Merged XM, Sirius pricing improves business model, says Analyst

These updated business model projections are being based on a subscription service. The wild card is what if the merged company is bought out by a media conglomerate who thinks along the line of a free service based on advertising picking up the tab for expenses. While some "mostly" commercial free stations would remain (music), the others would have advertising. I believe that such a model would have almost universal acceptance by the general population. This is what the NAB fears the most.

I hate to nitpick, but here goes:

""While many investors think a la carte would obliterate the ARPU of the combined entity (due to the $6.99 option), applying a normal distribution curve to the potential pricing options actually shows minimal impact," wrote Peck. "

Tell that to Comcast. Their first two years of packages almost killed them.
While I'm no expert, I believe the ARPU will seriously hurt them for the first couple of years. A lot worse than the analysts believe.

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"Further, while Peck believes ARPU would be largely unaffected, he finds that gross subscriber additions should increase, while churn should decrease thanks to the added choice and lower available pricing structure."

Thank you captain obvious! Churn should decrease and the take rate should increase. It's common sense.

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"Bear Stearns' analysis suggests that a combined Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. "could generate an incremental ~$850 million in pre-tax synergies by 2013." This would result in a tax-adjusted net present value of synergies at ~$5 billion."

Finally a timeline! I agree with the pre-tax synergies. I'd still like to know where the rest is coming from. You can't undo the satellites or the technologies that were spent, you shut one down and lose the money there.

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"On a combined basis, the firm expects a total of about 33 million net subscribers by 2013, or about 10% more than current estimates. The model includes a 10% reduction in churn, and an increase in gross subscribers by 16% at retail and 7% in OEM (phased in to allow for OEM ramp up time)."

That sounds reasonable. Only minor complaint is that I believe that the OEM will outperform retail down the line, not vice-versa.

>>>> Thank you captain obvious! Churn should decrease and the take rate should increase. It's common sense.

I'm not so sure. If there is competition from Ipods, Slackers, Terrestrial, WiMax, and 50 other technologies as has been asserted, why would churn decrease and why would the take rate increase? Particularly, given Peck's analysis that one-half of all in-house programming will be eliminated within 2 years of the merger? You're eliminating either Deeptracks or the Vault. You're eliminating someone's decades channels, blues, classical, in fact, the merger will result in HALF as much choice between the two companies based on Peck's analysis. So, this is going to reduce churn in the face of increasing competition and increasing penetration? (In fact, Peck's savings analyses are way, way off what can actually be accomplished and have MergeCo still remain competitive).

This is just one of several major inconsistencies in this analysis. Others include purported 50% cuts in marketing expenses (which obviously cannot be done and still remain viable in the face of all the claimed "competition"), eliminating half the R&D budget while developing much more complex devices, eliminating half the G&A expense while maintaining two complete facilities (which Mel has claimed he'll do). And my personal favorite, where NFL/MLB/other outside content providers, just agree for no reason to allow the broadcast of their content to both services at no additional charge (or with a de-minimus 5% fee). The list goes on.

The reality is that Peck's analysis was a fine try, but is just more pie-in-the-sky. Could I have done better? No. You have to pick some numbers and go with them. But his numbers are not, as he claims, "conservative" -- the assumptions are pretty wild -- even though he may be fed these numbers by management, accomplishing this level of cut without materially damaging the post-merger service just isn't going to happen IMO.

I forgot Stack, where exactly did you get your business degree from? I'm looking at MBA schools, and given your ability to outsmart every single analyst and executive from both Sirius and XM, you must have gone to a great business school. Perhaps one day I can be smart enough to spend 8 hours a day outsmarting people on an internet message board.

"I'm not so sure. If there is competition from Ipods, Slackers, Terrestrial, WiMax, and 50 other technologies as has been asserted, why would churn decrease and why would the take rate increase?"

Good points. It is hard to determine what the future will hold in terms of take rate, but combining services *should* (not will) have a positive outlook since they combine most content.

