This site is dedicated to new ideas and concepts with regard to Sirius XM Satellite Radio. New technology, marketing ideas, and strategic partnerships are fair game. This site is for brainstorming and I welcome all new ideas.
DISCLOSURE: I own shares of Sirius XM Satellite Radio.

9.11.2008

Sirius Numbers

As an investor in Sirius, I took it on the chin the last day or two like many others. I'm still standing, though a bit beaten up. The main reasons for the beat down: lowered guidance for next year and debt coming due in 2009.

Let me just get it out of the way. I do not believe for a second that Sirius will only add 2M subscribers all next year. I think this number is far too conservative. I understand the OEM market isn't what it has been, but with higher penetration rates Sirius should be adding more subscribers. Not less. In my opinion, this number is conservative because it does not take into account Ala Carte subscribers. If Ala Carte subscribers count in an equal way towards our subscriber numbers, then 2M is far too low an estimate. If the 2M subscribers refers to full subscriptions only, there may be something to the number. I certainly do not think this number represents what is being portrayed in the media.

The main issue that shareholders have hanging over their heads is the debt situation. Somewhere in the range of $1B comes due in 2009 (Feb/May/Dec). While Sirius is considering refinancing the debt, I have another idea. Scrap some of the refinancing altogether and offer lifetime subscriptions.

Lifetime? But then we are losing money right? Yes and no. If you offer a limited amount of lifetime subscriptions(say 2M = 10% of current subscribers) on a first come basis, you have another avenue of raising cash to pay down bonds. Long term you would lose some money. However, you are getting money for about 5 years worth of content up front. If you managed to sell 2M lifetime subscriptions at $500 apiece, you have $1B cash on hand to pay off debt. This would improve liquidity and allow the stock price to rise again. This puts the company in a stronger position going forward. Considering that in that same 5 years you will have another 10M to 15M customers, 2M customers for financial stability isn't such a hard decision. You could even reward shareholders by offering the deal to them first.

Maybe this is not an avenue that Sirius is considering, but it is certainly a possibility to get cash quickly to pay off debt and return something to the shareholders.

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