Terrestrial Radio Revenue vs. Satellite Radio Revenue
Many people love to make comparisons between terrestrial radio and satellite radio. We have ad based vs. subscription based, localism vs. nationalism, and censored vs. uncensored. Perhaps the starkest comparison comes in the revenue.
According to BIA Advisory Services today, the terrestrial radio industry will see a negative 7% revenue growth rate in 2008 with sector revenues falling to their lowest level in five years ($16.7 billion). Worse still is that the group expects the decline to continue through 2009, where it will bottom out at $15 billion before turning around. Thus, revenues for terrestrial radio are on the decline.
In contrast satellite radio is seeing revenues increase each year. While costs are high, the balance between losses and profits is beginning to shift. In Q3 the proforma EBITDA loss was $9 million for Sirius XM (excluding one time costs). The losses are expected to become profits in 2009, and revenue continues to grow quarter after quarter. The problem for satellite is that they are lumped in with media in terms of a category. Only a year getting lumped into media was desirable. Now, because of the poor performance of radio stocks, it is a group you would rather not be associated with. According to Inside radio, 50% of radio companies have stock trading at less than $1.00.
BIA’s mark Fratrik notes, “The already low forecasts for growth in radio coupled with a generally dismal economic climate have also placed a particular strain on the valuations radio stations need to maintain their financing or to be sold.” – “The waters are very rough right now, but the general profitability of radio keeps us optimistic that the industry will weather the storm providing it strategically invests in its online presence, which will prove to be its rescue as ad budgets continue to shift to more measurable online media.”
If the on line media is a solution for terrestrial radio, perhaps it is something that Sirius XM should consider. XM had a pretty good start by having company sponsors with web pages with special ads for subscribers. This is one synergy management at Sirius XM should consider. Another is a general improvement to their on line version of the service to facilitate ads and sponsorships.
From a business perspective, satellite radio is still seeing top line growth. This aspect of growth has been missing from terrestrial radio for quite some time. With the ever-changing economic situation, and ad budgets being trimmed, it is little wonder that terrestrial has not yet reached the bottom. For satellite radio investors the question is whether or not the growing revenues from an ever increasing subscriber base will become convincing enough to change the valuation of the company. Right now, if your company has radio in their name, investors are nervous. the job for Sirius XM is to accentuate their growing revenues, and demonstrate synergies. They got off to a good start in Q3, but need to build on it in Q4.
If the company can change the perception, they could have an entire year to build confidence in investing in the subscription model vs. the terrestrial model. It is an uphill climb, but solid numbers quarter after quarter could become convincing.
The media sector is down, but therein is the potential for a few shining stars to become the darlings of the sector. Sirius XM is not there yet, and getting there will be hard, but if they do become a shining star, then the equity will respond in a positive manner.
[Via Radio and Records & Inside Radio]
Position: Long Sirius XM
For the true longs in “Sirius,” this is essentially the same problem we dealt with pre-merger . . . Sirius trading down in SYMPATHY to its inferior competitor, “XM”
Can’t tell ya how many times I cursed the ticker when an uninformed marketplace took down the price of “Sirius” due to negative conditions at XM . . . I was always convinced that the negative conditions at “XM” were due to market-share loss to “Sirius” but the market just never traded it that way . . .
So here we are again . . . lumped in not only with terrestrial radio but with the auto-makers as well, trading in sympathy without rationality.
just a footnote . . . when I say “pre-merger” I mean pre-merger announcement . . . long before any discussions were formalized.
Obviously the seeming “sympathy” trade that occurred after the merger announcement was really just an arbitrage play on the exchange rate.
Tyler. We need a ceo that is not from the terrestrial radio world, if we want to get away, from being lumped in with them. imho.
________________________________
Taken from the yahoo board.
Titled.Mel should write a new book titled.
‘HOW TO DECREASE SHAREHOLDER VALUE BY TAKING ITS STOCK FROM $9.43 TO .26 IN ONLY SHORT 4 YEARS’
A Lesson in extraordinary Chief Executive Stewardship during a company’s most crucial growth years in the favor of short-investors and related hedge funds.
Other highlights in this dynamic and insightful expose by one of the most respected short-investor admired CEO’s in the country much less the world include
How to spend 18 months prior to an anticipated highly capital-intensive merger closing without any financing in hand other than to facilitate the shorting of shareholder shares to obtain toxic financing in favor of bond holders.
How to take a company private from right under the nose of unsophisticated shareholders.
How to alienate a company’s own subscriber base.