--------------

"I forgot Stack, where exactly did you get your business degree from? I'm looking at MBA schools, and given your ability to outsmart every single analyst and executive from both Sirius and XM, you must have gone to a great business school. Perhaps one day I can be smart enough to spend 8 hours a day outsmarting people on an internet message board."

Perhaps it's you attackers that need to ease up. Last time I checked, everyone's entitled to an opinion.

I may not agree with everything Stackpointer says, but he has the right to say it just like you do.

It's nice to see people not in lock-step with these "analysts" all the time. They can be just as wrong as anyone else. A degree doesn't gaurantee you know what you're talking about, especially after the analyst blunder of predicting 60M subs by 2010.

Stackpointer: "And my personal favorite, where NFL/MLB/other outside content providers, just agree for no reason to allow the broadcast of their content to both services at no additional charge (or with a de-minimus 5% fee). "

IMHO, this is a biggie. Since the subscriber base practically doubles after the merger, the contracts have to be renegotiated.

It would be *highly* unlikely that these sports organizations will ask for equal (or less) money when renegotiating due to the massive increase in listener base.

To current contracts only allow the current carrier to broadcast the games. Any cross-service sports content is usually strickly forbidden in the contract without compensation.

Mel may say that sports are included in the cross-service ala carte packages, but I have a feeling that if the merger gets approved the sports organizations will put the stop on it until they are compensated. If Mel promised this, he could be in trouble.

Stackpointer: "And my personal favorite, where NFL/MLB/other outside content providers, just agree for no reason to allow the broadcast of their content to both services at no additional charge (or with a de-minimus 5% fee). "

IMHO, this is a biggie. Since the subscriber base practically doubles after the merger, the contracts have to be renegotiated.

It would be *highly* unlikely that these sports organizations will ask for equal (or less) money when renegotiating due to the massive increase in listener base.

The current contracts only allow the current carrier to broadcast the games. Any cross-service sports content is usually strickly forbidden in the contract without compensation.

Mel may say that sports are included in the cross-service ala carte packages, but I have a feeling that if the merger gets approved the sports organizations will put the stop on it until they are compensated. If Mel promised this, he could be in trouble.

Sorry for the double post. Please delete the first one.

Mel has never said sports would be included in any a la carte package. In fact, he's always said just the opposite. Look at the plans they've presented. It specifically doesn't include sports. All sports contracts would have to be reworked and xm/sirius would have to pay more, substantially more, for the rights. SDARS needs the sports leagues, not the other way around. Neither MLB, NFL, NBA or NHL will take less money, they'd take no money and have no deal rather than devalue their product. They don't need the pennies that SDARS is paying them.

Keep on supporting that merger.

The sports leagues should not get any more money than they already make - they were payed a premium to be exclusive providers in the first place. I guarantee you that if MLB could have made more money by signing contracts with both Sirius and XM, they would have done that instead of signing an exclusive deal with XM. The fact is that the sports leagues were grossly overpayed so that XM and Sirius could use the word "exclusive" in their advertising. If they want extra money, they can get it from the extra advertising dollars from a bigger audience.

When the contracts come up for renewal, then that's where you'll get the benefit. The leagues can't play the 2 services against each other anymore and demand ridiculous money. And if MLB, NFL, etc. don't like the terms, I'd just as soon have MergeCo tell them to take a hike. Don't get me wrong, I'm a huge MLB, NFL, and NCAAF fan, but I have never once needed to listen to any of my teams on satellite radio.

Ask yourself this: how many people out there:
1) Aren't able to watch their team on TV AND
2) Don't get the game on local radio AND
3) Don't get the game on their cell phone or the internet AND
4) Are so dedicated that they'll spend $13/month plus a radio just to listen to the game?

I know there are some out there, but I just don't think the leagues are bringing in nearly enough subscribers to justify the current cost, and this will be a matter of discussion when it comes time to renew the contracts. If the leagues don't like it, MergeCo can tell them to take a hike, and they can spend that money on improving the service elsewhere.

