This is a guest post from satellite radio fan Levi Ramsey. Do you like this article and want to see more from Levi? Sound off in the comments.The headline numbers from Sirius XM's earnings release earlier today were covered by Ryan in his post. There are a few figures that aren't directly stated in the earnings release that shed light on how the business (and by extension, the service as a whole) is doing.
When performing that analysis, it is clear that the decline in subs is almost solely attributable to the decline in auto sales over the past year.
In 2009, we have been treated to the most detailed subscriber count
breakdowns this industry has ever seen. Perhaps this is because there
is no longer the issue of a rival satellite radio company that performs
better on a given metric (e.g. Sirius' historical refusal to disclose
exactly how many subs are in promotional periods or XM's historical
refusal to put a fully-loaded churn rate in writing).
One of the fringe benefits is that it is now possible to calculate the promotional vs. self-paying splits on gross adds.
At the risk of turning this into a math class, I'll go step by step through the process of calculating these breakdowns (largely to save the trouble of having to go through it every three months in the future). These figures do have a margin of error of plus-or-minus 50 thousand or so and ignore the effects of rental car subscriptions (which account for about one four-hundredth of the sub base: they're a rounding error and can safely be ignored at this point).
The first figure is self-pay deactivations and is based on the self-pay churn rate and the average number of self-pay subs; it works out to about 926 thousand over the three months. Since every sub is either self-paying or promotional, then this implies that there were 640 thousand failed promotional subs.
From the number of promotional deactivations and the conversion rate of 44.4%, 511 thousand subs moved from promo to self-paying. In order for this figure to square with the net loss of 15 thousand self-paying subs, there would have to be 400 thousand self-paying gross adds. The remaining 1.38 million gross adds were thus promotional.
Applying the same process to the 2nd quarter of 2008 gives the following comparisons:
The decrease from last year dwarfs the net loss of subscribers in this quarter. Indeed, if the auto market was only slightly worse than it was last year, there would be more than 400 thousand net additions.
The important thing to remember is that OEM promo additions have nothing to do with the content offering: the net loss of subscribers is not a reflection of dissatisfaction with post-merger changes.
The increase in average subscription rates further indicates that there hasn't been an increase in retention discounts. The changes have not displeased subscribers to the extent that they are hitting Sirius XM where it hurts.
One of the fringe benefits is that it is now possible to calculate the promotional vs. self-paying splits on gross adds.
At the risk of turning this into a math class, I'll go step by step through the process of calculating these breakdowns (largely to save the trouble of having to go through it every three months in the future). These figures do have a margin of error of plus-or-minus 50 thousand or so and ignore the effects of rental car subscriptions (which account for about one four-hundredth of the sub base: they're a rounding error and can safely be ignored at this point).
The first figure is self-pay deactivations and is based on the self-pay churn rate and the average number of self-pay subs; it works out to about 926 thousand over the three months. Since every sub is either self-paying or promotional, then this implies that there were 640 thousand failed promotional subs.
From the number of promotional deactivations and the conversion rate of 44.4%, 511 thousand subs moved from promo to self-paying. In order for this figure to square with the net loss of 15 thousand self-paying subs, there would have to be 400 thousand self-paying gross adds. The remaining 1.38 million gross adds were thus promotional.
Applying the same process to the 2nd quarter of 2008 gives the following comparisons:
- Self-pay deactivations: increased from 743 thousand to 926 thousand
- Failed promotions: decreased from 766 thousand to 640 thousand
- Conversions from promo to self-pay: decreased from 785 thousand to 511 thousand
- Self-paying gross adds: decreased from 474 thousand to 400 thousand
- Promotional gross adds: decreased from 1.638 million to 980 thousand
The decrease from last year dwarfs the net loss of subscribers in this quarter. Indeed, if the auto market was only slightly worse than it was last year, there would be more than 400 thousand net additions.
The important thing to remember is that OEM promo additions have nothing to do with the content offering: the net loss of subscribers is not a reflection of dissatisfaction with post-merger changes.
