NPD Group's October sales data continues to show a consecutive decline in the satellite radio retail channel, when compaired to the same period last year. This is the third month in a row that retail sales are down year-over-year. August was down 3%, September down 12% and now in October retail sales are down 25% industry-wide when compared to the October last year.

The Quick Glance:

• Sirius October 2006 Retail Sales:
  Down 26% YoY
• XM October 2006 Retail Sales:
  Down 23% YoY

Marketshare:

• Sirius Oct '06 Retail Marketshare: 56%
• XM Oct '06 Retail Marketshare: 44%

Looking at purely the numbers, this supports the argument that the satellite radio retail channel has reached it's peak, but that only comparing the year-over-year numbers. Expecting the same - or greater - growth as last year is completely unrealistic. This is also the first time since April that Sirius didn't see better year-over-year growth, percentage wise, than XM. The Stern Effect was in full swing at this time last year, so again it's unrealistic to expect the same growth this year. I don't care what the skeptics say, it's just not possible.

2005 was a breakout year, and ridiculous money was being spent in order to maintain the momentum. This helped growth (gotta spend money to make money). From one side the critics say that satellite radio needs to control costs, from the other they say it needs to add subscribers. The key is finding that sweet spot somewhere in between.

That said, Sirius still expects to bring in more subscribers this Q4 than they did last Q4. They've reiterated their year-end guidance of 6.3M net subscribers, so they're obviously confident that they can pull it off. I'm just not exactly sure how.

Now that the numbers are out, let's take a look at gross subscriber additions between both Sirius and XM.

Looking at gross subscriber additions is a more accurate way of looking at the trending of the industry and gives a better feel of the pulse of the market. It eliminates factors like churn, which as the subscriber base for each service increase, creates the illusion that industry growth has slowed. Yes, net subscriber additions are extremely important and are in fact the "true" indicator of growth, but gross gives us a look into market penetration.

So with explainations out of the way, let look at it shall we? For the 3rd quarter of 2006, here's how gross subscriber additions stacked up:

SIRIUS Gross Subscribers: 732,406
XM Gross Subscribers: 868,007

Now since we're talking about trending, let's take a historical look at gross subscriber additions per quarter, starting from the beginning of 2005:

 

Here's the data:

	1Q05	2Q05	3Q05	4Q05	1Q06	2Q06	3Q06
Sirius	354,708	432,687	465,228	1,266,674	960,610	830,571	732,406
XM	821,631	945,885	989,045	1,373,876	1,007,306	926,281	868,007

 

Of particular interest is how 2006 is trending. We all expected the spike in 4Q05, but since then it's been nothing but downhill. Ignoring the 4th quarter, let's look at the same periods in 2005 - there was nothing but growth. This is all the more reason why managing churn needs to be high on the priority list for both companies.

It's also a good thing that both companies have saved up their marketing cash for a big pop this quarter... the 4th quarter is going to need it.

Is there a rally looming for both satellite radio stocks?

Some observers are commenting that the renegotiations over music royalities, and the accompaning uncertainty, are keeping investors at bay. But the decision for this is likely to take upwards of 18 months to resolve, so for the short-term it's pretty much a non-issue.

Citigroup analyst Eileen Furukawa is bullish on both XMSR and SIRI, arguing that so much bad news has been factored into each that they are due for a rally, especially into the holiday season.

"We are currently forecasting the satellite (radio) industry to grow from 9 million subscribers at year-end 2005 to 51 million subscribers by year-end 2015," Furukawa said.

Additionally, according to a research report by American Technology Research analyst Rob Sanderson: "Both stocks have been exceptionally poor performers. While we do not see a turn in weak fundamentals in the near-term, we think both stocks may be candidates for a year-end bounce."

Sanderson said as fund managers try and unload their worst performing stocks to offset capital gains taxes, poor-performing stocks historically see solid gains in the following months.

"Investors are bottom fishing," he said in a telephone interview with Forbes. "A lot of times you see a bit of a rally at the end of the year."

I'm live blogging XM Satellite Radio's 3Q06 Earnings Call today.

Keep refreshing to view updates.

• Conference call introduced by Joe Titlebaum
• Handed over to Hugh Panero - introduces XM service and history

XM Satellite Radio has released their 3Q06 results.

Here's the highlights:

• End of year subscriber guidance has been updated to be between 7.7 million and 7.9 million
• Revenue was roughly $240 million - up 57% from $153 million in 3Q05
• Net loss for 3Q06 was $84 million - compared to $132 million in 3Q05 - a 36% improvement
• SAC was $60 compared to $53 in 3Q05
• CPGA was $93 compared to $89 in 3Q05
  
• Gross subscriber adds were at 868,007 with net subscribers being 286,002
• XM finished the third quarter with a total of 7,185,873 subscribers - 43% higher than the same period a year ago
• Oh, and net loss was $83.8 million, or 32 cents a share, down from a loss of $131.9 million, or 60 cents a share, a year earlier (far smaller than the 43 cents per share expected by analysts)
  

That's quite a wide spread between gross subscribers and net subscribers. XM's conference call is set for 10am ET today - I will be Live Blogging the event, so if you're not able to tune in check back here for the details during the call.