Did anyone notice the mess with MLB and DirecTV earlier this year? DirecTV was going to sign a ridiculous exclusive contract with them until there was a huge consumer outcry. MLB ended up continuing with all the providers for less combined money. Why was the exclusive MLB deal considered anti-consumer for subscription video, yet it's been perfectly acceptable for satellite radio?

JB, the same can be said about any content (Stern anyone?).

Let's get one thing perfectly straight. XM/SIRI needs the sports leagues more than the sports leagues need XM/SIRI. While I agree on your perspective of listening to games vs watching them, XM/SIRI have put themselves in the position of using these games as a push for content advantages and eclusiveness. XM/SIRI deemed it a much needed asset to differentiate themselves from AM/FM. Because of this, the sports leagues have the advantage, whether they merge or not.

>>> The sports leagues should not get any more money than they already make - they were payed a premium to be exclusive providers in the first place.

Utterly absurd.

I cut a deal with you whereby you will broadcast MY content to your customers. Suddenly, you unilaterally decide to enter into an agreement to merger with another company. Somehow, you think I am bound by YOUR decision to merge?

Unless that contract is assignable to the merged corporation (and you can damned well bet it isn't assignable to ANYONE), then you have no such rights. And why would I, as the owner of the rights, allow you to provide it to yet another reseller without ME being paid for it?

I'm sorry, that is just plain stupid. MLB owns the rights and contracted them to XM. Surely, MLB isn't going to just quietly say, "Oh, that's okay if you want to GIVE our rights to Sirius. We don't mind."

I can imagine that MLB and NFL won't require payment of DOUBLE. OTOH, if I were in control at MLB and saw what they paid Stern, I might just insist on it. If Stern is worth 3/4 billion, they could certainly argue that MLB is, too.

>>> When the contracts come up for renewal, then that's where you'll get the benefit. The leagues can't play the 2 services against each other anymore and demand ridiculous money.

What evidence do you have that the leagues EVER "played the 2 services against each other"?

Sirius overpaid Stern (3/4 billion for five years) while XM was saying, "Hey, we don't think we could go over 25M/year. That is not the two services being played against each other. That is one service acting like a freaking idiot while the other is being fiscally responsible. Same is true of NASCAR -- XM was paying NASCAR $5M and Sirius comes across with $100M with no real evidence XM was even thinking of bidding in the range Sirius was.

The argument that competitive bidding was running content costs up makes total sense until you look at what XM paid for content versus Sirius. At that point, it falls apart -- the reality is that Sirius overpaid because they were downright desperate. And while it is true they probably won't do that again, they probably wouldn't now that Clayton is gone, anyway.

Stack -

How can you argue this point? If MLB could have made more money by signing with both Sirius and XM, they would have done so.

You know damn well that content providers get paid a premium when they are exclusive - or else they wouldn't agree to exclusive contracts in the first place. You are incredibly naive if you think that the existence of the other company doesn't drive up prices for content for both companies.

MLB etc. may or may not agree to simulcasting under the current contract - I don't know, and I don't think it'll come up anyway, because there are better simulcasting options for both companies. But I can be sure that MergeCo will not pay another premium on top of a defunct exclusivity premium.

What I'm saying is that when it comes time for renewal, MergeCo will have a lot more power in negotiations, and I think this is where the real synergies come into play. MLB can't say, "If you don't want to pay us, we'll take our business to Sirius." Likewise with NASCAR or Stern. They can actually iron out a fair deal instead of a deal based on a threat.

And I really don't care about Stern one way or another, but it is obvious to anyone who isn't blindly devoted to XM that he has brought more than enough subscribers to Sirius to justify his contract. I think the last estimate by Bridge showed over 2 million subscribers, which gives Sirius about a 50% gross margin on that contract so far. I guarantee you that XM would have done that same deal in retrospect - and then XM would have been able to scoop up a bankrupt Sirius 6 months later without any questioning.

>>> MLB can't say, "If you don't want to pay us, we'll take our business to Sirius." Likewise with NASCAR or Stern. They can actually iron out a fair deal instead of a deal based on a threat.