The increase in average subscription rates further indicates that there hasn't been an increase in retention discounts. The changes have not displeased subscribers to the extent that they are hitting Sirius XM where it hurts.
First of all, in response to Ryan's question, the article (actually it's an editorial) is certainly appropriate to this site and I have no problem with this or future articles from Levi Ramsey.
However, in response to the point he is making, I do not find that the information presented supports his conclusion that the net loss of subscribers can be written off as a casualty of weak car sales.
First of all, there's too much information missing. For example, how does the conversion rate of 44.4 percent on promo subscriptions compare to the past conversion rates of Sirius and XM -- the pre-merger numbers? You would have to know this to determine whether or not the new programming is successful among people who start with promo subscriptions. I realize this information may not be available, but it would be required before it would be possible to draw the conclusion that's being advanced.
Second, while car sales have indeed been lower in 2009 versus 2008, we don't know how many of the cars sold started out with promotional subscriptions, and this could have changed significantly due to changes in consumer choices of vehicles, as some models do and some do not come with an XM or Sirius radio. Further, nowhere in the numbers are actual car sales factored in -- and even this would be nothing more than a vague indicator of what's happening, since we would really need to know the difference in the number of cars sold with either a Sirius or XM promo subscription from period to period. I would suggest that the growing percentage of cars with Sirius or XM might somewhat offset the decline in the total number of cars sold, which would make it harder to attribute the subscriber loss to the car sales slump, but, again, we have no numbers to either support or refute that.
Third, the figures here show startlingly bad numbers that are glossed over: There were almost a million self-pay cancellations, and only 400,000 self-pay additions to offset it, for a self-pay decline of roughly half a million.
The bottom line here is this: I think we would agree that much of the companies' subscriber growth over the years has come from the increasing percentage of cars with OEM satellite radio installations, but this has already started to level off, and will continue to do so as the number of new cars with OEM installations moves closer to 100 percent. So, over time, it will be increasingly less possible for the company to offset its inability to retain its paying customers by bringing new ones on board. Yet, it is this area of retaining paying customers where the greatest weakness is seen. If this is not an indictment of current practices (programming or otherwise) I don't know what is.
So, no, I don't agree that the programming makes no difference. It makes a lot of difference -- and it's going to make ever more difference over time as the paying customers keep heading for the exits twice as fast as new ones are coming through the door.
Who cares about what Levi says?
"Drop in Satellite Radio Subscribers related to Auto Sales" What a bunch of BULL!
The "Drop in Satellite Radio Subscribers related to" siriusxm sucking.
The "Drop in Satellite Radio Subscribers related to" Melvin's deception about the "merge" which is really a MONOPOLY.
The only ones who subscribe to siriusxm and/or siriusxm's BS reports are newbs and suckers. As noted many times before the ch ch ch CHURN away from siriusxm is mind blowing.
Where are the numbers showing all the free subscriptions given out to customers who have smartened up and want to cut all ties with the turd known as siriusxm?
Where are the numbers showing all the radio's sitting on car lots without paying subscriptions?
Where is the date that siriusxm will have to shut down completely as the debt is due and there is no one else stupid enough to throw money at Melvin's satellite black hole?
Siriusxm is DONE.
I don't pretend to totally understand all the figures used here. Speaking from real life, I am one of only two subscribers left of the seven at my job. They dropped service with the price increase. I think one would have stopped service no matter what, but the others said with hours being cut, no way would they pay more.
I don't believe any of us have a problem overall with programming however. None had a subscription or trial on a new car. Not scientific, but there it is.
I think the crappy programing has alot to do with it too .
And the programming on anything else is better? Granted we have to pay it is still better than the competition. Most people don't seem to make a stink about cost when they buy cigarettes or Slurpee's every day so why when they have to pony up money for entertainment?
Of course programming has a lot to do with it!!!
