Retail Sales - Satellite Radio - A Deeper Look At NPD
July 19, 2006
With the release of the NPD data today, investors have seen a glimpse of where retail sales stand. During the quarter XM satellite radio has made indications that retail sales of radios was slowing. Something that some analysts took to mean as a sector wide issue. Sirius satellite radio has been quick to state that they are not seeing a softening at retail, and that they are in fact seeing growth.
Now that the sub numbers are released, and the NPD data is in, some conclusions can begin to be drawn:
Satellite Radio as a whole experienced flat overall Year Over Year (YOY) growth in June. Sirius saw a YOY uptick of 18% while XM saw saw a YOY downtick of -19%. June was the strongest month of the year for both Sirius and XM for NPD sales. An interesting item to note is that XM's best month so far this year (June) only beats 2 of Sirius' months (April and May) so far this year.
This trend, SIRI with positive YOY comparisons and XM with negatives, seems to be continuing for longer than many people have anticipated. What is happening is that the retail preferences have shifted from XM to Sirius. The sector is growing, but it is Sirius that is capturing the bulk of the growth. Taking a look at the new additions in satellite radio on a YOY basis, it becomes clear that Sirius is capturing nearly all of those subscribers.
How long will this trend continue? Only time will tell.
The bottom line here is that as a sector, satellite radio is just as strong, if not stronger, at retail than it was last year. Those that look at the sector as a whole can clearly see that the growth is stable at a minimum. Now you need to look at where in the sector the growth is happening.
In any business there comes a point in time when the YOY growth figure begins to level off. For satellite radio as a sector this seems to be the case (at least in June, although YOY for 2006 is still seeing overall growth).
This year both Sirius and XM have issued guidance to retail parity. As yet, this has not happened. If you follow Sirius, you are likely happy that Mel K is over-delivering on his guidance. If you follow XM, you are likely upset that Hugh P is still missing the number.
It is important to note that NPD does not capture all sales. It is also important to note that NPD does not track churn of the companies. These items have the potential to drastically impact the perception investors have. By example, in an analyst report issued today, Barton Crockett of JP Morgan noted that he anticipates 269,000 NET retail additions for Sirius and 159,000 for XM. On a NET basis this means Sirius will have garnered 63% of the NET additions. Here at SSG we are anticipating that the NET retail spread will be roughly 65% SIRI and 35% XM
7/19/2006 03:49:00 PM
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