Well, that is the nature of competition. Still, the massive overpayments have been made by Sirius, not XM, even though many have characterized it differently.

>>> it is obvious to anyone who isn't blindly devoted to XM that he has brought more than enough subscribers to Sirius to justify his contract.

Perhaps, but it is blindly obvious to anyone who can read and interpret financial statements that he hasn't, and probably won't over the five year term of his contract.

Rather than rehash the details, I'll make it simple for you: Go back and look at what Peck (and other "anaylsts") predicted Sirius would lose in '06, '05, and Q4'04, and contrast that with what they actually lost during this period -- the period immediately after Stern's hiring. Perhaps you'll find it enlightening. The question then is, "can Sirius recover these increased losses over the next couple of years?" The answer is a big fat "maybe, but I doubt it". Which is a fundamental reason the merger is absolutely essential for Sirius -- to leverage the massive investment in Stern while they can.

>>> I guarantee you that XM would have done that same deal in retrospect - and then XM would have been able to scoop up a bankrupt Sirius 6 months later without any questioning.

No way. Sirius did the deal because they were desperate and it bought them some time (at massive cost). XM didn't need the deal, and wouldn't have benefited from it. I will say that XM would have not taken the hit Sirius did, because XM's cost to add subscribers was half what SIRI's was. The deal didn't make sense for either company, but I understand why SIRI did it -- they were dead meat then and there had they not -- as it is now, they're still dead meat, just later on down the road if the merger craps out.

Wow. More objective research from an obviously unbiased XM fan. Not that I had to point that out to anyone here.

I like the logical analysis that since Sirius lost more money in 2006 than an analyst had predicted in 2004, it must be the Stern contract. It doesn't take a calculus degree to show that, at 2+ million subscribers each at ~$150/year, Stern is bringing in $300 million a year. Clearly, paying a $130 million salary to bring in $300 million in revenue is a terrible deal, and XM was right to avoid it.

Does anyone else find it hard to believe that Stack can say all this with a (presumably) straight face? I mean, it's one thing to like XM, but seriously - use some common sense and stop distorting personal opinions into indisputable facts.

And to be honest, I'm still tickled to death by the statement that music piracy is "just a temporary market condition" slowing the growth of satellite radio.

>>>> I like the logical analysis that since Sirius lost more money in 2006 than an analyst had predicted in 2004, it must be the Stern contract.

Duh. It is blatantly obvious that Stern that caused it. I'm not sure how anyone with even a basic familiarity with the situation could conclude otherwise.

>>>> It doesn't take a calculus degree to show that, at 2+ million subscribers each at ~$150/year, Stern is bringing in $300 million a year. Clearly, paying a $130 million salary to bring in $300 million in revenue is a terrible deal, and XM was right to avoid it.

I have no "calculus degree". But it isn't as simple as you would like to make it. Like so many who don't understand the basics of accounting, you want to attribute the revenue to Stern but you conveniently ignore the cost to produce that revenue. In particular, SIRI's unit SACs were SKY-HIGH when most of those subscribers were added, which means that the first 18 months or so of revenue go just to recover the cost of adding the subscriber. Lop off another 40% or so for variable costs of servicing a subscriber (yes, even though they are "Stern" subscribers, there are OTHER content costs associated with them, too) and allocate a chunk of Stern's insane payday, and it becomes clear that Stern has been, at best, a horrible loser for Sirius to date.

Can Sirius one day recover those losses? Perhaps -- if Stern can keep the subscribers around longer than the average Sirius subscriber stays around. But if they're gone in 39 months like the average sub, it will be difficult for them to recover their money -- PARTICULARLY, if as I suspect, they're going to fork over more stock at the end of each year.

Stern was a loser for Sirius. He did bring them a great deal of brand recognition, but in the end, that matters only if it brings in retail subscribers. And we know how that's going.

>>> And to be honest, I'm still tickled to death by the statement that music piracy is "just a temporary market condition" slowing the growth of satellite radio.

