How are you handling "parking lot" subs? Does Sirius still include them in their subscriber count? If so, are you going by XM's "parking lot" included number as well?

Every Chrysler product out there seems to come with 1 free year of Sirius. Every rental car company out there rents (among others) new Chrylser products. So the question is: How many of these subscribers are Chrysler/Dodge cars sitting idle in a parking garage at your local airport? XM is certainly not as prevalent in the rental car market.

I'm so glad this has been made nice and clear! The first graph shows XM in blue and Sirius in red. The following bar graphs show XM in red and Sirius in blue. :?

10% of Sirius subs are in parking lots by their own admission, so about 860,000.

In the last conference call (last quarter) XM said if they counted subscribers the way Sirius did they would have been at over 10million. So lets redo the math with that number. Thanks.

This is from XM's Conference Call from yesterday...

"Now as you recall, XM does not report promotional subscribers when a new vehicle is manufactured but rather only account to subscribers when the vehicle is sold and when we have a paid subscription. As I meet many investors and analyst have asked for the number of XM equipped vehicle that have been manufactured and shipped to dealers but not included in our subscriber account. This is the so called parking lot sub-number. At the end of the first quarter there were an estimated 1.5 million of these vehicles. In assets, if XM included these unsold vehicles in the first quarter results, we would have reported an ending subscriber total of roughly 10.8 million"

-

Thank you Homer

So if Sirius is at 8,644,319. And XM could be at 10,800,000. Thats a difference of about 2 million subscribers. When Sirius started XM was as (i believe) 3 million. So they have only cut the led by a WHOPPING 1 million subscribers. CONTENT IS KING?

Scott, Sirius started 6 months after XM. XM had 32,000 subscribers when Sirius hit the air.

Just to give you a perspective.

..................................

The gap will continue to shrink, but because retail is officially dead (SIRI did 2k, yes only 2000 retail adds.... not a typo), OEM will rule, and XM will eventually pull away again if they don't merge.

@jcrean Sorry about that. I fixed the chart colors, thanks for spotting it.

Oops Anonymous Coward. I meant 3 million when that 500 million dollar man started.

My bad.

>> At the end of the first quarter there were an estimated 1.5 million of these vehicles. In assets, if XM included these unsold vehicles in the first quarter results, we would have reported an ending subscriber total of roughly 10.8 million"

There was never a reason to assume the split would remain 95/5 or 90/10 in the first place. But as Homer has pointed out, the subscriber gap hasn't really closed that much since, for example, when Stern was hired. What HAS closed is the market share gap.

When Stern was hired, XM had about 2.5M more subs than Sirius. Today, if one adjusts for the difference in the counting methods, XM has 10.8 vs. SIRI's 8.6M, a gap of 2.2M. So, since hiring Stern Sirius did reduce XM's lead by 300,000 subscribers.

What is becoming more apparent is just how important the OEM market will be to the survival of these companies.

And for the life of me I cannot understand why XM is willing to give up its OEM advantage to merge with Sirius. Let alone, at the 4.6 exchange rate which is ridiculous.

XM should review SIRI's results, come to its senses, and realize that they are overpaying for SIRI, and run, don't walk, away from this sorry deal.

"XM should review SIRI's results, come to its senses, and realize that they are overpaying for SIRI, and run, don't walk, away from this sorry deal."

"Oops Anonymous Coward. I meant 3 million when that 500 million dollar man started."

so everyone waited till the day stern started to buy their radio....?

the day he announced his move they were substancially lower then 3m.

6 months? Sirius didn't go on the air until July 2002. I've had XM since October of '01. That's a little more than a six month head start. SIRI just continues to be 2nd rate to this day too.

Homer and Stack Pointer,
If you're going to use XM parking lot subs for today's total then you will need to do the same for when Stern was hired. Obviously Sirius has gained much more than 300k, not to mention the increased brand recognition.

Anon Coward,
"Scott, Sirius started 6 months after XM. XM had 32,000 subscribers when Sirius hit the air."

That is true, but remember Sirius started with a "soft opening" and was only available in limited states for the first six months and did not have an OEM presence at all, while XM was counting trial period subs from GM.

Both companies have their strong points and I can't wait for them to merge and battle terrestrial radio instead of themselves. I've never met anyone that has the service that would go back to commercial radio.

I think one fact that is being missed here -- that I have been trying to point out for some time now -- is this steep ramp in OEM subs. This is a BIG (yet expensive) deal. There has been a reason for all of these increased expenses in SAC over the last 9~12 months... and we are seeing it now. There are bashers out there that are trying to trumpet Sirius' financials as superior to XM's, but they (A) don't know how to read financials beyond the net loss; and (B) don't know why XM's expenses had increased so significantly over the last year... thus they draw the conclusion that Sirius is better off and XM will go under.

