (926,281 gross subs) and Sirius topped the scale at 600,460 net subscribers (830,571 gross subs).

Even if XM and Sirius beat out the more bullish estimates, they still likely won't beat 2Q06's numbers... albeit by a relatively small amount. But with the merger on everyone's minds, will it even matter?

Since April of last year, Bridge Ratings has shown overall "brand interest" in satellite radio to be on a significant decline - as is obvious from the above graph - but the good news is that in the latter part of Q2, consumer interest has improved.

After a slight uptick in interest during 4Q06, interest in satellite radio among consumers fell to its lowest point this spring - falling below the 5.0 point for the first time ever. (see chart) A "Brand Stimulation Score" of 4.8 indicates that as a group, those Bridge interviewed were just as likely not to consider subscribing as were.

The comps are difficult though: in the first half of '06, the average Brand Stimulation Score was 7.3, assumably as a direct result of the Stern Effect. The "brand stimulation" then slid to 6.0, reflecting the soft consumer interest during the middle part of 2006. And though the full Q2 average fell to 4.7, Bridge's numbers show a flattening occurring. As Bridge puts it, "It is possible that consumer apathy for satellite radio has bottomed out."

Bridge's study also shows that consumer hestitation due to the pending Sirius-XM merger has dropped significantly as well.

Bridge Ratings Q1 data indicated that 52% of potential subscribers would wait longer than previously expected before subscribing thanks to the merger. But their Q2 data shows that number has dropped to 40%.

The key takeaway here is that satellite radio appears to have lost its original appeal, but is showing signs of recovery (during a generally slow time of the year even). This is good news, but how do they stimulate this momentum further? One big factor, in my opinion, is the style and design of satellite radio retail products.

It's the overall experience of the medium that ultimately drives recommendations from friends (aka word-of-mouth) - which leads to consumer interest - and that includes the clunky device sitting atop your friend's dashboard.

[Bridge Ratings]