Again, I'm not sure how anyone could rationally conclude otherwise. As more music is copy protected and the CD continues toward the end of its life, it is pretty obvious that piracy will decline, not increase. And as people have to start paying for all that music they load on their Ipods, it certainly is going to drive more of them to alternative sources of music.

Sat Radio is an absolute bargain at $13/month considering that buys ONLY ONE ALBUM on ITunes. So, yeah, I think it is likely as piracy is controlled (and it will be, over time) that people will find Ipods less appealing.

I continue to be dumbfounded how people can be so emotionally involved in XM that they reject the laws of mathematics to suit their personal opinion. If reality doesn't match personal emotions, the answer is simple - just distort reality!

>>>> I continue to be dumbfounded how people can be so emotionally involved in XM that they reject the laws of mathematics to suit their personal opinion. If reality doesn't match personal emotions, the answer is simple - just distort reality!

I have not mentioned XM in this discussion so I'm not sure what my purported "emotional involvement" has to do with it.

You claim I have distorted reality yet you failed to counter any remark I made. The simple truth is that you cannot reasonably attribute all this revenue to Stern without also attributing the related costs to him. You do not measure profitability of a contract by looking at increased subscriber numbers or even increased revenue. You measure whether a contract is profitable by looking at incremental revenue less incremental expense. Had you made a "C" or better in Managerial Accounting, you would know this.

When you evaluate the Stern contract in terms of the incremental revenue produced to date less the incremental expense to date, the deal is hundreds of millions in the hole. Now, it is a fact that it should come back a bit over the ensuing term of the contract, but the extent to which they will recover these losses is as yet unknown (and the extent to which additional stock giveaways will increase the losses, as well). Perhaps they'll break even by the end of the 5-year deal, perhaps even turn a tiny profit. The return on the 3/4 billion dollar investment will, I suspect, be negative or minuscule when all is over and done with. Not what you want in an investment.

>>> "I continue to be dumbfounded how people can be so emotionally involved in XM that they reject the laws of mathematics to suit their personal opinion."

How is that any different than your Howie math JB? Stack may be crazy, but he proves a point. You don't just conveniently say "well it's simple math, 2 Million x 150/year", there are costs associated with getting the subscriber, and stack is right. It cost Sirius nearly $200 each to get those subs when they signed, which mean the first year or two Sirius lost money. And don't forget to add the other ~$220 million that Stern got as bonuses and stock in the equation. Will Sirius make money? Sure, but nowhere near what you're suggesting. It'll all be moot when he retires in 2 years anyway. He did his job, name recognition to Sirius.

>> Stack may be crazy, but he proves a point.

Thanks ;)

First of all, I included the bonus in the $130 million/yr for Stern. Second, the SAC is significantly lower for retail than for OEM, and that's where the vast majority of Stern subscribers came from. Third, the churn for retail subscribers is significantly lower than for OEM (and probably even lower churn for Stern-motivated retailers). Fourth, the number of Stern-motivated subscribers is still INCREASING (see Bridge Reports). Fifth - and this is a huge point that has been ignored - Sirius will still get the benefit of keeping a good chunk of those subscribers even after Stern's contract is over. Sixth, I guarantee you the ARPU is higher for Stern subscribers than others, since they are mostly retailers and his channel has the highest ad rates. And seventh, he has unquestionably brought higher brand recognition to Sirius - just look at the last 2 years of Sirius at retail.

This is all just common sense, whether or not you like Stern or Sirius. Yes, his salary is ridiculous, but the economics worked out for Sirius.

I absolutely understand that the cost is more than just the ~$130 million salary, which is why I used the word "GROSS" and not "NET". But I can guarantee you the additional costs to keep those subscribers is significantly less than $170 million/yr, which would be the breakeven point at $300 million revenue/yr. I guarantee you that XM would do that same contract in a heartbeat in retrospect - they would have finished off Sirius by the end of 2005 if they had.

