During Thursday's earnings call with investors, XM Satellite Radio Holdings Inc. said the company would have 10.3 million subscribers if they counted promotional subscribers when a new vehicle is manufactured.
"XM does not report promotional subscribers when a new vehicle is manufactured but only counts it as a subscriber when the vehicle is sold and when we have a paid subscription," said CEO Nate Davis. "So investors often ask for the number of XM-equipped vehicles that have been manufactured and shipped to dealers but not included in our subscriber numbers. This is the so-called parking lot subs number."
The company said that automotive partners report that XM-equipped vehicles reached 1.255 million at the end of 2007.
"In essence then, if XM included these unsold vehicles in its subscriber totals, then we would have a subscriber total of roughly 10.3 million," said Davis.
XM reported this morning that they ended 2007 with just over 9 million subscribers.
During Sirius Satellite Radio's earnings call earlier this week, CFO David Frear said that these so-called "parking lot subs" accounted for 11% of the company's subscriber base. Sirius said it ended 2007 with 8,321,785 subscribers.
"...the cars that have yet to sell through are about 11% of the base at the year end," said Frear to investors on Tuesday. "It is up slightly from the third quarter and up from the prior year end where I think it was about 9%."
Sirius counts these "parking lot" subscribers because they get paid for them, and so they include them in their metrics.
Still, the 10.3 million number may not be true comparison, as XM may not get paid for all of the 1.255 million unsold vehicles. XM receives payment from automakers such as GM and Honda, but they do not from others like Toyota, Hyundai and Nissan. Still, the latter are still ramping up in their penetration rate, so the "true" number is likely substantial regardless.
Davis didn't make this into an XM vs. Sirius moment though.
"This OEM growth story is true for both satellite radio providers," the CEO added. "In fact, with Sirius reporting 4.2 million gross additions in 2007 and XM having 4.5 million gross additions on a comparable basis, each company would have added the largest number of yearly gross additions in the history of either company."
[Transcripts via SeekingAlpha: XM, Sirius]
>>> Sirius counts these "parking lot" subscribers because they get paid for them, and so they include them in their metrics.
This is a significant misconception.
Sirius doesn't count them because they get paid for them, they count them because they want to convince gullible shareholders (and analysts) that their growth rate is higher than it is.
When payment is made for a subscription has nothing to do with the issue at hand. The question is one of when the earnings process is underway.
Sirius earns 12 months worth of revenue over the 12 month period beginning the day the vehicle is purchased by its eventual owner. Yet, they include that that subscriber in their numbers for a period of about 16-17 months. They begin counting it 3-4 months before the first nickel of revenue is earned, and the continue counting it past 12 months until the receiver is either cut off or renewed.
XM, in its presentation, actually cut Sirius quite a bit of slack.
To truly arrive at comparable figures, one must take into account the fact that paid XM promos who don't subscribe are considered churn in about 3.5 months. Sirius subscribers who are going to churn cannot do so for a full 16-17 months.
So, not only are they counting parking lot subs, their deals are structured to eliminate the possibility of churn for nearly a year and half, even though we know (or suspect, since Sirius refuses to disclose its conversion rates) that half of those vehicles will churn when the promo period is up, and WOULD churn immediately if there were not a prepayment (funded by Sirius) for the full year.
I am pleased to see that XM management finally grasped that it is important for customers, analysts, and stockholders to actually have a grasp on the relative growth rates of these companies, which look quite different when counting methods are clarified.
""This OEM growth story is true for both satellite radio providers," the CEO added. "In fact, with Sirius reporting 4.2 million gross additions in 2007 and XM having 4.5 million gross additions on a comparable basis, each company would have added the largest number of yearly gross additions in the history of either company."
OH SNAP
So in Sirius numbers Xm has 10.3 mill subs.
Ryan
When you get time could you update the SUB graphs for XM/Sirius for 4Q07.
I would like to see a combined (XM Sirius data merged) SUB graph sometime also.
Sorry to assign you homework over the weekend.
Mike
@Mike: Not a problem, it's already in the works. :)
So according to that Sirius really only has 7.4 million subscribers, vs. 9+ milion for XM. Interesting. So basically the gap is still about 1.5 million subs between Xm and Sirius.
>>> Sirius counts these "parking lot" subscribers because they get paid for them, and so they include them in their metrics.
This is a significant misconception.
Sirius doesn't count them because they get paid for them, they count them because they want to convince gullible shareholders (and analysts) that their growth rate is higher than it is.
You do know that was XM and not Sirius holding a meeting, So you know better what is going on at Sirius than the guys at XM
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