Sirius confirmed guidance of 6.3 Million subscriber during the last conference call. It is an aggressive target, especially in light of the reductions in guidance that XM has made. Satellite Radio TechWorld examines here what Sirius has to do to make it. According to our calculations, Sirius will have to net 1,180,692 subscribers for the quarter. So, how many gross subscribers will they have to add this quarter? As the chart below indicates, churn is inexorable. There are actions that can be taken to trim churn, but it is relentless part of the growth cycle. The chart below shows Sirius' churn over the last several quarters, along with a trend line into the fourth quarter 2006. The fourth quarter projection suggest a churn in order of 370,000, nearly triple of what it was last year.
In order for Sirius to hit its target, it will need on the order of 1,550,692 gross subscribers. In fourth quarter 2005, Sirius added 1,266,674 gross subscribers; therefore, Sirius needs to add about 284,000 more gross subscribers this quarter than when Stern was coming on board.
The chart below represents the year over year growth in the net subscribers. Projecting into the fourth quarter, one might conclude that the growth would be flat to negative. In the fourth quarter 2005, Sirius netted 1,142,640 subscribers. If growth is flat, it will be very, very close. If it is negative, Sirius won't make it.
Without any major drivers out there, it might be worth comparing the percent increase in growth that XM experienced last year between the third quarter and fourth quarter. XM had a hefty 37.7% increase in gross subscribers. We could call this the holiday effect. If this percentage was now applied to Sirius, Sirius might expect 1,008,523 gross subscribers this quarter. To hit 1,550,692 would require a 112% increase over last quarter. Sirius did better than that last year, but that was with Stern coming on board. Sirius is doing all the right things to attract subscribers. They are leveraging off their NFL deal, there is cheap hardware available, they are pushing the family plan, the internet plan, and they are marketing extensively. It sounds a lot like XM last year.
It is going to be a challenge to meet the numbers. First indications are the the Big Box sales are not that spectacular in this holiday season, and Sirius needs a spectacular quarter. Perhaps we will see even more aggressive marketing.
Alternative views are welcome.
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