The year 2009 was a tough one for the sole operator in satellite radio, SiriusXM.
For the first time since satellite radio began in 2001, the numbers of subscribers declined. Through the first three months of 2009, amid fears of a worsening economy (but also due to dissatisfaction with program changes made by the merged company, including an extra charge for online service), 1.7 million subscriptions expired or were canceled. The company had a total of 18.8 million subscribers at the end of 2009.1
The rate of subscription loss (“churn”) did slow as the year progressed. In the first quarter of 2009, SiriusXM reported a 2% drop in subscribers. In the second quarter, the drop was 1%.2 For the year SiriusXM lost 231,098 subscribers compared to 2008.
And Veronis Suhler Stevenson predicted that the number of subscribers would grow by the end of the year. Still, it also expects growth rates to steadily decline through 2013.3
Because the company generates virtually all (97%) of its revenue from subscriptions, which average close to $12 a month, the loss of subscribers greatly impacts its bottom line. In 2009 SiriusXM increased its revenue 3.7% to 2.5 billion compared to 2008.
When it came to total profits, however, the company, both before and after the merger, has continued to report losses in each of the last three years. In 2009 SiriusXM posted a net loss of $441 million, compared to a net loss of $902 million in 2008.
Part of the challenge, too, is that while consumers now know about satellite service, many have made the decision not to buy it. In a survey released in April 2009, some 65% of people aged 12 and older said that they had heard of SiriusXM.4 This was up about 5 percentage points from those who had heard of either of the two companies a year earlier (60% for Sirius and 59% for XM). Much of that increase though may have been due to the large amount of media coverage about the merger, rather than increased interest in using the service.
Analysts at Veronis Suhler projected revenue growth of 5.2% in 2009 but then a steady decline through 2012:
- Ad dollars were expected to drop 7.5% in 2009 to $65 million. Veronis Suhler predicts that this loss in ad dollars will continue at least through 2010.
- This comes on top of a 4.1% drop in advertising in 2008, to $70 million.5
In another sign of distress, the company received notice from Nasdaq in September 2009 that it was in danger of having its stock delisted by the exchange because it had closed below $1 per share for 30 consecutive days. The company has until March 2010 to boost its stock value.6
In addition to these troubles, a new regulatory ruling in 2009 could be a further blow to satellite radio’s financial future.
The Copyright Royalty Board issued rulings that resulted in satellite radio having to pay higher royalty fees to the music industry.
The board, which sets royalty rates for the broadcast of sound recordings, ruled that satellite radio providers had to pay the recording industry more for music beginning July 29, 2009. SiriusXM said it would have to raise its subscription rates to offset the higher cost. (for more information about this dispute, see the 2009 State of the News Media report and this year’s Internet radio section)
2. SiriusXM press releases
3. Veronis Suhler Stevenson, “Communications Industry Forecast 2009-2013”
4. “The Infinite Dial 2009,” Arbitron, April 2009
5. Veronis Suhler Stevenson, “Communications Industry Forecast 2009-2013”
6.Eric Seitz, “Sirius Gets Nasdaq ‘Minimum Bid’ Warning; Could Lead to Reverse Split.” Barron’s, September 17, 2009.