Sirius Ford News Is Very Big News
July 13, 2006
The news regarding Ford and their decision to make Sirius virtually standard equipment in Canada is bigger news than many may realize. This announcement has the potential to have a ripple effect throughout the “Big Three” automakers, and investors in this sector should keep a close eye over the coming months.
First, it is a great “test market” for Ford to see how well the program works. Ford has been pretty creative so far this year regarding Sirius. The 3 year promotion that Ford is running with the Mercury Mountaineer has been a huge success, and that promotion may well have shown Ford the value that Sirius can bring to the table as an option on vehicles.
Second, it is a good indicator of what can happen in the United States, not only with Ford, but with Chrysler and GM as well. This is the first time any one of the “Big Three” have made such a large overall commitment to satellite radio. If Ford were to make a similar announcement about the U.S., there would have to be serious consideration given by Chrysler and GM to standardize things as well.
Third, standardization would mean that satellite radio gets much more exposure than it has in the past. It would become virtually impossible to leave an auto dealer without a satellite radio equipped car.
Those that follow the sector, and see the annual sales rates of “The Big Three” can quickly see the subscriber numbers ramping up substantially. Now it boils down to the costs associated with the OEM deals and the cash flow that the structure of these deals have in place. Not all OEM deals are created equal, and the investors would be well served to understand which type of deal is best suited or structured for mass installation and penetration. There is no doubt that OEM subscribers have a cost associated with them. That comes with the territory. Viewing these deals from a cash flow perspective is something that prudent investors should be looking into if they are not doing so already. The key questions are:
-How much does an OEM sub cost?
-How much subscriber revenue will that sub generate?
-How much advertising revenue will that sub generate?
-How long will it take to make a profit on that subscriber?
-How big is the revenue sharing between the satellite radio company and the OEM?
The bottom line here is that this Ford News in Canada is very big news to this sector. Investors should keep an eye on the wires. Analysts are sure to be generating reports on this development.
7/13/2006 01:36:00 PM
SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here
0 Comments:
SSG is not a Financial Advisor. Read Disclosure: HERE
--------------------------------------------------------