Consider this...

As of 09/30/07, XM had 900,000 uncounted "parking lot subs";
As of 12/31/07, XM had 1,100,000 uncounted "parking lot subs";
As of 03/31/08, XM had 1,500,000 uncounted "parking lot subs";

I believe that this large rampup (66% increase) is due mostly to the rampup of Infiniti/Nissan/Hyundai, plus some Toyota and Lexus... and of course a few more GM/Honda's. But we need to remember that the latter OEM's are not only sitting on the lot, but most of them will NOT be counted as promo's and will only become Gross additions AFTER the 52% (estimated) conversion from promo to paying sub. And since a car can "sit" on the lot for 90~120 days... plus have a 90~120 day promo period -- it could take between 180~240 days before many of these uncounted subs (noted above) will become Gross OEM subs (that's 6-8 months).

Here is the ramp in OEM Gross subs over the last 4 quarters:

Q2 2007 XM Gross added 618k OEM subs
Q3 2007 XM Gross added 700k OEM subs
Q4 2007 XM Gross added 766k OEM subs
Q1 2008 XM Gross added 802k OEM subs

This surge in OEM ramp actually began in Q2 of 2007 -- and XM immediately began getting hit with the expense associated with this ramp. However as I noted above, it takes 6~8 months before installs from those "newer" OEM partners begin to become subs... thus the expense hits first, before the ramp in Gross subs. The ramp in OEM Gross should be more than evident now (above).

Taking a look at the surge in "parking lot" subs above too, remember that XM has already paid and realized the expenses associated with those installs -- but not counted them yet... the OEM Gross ramp should continue to surge for quite awhile yet. The question is, when they convert to paying subs -- will the ramping revenue be enough to make up for the increase in SAC? Many think not -- I'm not 100% convinced either way. Regardless, XM's sub count could be in for some decent boosting going forward. OEM Gross alone here in Q2 could be over 900K.

Food for thought.

--

>> If you're going to use XM parking lot subs for today's total then you will need to do the same for when Stern was hired. Obviously Sirius has gained much more than 300k, not to mention the increased brand recognition.

The "parking lot subs" are not XM's, they're SIRI's.

The number of parking lot subs at Sirius when Stern was hired, or before, was immaterial, as their OEM rollouts had not started in significant numbers; thus, the parking lot subs don't influence my remarks.

The increased brand recognition is a fact -- HOWEVER, what value does it have if you are only adding 2,500 net retail subs in a quarter? Answer? None. Who cares about the brand if it doesn't increase sales?

I have been the sole voice for years now claiming that the Stern deal was stupid, and Q1 makes me more confident than ever that I'm exactly right about it. SIRI will never, ever, recover their investment in Stern.

TO make matters worse, Stern may very well walk away with a million of SIRI's customers when his deal is up if SIRI doesn't come across with a huge pile of money (which they won't be able to do).

What SIRI has done is managed to pull off the sleight of hand without getting caught. After years of reporting bogus subscriber #s, they will never have to own up to it because the merger gets them off the hook -- from now on, you'll get only combined figures and SIRI will never be held to account for its reporting transgressions. Slick. Very slick.

Stack Pointer,
I think you misunderstood my comment about "parking lot subs". You are saying that Sirius has not gained because when you add parking lot subs to XM's CURRENT total the gap has not changed much since when Stern began. All I was saying is add XM's parking lot subs to XM's total when Stern BEGABN and you will see that the difference between the two was greater back then so the gap has narrowed MORE than your figures purport.

>>> All I was saying is add XM's parking lot subs to XM's total when Stern BEGABN and you will see that the difference between the two was greater back then so the gap has narrowed MORE than your figures purport.

Yeah, I saw what you wrote -- but it makes no sense since XM doesn't HAVE parking lot subs.

If you want to take issue with the remarks, why not present your own calculations so others can understand what you're talking about? The bottom line is that today, the difference between XM's and SIRI's counting method is 1.5 Million. Several years ago, e.g., when Stern was hired, that figure would have been approximately zero. Thus, doing ANYTHING with that figure then would not affect the analysis at all.

Stack:

Until you can come up with concrete numbers about the Stern deal - i.e., how many total subscribers are at Sirius now versus how many would be there if Stern hadn't signed, and the incremental expenses associated with those subscribers - then please, quit sucking yourself off to reduced retail numbers 2.5 years after the fact.