Years ago I looked at both services and went with XM because the play lists were deeper, less DJs chatting away, better sound. Musically speaking, a better experience. When Sirius took over XM last year, I gave the service two months. I was fed up with Classic Vinyl sounding like a 56k stream and the constant repetitions. 1st wave, horrible!! Anyhow, the XM subs that don't give a crap about Howie got Siriusly screwed in this deal, and if you like music, there are better alternatives out there like Slacker, which I gladly own and listen to every day. The music on the pre-merger XM was far superior and eclectic, choice not repetition is what sat rad was about, now it's more like FM's cousin.
"And the programming on anything else is better?"
I've found better programming on podcasts. I went for XM mainly for music, and have similar feelings to themadcap. If you have diverse, eclectic tastes, it's not hard to find better (and cheaper) alternatives to the current music lineup.
Actually, people do often complain (and change their buying habits) when the prices of other things go up. But, that isn't even the issue here: We already have numbers in front of us showing how many people have canceled their self-pay subscriptions, and that, of the new subscriptions, an amazing 1.38 million of them are promotional -- which makes you wonder if the company has increased the number of promo subscriptions in unsold cars sitting on lots to mask the true extent of the subscriber drain.
Looking at the numbers again, the company has to be very concerned, even though they'll obviously not say that publicly. They're trashing amazing numbers of paying customers and exhausting an ever-shrinking pool of potential new customers. Maybe the business plan is ultimately to have about 1,000 listeners and charge them $1,000 bucks a month each.
You and "madcap" are right.
Looks like the disatisfaction with Mel's screw-ups are growing...........
I never really checked out internet based music and comedy untill about a year ago when I moved up to broadband and SiriusFM got to sucking...
Thanks Mel & Greenstein, you guys have motivated shitloads of subscribers to migrate AWAY from SiriusFM!!!
I program my custom channels on Slacker , so yea programing on other services are much better . I bet your thinking of Fm . There is no reason to ever go back to Fm ever with internet radio mp3's and podcasts ( Torrents also ),same goes for Sirius .
it's an interesting comment, which is basically a rehash of a Business Week article of a couple of days ago. I would expect you, Ryan, to give the credit where it is due
this author doesn't know what he's talking about....booo this man
oh ya .. one other thing .. to say the drop in subs is due to new car sales is bull sht.. the programing is just like am radio now.. bla bla bla
just play the music.. thats WHAT WE PAY FOR..adios
I would be happy to read more from Mr. Ramsey although I don't completely agree with his analysis it is well thought out and supported.
Service and music are horrible, that explains the churn. Please, if anyone can recommend anything out there like the old Deep Tracks, please tell us!
Programing of the music sucks... Stern is mailing it in. Price increase??
ARE THEY NUTS. Every time a channel is removed or the price is increased I drop a sub. I am down to ONE now. I had FOUR a year ago. I brought ten or so people over to Sirius... I am the only one left.
Management=BAD
Here are some pro's you should think about when you weigh cost of the service:
1. Commercial Free Music - Yeah, it might be a "tight" playlist, but it's not any tighter than regular FM radio is, and there is no commercials. I can't complain. As long as they still pump new bands and new music through, I am happy.
2. Sports - XM subscription with a Best of Sirius gets access to basically every major sport out there. For how much? I believe it's $16.95 or something like that for XM + Best of Sirius? I don't really know, but all I know is that for Direct TV and the football package, you are paying $100's for 17 weeks of football where you have the option to watch every game if you want. I chose to just pop in my radio, and listen to my miami dolphins at home instead of paying an absurd amount of money just to watch on tv.
Those 2 together right there is reason enough for me to pay for the service. Best part, I can drive cross country and not lost reception. Hell we go to Mexico and it still works down there for us. I can't complain. This is a great service, and when the economy bounces back, they are going to become profitable, and hopefully expand their business to provide better choices and such. This is such a great service to have, I don't see this folding at all.
I love Sirius and would pay an extra 10.00 a month if I had to!
Terrestrial radio sucks and who wants to constantly update your tired old MP3 player's play list!
I get live feed and that is what I want!
Interesting article--well done Levi. I think a very small rotation of guest bloggers is a great idea==Levi is also a great choice as evidenced by his input on another board.
