Wachovia Securities senior media analyst Jeffrey Wlodarczak had some pretty harsh words to say about the satellite radio industry as whole, especially about XM Satellite Radio.

“It is hard to argue that Sirius and XM valuations are not implying an optimistic long term scenario for the satellite radio industry.”

“We do not believe that, in '06, the market will be able to reach a conclusion whether or not satellite radio will ultimately be a great success or not. Therefore these stocks are likely to trade primarily on news flow and we believe Sirius is likely to have what appears to be a materially stronger year than XM.”

The interesting thing is that his forecasts for XM's new net subscribers isn't that far off from XM's own guideance - 3.05 million versus 3.067 million respectively. So what gives? Well, in a word, ch-ch-churn.

Part of Wlodarczak's reasoning involve an increased likelihood that more XM subs might drop the service than are expected to do so. As the Wachovia analyst put it, “potential higher churn from ultra low radio pricing in Q4 and Q1 (when consumers have less 'skin in the game' they are more prone to churn).”

[Billboard Radio Monitor]