How to say things that are detrimental to a share price through press releases, conferences, and other important CEO functions.
How to dilute shares and issue extreme Reverse Splits which are injurious to shareholders while still receiving bonuses and salary.
Many more tips and strategies inside that the burgeoning media CEO can utilize to his or her advantage and to the detriment of his shareholders. It’s all in this amazing book.
Learn from a master. It’s like earning a Harvard MBA for only $5.95!
What are you waiting for!
LHUN….
Revenue forecasts are too often a WAG. Too many organizations overrun their forecasting headlights or fail, miserably, at identifying and planning based on assumptions, constraints, and risks.
Take an assumption stated by Sirius XM Operations and Sales President Jim Meyer in an article published on the TWICE consumer electronics business information website on Monday. The article is titled, “Sirius XM’s Meyer Shares Q4 Strategy” and contains a questionable assumption by Meyer in the following paragraph: “The company hopes the switch to joint advertising will alleviate customer confusion at retail. ‘If you go to a Best Buy or Circuit City beginning [last] week, for the holiday period, you’ll see a common display with both brands displayed and a common merchandise strategy. We think that goes a long way toward the elimination of confusion. Also, within the retail brochures, [there is] one promotion for both brands.'”
What’s the assumption? “If you go to a Best Buy or Circuit City beginning [last] week, for the holiday period, you’ll see a common display with both brands displayed and a common merchandise strategy.”
Okay. So there will be a display representing the merged Sirius XM. Beyond that statement, however, is the assumption that the display will connotes sales in line with related revenue forecasting.
Will it be certain that the retailers will do what is needed and expected?
I’ve posted before–and so have others–about Best Buy and other retailers not properly displaying Sirius or XM products, or assertively offering the related services. So what is there to convince investors that the retailers will do any better when handling combined Sirius XM products and service offerings?
The last time I went to my local Best Buy to see displays of what were still separate Sirius and XM products, I found that they were on a dimly lit shelf in a poorly trafficked area of the store, facing a corner in the back of the building. Will that kind of product and service exposure help Sirius XM increase its revenue?
Meyer had better get on his horse and at least do some spot checking to make sure retailers are properly displaying satellite radio technologies and knowledgably answering customers’ questions about the related services.
My confidence in Sirius XM’s strategy implementation at the retail level is not high.
Sirius XM products and services need improved handling by retailers. Otherwise, the assumption made by Meyer in the TWICE article will be proved false.
Don’t count on the retailers to do what is right for Sirius XM; get out there and make sure they help contribute to revenue expectations by visibly displaying satellite radios and service offering literature, and by assertively going after sales.
Ho ho ho! Long SIRI.
Socialrunningfool,
For someone who is always criticizing others for speaking from a yahoo perspecive, you sure do seem to know whats going on on the yahoo boards! $5.95 book read and you know more about running a company then Mel? That damn cramer! Wienkes is always screwing me! Let’s sue sirius with that other asshole! The FCC is to blame! GS is really to blame for my mess! Come on dude! Is is you responsible for your mistakes, YOU! I know a big timer like you should expect Mel to deliver you a Huge return on your investment! Didnt you know how much debt we have? Wasnt it YOUR mistake for underestimating how many zero’s are involved with the word billion? I know, I’m also wrong and also to blame for YOUR mistakes.
hey socal . . . is a “Socialrunningfool” (see Kevin’s post above) someone who talks your ear off in the middle of a race? (lmao)
Tyler,
Do you think there is an opportunity for Sirius to sell spectrum as a means of off loading/funding their debt requirements in 2009? If bankruptcy is truely “not an option”, perhaps this is the next best alternative.
Finally Mel speaks. According to Reuters (today, wed 12-03-08 11:37 AM) Mel gave some positive news about Black Friday and expected Q4 sales. And the Co. is not for sale. And he expects to do the financing. Too good to be true? Let’s hope not.
Kevin,
I’ve had the socialrunningfool tag before. I think it fits.
And I do own that I am unofficially in charge of the complaint dept.
My only statement I every make with posters like you when you criticize me. Is this.
Call out your position in this company stock ahead of time. Tell me “ahead” of time how you bought at such and such price, and sold later and made a killing.
Also disclose your current position and average share price. Or if you have no position then you have no reason to address my issues with the current “.17” share price.
Time and again posters like you say the writing was on the wall. Yet your own investment decisions are neither known now, nor disclosed earlier.
So I’m calling you out Kevin. What is your current position?
Do you have one? If so what is your holdings and average share price.
Thanks in advance.