RMAN:
You are correct, Sir! MP3 can kiss my ass; the sound is horrible, but the under 30 crowd is used to listening to crappy fidelity and doesn't seem to care - as long as the gadget is cool and popular. Another case of being controlled by the media, technology, and corporations.
PS - Make that 40, because the naive, ignorant 40 year old is the new 30.
TheMadcap,
Amazing how much we complain about Sirius being an FM clone and the lack of any kind of positive change from the company that reads these sites daily.
Hope Sirius burns through the bailout money fast, goes belly-up and gets taken over by someone that gives a shit about the quality of programming.
To my ears, MP3s sound much better than Sirius XM. I know when I used to record satellite radio content on my SkyFi3 (before I had it deactivated), when you'd put both MP3 and Sirius XM content on the same playlist, it would sound like someone covered the speakers with a piece of cardboard when you changed from MP3 content to recorded Sirius XM content.
xcountry:
I don't doubt for a second that you are right about MP3 vs SiriusXM. I was really thinking in terms of MP3 compared to CD and vinyl. I have never actually A B'd the two to compare them, so maybe I should reserve judgment until I know what I'm talking about. At least you and I agree that Sirius/XM needs to improve the audio quality of their broadcasts.
FM sounds much better than Sirius XM.
A decent sounding MP3 will be encoded at 256mbps
Sirius, who will never divulge their actual encoding bitrate is estimated
to be in the low 100mbps.
Listening to it in the car yesterday I thought "muffled" to be the best
description of listening to Sirius radio vs. a MP3 song at a 256 bitrate.
256k or 320k, the highest mp3 encoding rate.
XM uses (or used to use?) 384k mp2 to encode its audio. The quality degradation occurs in the transmission phase when processing and bandwidth become issues.
Amazing , every time I read the comments here it is like a bunch of spurned old spinsters that just can't get over the fact that Mel whooped your XM shareholder butts . So now the service stinks . Well I have news for you all Sirius is on the way back up and the service is just fine anyone that can keep this company afloat with the mess he inherited and the debt that the merger added from the XM side all while the economy tanked as we hadn't seen in decades is nothing short of a magician !
Go cry me a river !!!
Enough is enough your like a bunch of little school girls here !!!
Mel inherited a mess? Excuse me.
He helped create it.
Steve_O and NJRonbo, maybe we're talking about different things, but my understanding is that the SiriusXM music channels are 32k and the talk channels are 16k. They chopped them all down so they'd have room to add "Best of Sirius" (an oxymoron if ever there was one), so we all suffer even if we don't want it. You're right that the "good" MP3s are 256k, but the average and most common one people download seems to be 128k.
Now, I don't know if the 32k/16k SiriusXM figures are comparable to those of MP3s, but I do know that a 128k MP3 sounds much better than SiriusXM, and, as Rager said, so does analog FM. If you've ever listened to HD FM, you hear "the digital difference," and it ain't pretty. Yeah, you have no static, so if you've got a signal, it's perfect, but you get total cut-outs if you don't have a perfect signal, and the quality of compressed digital audio just isn't what you get with real analog sound. HD Radio is a good way to compare because you can go back and forth from analog to digital, and I'll take the fidelity of clean analog any day.
32k? Are you serious? Was I giving SiriusFM more credit than they were worth?
Perhaps I am wrong. Not that it doesn't make sense that the music is encoded at such piss poor rate.
Yes, 32k is what I understand it is. Most of the music channels were 40k before the "Best of Sirius" nonsense was added, and the Clear Channel stuff was 48k, but I think they have cut back on Clear Channel's bandwidth, too, because while those used to sound noticeably better, I cannot discern that they do anymore.
I do think Sirius XM uses some sort of software in the radios to make it sound a little better at a high level of compression, which probably works a little like "interpolating" a low-resolution digital photo by adding new, synthesized data points to make up for data that's not there. Whatever, but it's not high-fidelity by any stretch of the imagination.
Mel inherited a mess? Excuse me.
He helped create it.