To be completely honest, I don't know exactly how many more paying subscribers are at Sirius right now, and neither do you. The last estimate I saw was 1.5 million subscribers a year ago from Bridge Ratings - figure in $11 ARPU for Stern retail subscribers, ~$2/month incremental costs, ~$50 subsidy for retail radios, $15 activation fee, and you're pretty damn close to breakeven on the deal. I'm not saying it's a good deal - probably a net neutral after all is said and done - but unless you've got better numbers than that, then you're wasting a lot of your (apparently unvaluable) time ranting about it.

I will say one thing though - I betcha that Sirius can't wait for the day that Stern retires - because if they keep just half of those Stern subscribers (the OEM take rate) - then they just inherited >750k subscribers for FREE and helped out their bottom line by ~$100 million/yr.

How does one dominate barely?

http://money.cnn.com/2008/05/12/technology/xmradiomoritz.fortune/index.htm?postversion=2008051218

>>>>>>>>Until you can come up with concrete numbers about the Stern deal - i.e., how many total subscribers are at Sirius now versus how many would be there if Stern hadn't signed, and the incremental expenses associated with those subscribers - then please, quit sucking yourself off to reduced retail numbers 2.5 years after the fact.

This isn't complicated. Before Stern was hired, analysts were projecting 500M loss for Sirius in the current year, with decreasing losses in each subsequent year -- that would have been under 1.5 Billion for the three years. The actual loss has been more than 2.5 Billion. There's a billion in loss that is attributable to Stern. You can argue about it from now on, but you're wrong and the numbers clearly reflect this fact.

To suggest that SIRI gets to keep "free" customers if Stern walks is stupid; they've paid 750M for those 1.2M or so customers -- $625/customer -- which they can never come out on.

I don't want to argue it with you as like most others, I have totally lost interest in sat radio going forward. But Stern was a disaster for Sirius, and every day that goes by makes it more and more evident.

Wow, that is impressive logic. I think the proper term for that is "post hoc" fallacy.

So when XM lost 100's of millions dollars more than analysts had projected 5 years ago, who should we blame that on? Surely not the analysts, because we all know how accurately analysts can predict earnings 5 years into the future.

>>>> So when XM lost 100's of millions dollars more than analysts had projected 5 years ago, who should we blame that on? Surely not the analysts, because we all know how accurately analysts can predict earnings 5 years into the future.

Look, the first time XM reported massively increased fixed costs I spotted it before the conference call was over. You couldn't miss it. Neither could the analysts. The analysts have been wrong about lots of stuff -- but in fairness, nobody expected XM's management to behave stupidly - they had been near-perfect until that time.

Likewise, the analysts were wrong about Sirius because Sirius made stupid decisions.

You're trying to make it sound as though the analysts were wrong because they misunderstood SIRI's financials. That could not be further from the truth. Had Sirius not hired Stern, SIRI would be a billion dollars better off today. This arithmetic is simple -- you wouldn't have had the $750 Million spent on Stern, and you wouldn't have had spent well more than a billion dollars on CPGA at a time when CPGA for Sirius was sky-high.

The simple truth is that Sirius could not afford what they spent on Stern and they couldn't afford the cost of selling the receivers for the Stern subs who came to them. This has been crystal clear to me from the outset, and I'd bet there aren't 5 people here or elsewhere who have been able to see this fact. It was a stupid deal and destroyed not only Sirius' possibility of ever becoming profitable, but XM's as well.

It is no coincidence that suddenly, Mel is not quite so willing to "renew Howard's contract at current rates". In fact, unless Stern is willing to take a 70-80% pay cut, he won't be back at the end of 5 years. Wait and see.

Back on topic.

The gap may be closing now, and SIRI may actually catch up to XM in the 3rd or 4th quarter. However, after that I believe XM will again pull away.

XM's OEM growth is going to continue to ramp up for the next 3 years (especially with Nissan, Hyundai, and Toyota). For SIRI, the growth is substantially less so, because their automotive partners are ramping up this year.

There is considerably less OEM growth for SIRI after '08. XM will have almost an extra 30% OEM marketshare growth for the next 3 years.

Unless there is a huge increase in retail subscribers in the next couple of years (doubtful if any of the last 3 quarters are a sign of things), then XM will once again widen the subscriber gap.

To clear up some misconceptions about car subs:

Both Sirius and XM count subscribers that they have received a payment for. This group includes GM, Honda, Chrysler, Ford, VW/Audi, and Mercedes, etc. Some OEM's such as Chrysler and Ford pay the subscription at manufacture. Some such as GM and Honda pay when the car is sold.

Neither company counts Toyota promotional subscribers. XM does not count Nissan, and Hyundai. Sirius will not count Kia. Neither company counts Subaru. The numbers are what they are. You will see the impact of how subscribers are counted in the ARPU metric. This is why you will see a differing ARPU between the two companies. I have written about the subject on Sirius Buzz many times.