It's one thing to like XM - it's just as good or bad as Sirius IMO - but this level of worship is mind-boggling.

You make a lot of "guarantees" but I don't see you providing anything to support ANY of them. There is little in your post that can be supported with actual data.

We have no idea how long Stern subscribers will stay around. And there are differing views on the retail vs. OEM SAC issue. In fact, the only statement you made that is known to be true is that Stern brought greater name recognition to Sirius -- and for what? So they can be forced to merge with XM before Stern's contract is half-way expired? A lot of good THAT did.

>>> This is all just common sense

One man's "common sense" is another man's unfounded speculation.

>>> But I can guarantee you the additional costs to keep those subscribers is significantly less than $170 million/yr, which would be the breakeven point at $300 million revenue/yr.

$300M/year
$(150M)/year (paid to Stern in the form of cash, stock, revenue share, etc.)
--------
$150M/year.
$120M/year direct costs (RIAA fees, 1/4 of other content costs, in-house, etc.)
--------
$30M/year Annual margin (giving Stern the vast benefit of the doubt).
=====

$30M/year for the next 3 years won't come close to recovering the incremental loss from the last two years. Not even close.

Yes, he contributed to brand recognition, but that is meaningless if the two competitors will soon become one.

A little knowledge is a dangerous thing, and I think that's what you've got on this subject.

Your "direct costs" are fixed costs and have nothing to do with Stern revenue, except for the RIAA fee. And the last time I checked, the RIAA fee is about 2% of total revenue.

That's one of the first things you learn in entry-level microeconomics - the difference between fixed and variable costs. Whether or not Stern is there, they still have to pay that arbitrary number you assigned for "other content costs and in-house costs". Stern didn't increase the cost of the satellites or the NFL contract when he signed.

These are variable costs that can be attributed to Stern revenue:
- RIAA fees (~2% of total revenue)
- Customer service/billing (~$1.50/month/subscriber)
- One-time retail radio subsidy (~$100/subscriber)

These are costs that would be the same with or without Stern:
- other content contracts
- satellite costs
- G&A expenses

I knew you well enough to know that you would manipulate fixed costs into the equation to "prove" your point.

And by the way, so you'll stop spewing that exaggerated number for his salary:
http://satellitestandard.blogspot.com/2006/09/inside-radio-and-nabs-bogus-number.html

So I've taught you the meaning of "fixed" and "variable" costs, and showed your lack of research on the Stern salary, what shall I teach you next?

>>> And the last time I checked, the RIAA fee is about 2% of total revenue.

You had better check again. And think about 300% of that figure. But that's only the beginning. There are other variable performance rights fees as well -- if you want to be in the ballpark, try 10%. But when you count ALL Revenue Share and Royalty items, you're talking 13-14% of revenue.

Customer care certainly is directly variable (a step-cost function that is clearly influenced when you add a million or more subs). 1.50 a month? If you say so. That's only another 20%.

Rather than debate this minutia with someone who clearly doesn't have the picture, let's consider this:

'04 - Total Operating Expenses $745 Million
'05 - Total Operating Expenses $1.1 Billion
'06 - Total Operating Expenses $1.7 Billion

If all these costs are "fixed", why have operating expenses increased by some 128% over a three year period? Even if one assumes the 745M from '04 were 100% fixed, you've got variable expenses of nearly a billion dollars in the ensuing 2 years. .It is no coincidence that this occurred immediately after Stern was hired.

>>> Stern didn't increase the cost of the satellites or the NFL contract when he signed.

No, but he does earn some revenue share, he does get bonuses, he does get a share of ad revenue, and his five-year deal increases every year.

If you want to argue that I'm all wet, it isn't 40% it is 35%, fine. But you're obviously clueless if you believe it is 20%, too.

