XM Canada Raising Prices from $12.99 to $14.99, Matching Sirius
XM Canada matches Sirius rateGRANT ROBERTSON
Globe and Mail Update, 7/14/2006
XM Canada is abandoning the price advantage it held in the satellite radio market for the past eight months, raising its monthly subscription rate to match rival Sirius Canada.
Canadian Satellite Radio Holdings Inc., which launched XM Canada last November, made the announcement Friday as it posted a loss of $20.4-million or 43 cents a share for the third quarter. Revenue for the three months ended May 31 was $2.34-million.
Executives said the decision to raise subscription prices by $2 or 15 per cent to match the $14.99 monthly fee of its competitor was not related to the losses.
“We had planned a price increase a long time ago, the reality is we decided to announce it (Friday),” Steve Tapp, chief operating officer of XM Canada, said in an interview.
“It's more about our confidence in the strength of our business. We never intended to have our service marketed as a price advantage.”
XM Canada said in April that it had no immediate plans to raise its monthly subscription price. In the United States, both XM and Sirius sell their services for $12.95 (U.S.) a month, and the move puts the Canadian subscription rates of the two brands on par with each other.
The Canadian rate increase takes effect Sept. 1. However, existing customers will keep the cheaper rate for another year after that, Mr. Tapp said.
Because this is only the second full quarter the company has reported since its launch, there are no comparable figures from a year ago. In the second quarter, which ended in February and included the Christmas selling season, Canadian Satellite Radio had a loss of $44-million (Canadian) or $1.05 a share. Revenue for that quarter was $1.14-million.
Canadian Satellite Radio expects to record losses in its first year or more of operations because of startup costs.
Carl Bayard at Desjardins Securities said the higher price is more likely the result of the company believing the service can be sold for more, rather than a need to pull in more revenue amid losses. “If they see fit to raise their price, that means subscribers are progressing in excess of what they had anticipated and they think the product is strong enough to increase the price,” Mr. Bayard said.
The company spent $69 for every new subscriber it added in the quarter, with most of that money going to marketing and subsidies on radio receivers to entice new customers.
Canadian Satellite Radio said it had 80,000 subscribers as of May 31.
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