>>> And by the way, so you'll stop spewing that exaggerated number for his salary:

Please. Don't cite Doberman, the Siriot-in-Chief -- he has had his head up his ass about Stern's payday since the outset and has been wrong at every turn. At first, it was $500M and he assured us that was it. Then, they gave him the stock (before he ever worked his first day at Sirius). Then, last January, they gave him MORE stock. Right now, if Stern got no more surprise "bonuses" Stern would have received about $700 million (excluding ad revenue and revenue share). And he will surely get more stock in January, and probably more stock the following TWO years. And that doesn't even count the revenue share and ad revenue which we have no idea about how much it is.

It is giving the idiots who run Sirius the benefit of the doubt to call it 3/4 billion. It would not be surprising if it totaled more than $850M by the end of year 5. And it is characteristic of Siriots to be blind to the actual operating costs. Doberman (aka Tyler Savery) does it all the time.

Total operating expenses were $745M in '04 -- I don't see how you can claim "fixed" expenses are more than this amount since fixed expenses are, by definition, "fixed" and would have been 745M in the ensuing years as well (other than the minor increases in depreciation due to new capex).

"Fixed cost" does not mean "constant cost" - again, this is entry-level microeconomics. For example, rent is a fixed cost for a retailer - it goes up every year, but it does not care how many clothes the store sales. Satellite depreciation is a fixed cost that changes every year independent of how many subscribers Stern brings.

"Fixed Cost: A cost that does not vary depending on production or sales levels." Understand it yet? Good, now we can move on to Cross-Price Elasticity of Demand (which, by the way, is a very key statistic for satellite radio).

The fixed costs you mentioned did not increase because of the Stern contract, they increased for other reasons. On the same token, fixed costs increased at XM in 2006 for reasons other than Oprah.

By the way, check this at the end of every one of "Doberman's" posts:

"Position: Long Sirius, Long XM" - and he's been long on both since well before the merger. So much for that bias you speak of. I think everyone but you knows who's the blindly devoted one here.

Keep stating personal opinions as indisputable facts, and keep demanding concrete numbers anytime somebody posts something based on common sense. I'm done exposing your personal vendetta against everything Sirius (and I really don't even care for Sirius any more than I do XM). I don't know how you have the time to write this incessant drivel, and I think you need a new hobby. I suggest something involving real-life face-to-face interaction with other people.

>>> "Fixed cost" does not mean "constant cost" - again, this is entry-level microeconomics.

LOL. Okay.

Fixed costs aren't fixed. I'll have to remember that. Clearly, it explains why Sirius has lost a billion dollars more than projected for the last two years. Microeconomics.

I would like to point out a large overlook in the debate about the contracts we and Sirius have with various sport leagues and other companies, organizations, and corporations.

The supposed lack of compensation is easily found when taking into consideration the difference in monthly rates between the proposed packages. You will notice that our current rates are ~$12.95/month (excluding promotions, multi-year packages, discounts, and commercial service), and the lowest package allowing you to recieve all of the channels in question is $14.95/month.

If you were ever to look at the allocations for royalties and bidding on these entities, you would notice less than a dollar per subscriber per month is destined to enter their accountants' ledgers.

This being said, the rate increase is well above the payout amount. This allows for royalties, surcharges, operating costs (based on bandwith used on other satellites and percentage of average channel use), and other costs, while still maintaining a fair price for the subscriber.

Not to mention... Don't you think these affiliates have thought of the implications of a merger? It HAS been on the way for quite some time now. As we have been informed, all the 'renegotiation' has already taken place, and agreements have been signed to ensure the supposed loss of certain channels will not happen.

Relax, people: These guys have thought this one out, and are aware of the challenges. That's why our insane struggle of half a decade ago has become a popular source of entertainment. It's also why they're in charge of the multi-billion dollar companies, and we're debating it on a website.

Suppose there are two online merchants both offering web hosting services on their sites. The first merchant offers a one- time commission type of affiliate program that pays 80 for every single affiliate initiated sale. The second merchant also offers an affiliate program, but this time a residual affiliate program that pays only 10 for every single affiliate initiated sale. As an affiliate, we may get attracted at once at what the first merchant is offering, as 80 is definitely a lot larger than 10. But by...