Friday, September 01, 2006

Sirius Business - A Serious Look

September 1, 2006

Satellite Standard Group Keeps You Informed.

Sirius Business has been growing at a rapid pace thanks to AMTC. ANTC has been very busy singing on businesses at $24.95 per month, and these are valuable subscribers.

1. They bring in more revenue per unit.
2. They give Sirius exposure to the patrons of the business utilizing the service.

Another aspect of this service that people sometimes overlook is how the Average Revenue Per User (ARPU) is impacted by Sirius Business subscribers. A subscription to Sirius typically runs at $12.95 per month. This is the category where most Sirius subscribers come from. A family plan subscriber generates $6.99 per month. While the revenue is not as healthy for a family plan subscriber, they tend to be easier to get, and more “sticky” (less likely to churn) than regular subscribers. Thus it makes sense to maintain a “healthy supply” of family plan subscribers.

Why do we term it a “healthy supply”? The answer is rather simple. If you grow the family plan subscribers to quickly, and the pool becomes too large, your ARPU will decline. As of last quarter Sirius had about 12% of their subscriber base in the family plan. We here at SSG have watched as the family plan subscribers at Sirius have grown at a rate between 1 to 2 points per quarter. We here at SSG feel that this category may jump to 15% or 16% for the end of Q3, because Sirius has become more aggressive at marketing the plan. We feel he likely comfort zone for family plan as a percentage of the base is between 20% and 25%.

This is where the Sirius Business subscribers come into play. Because the revenue for these subscribers is much higher, Sirius can grow the family plan base more aggressively without having a negative impact on ARPU. In Theory, for every Sirius Business subscriber, Sirius can add 3.5 family plan subscribers without impacting ARPU.

In the past couple of months, AMTC has signed many businesses to Sirius Business. Companies include Daily Grind, Put-Putt Fun Centers, Country Kitchen, The Grape, The Juice Zone, Four Seasons Hotel Silicon Valley, Piggly Wiggly, CiCi’s Pizza, Big Boy, Ford Showrooms, Spicy Pickle, Super Savers, Days Inn Graceland, Up The Creek, etc. They have certainly been very busy.

If the list above represents 5,000 business subscribers, Sirius can then sign 17,500 family plan subscribers and effectively remain ARPU neutral. For whatever reason, these Sirius Business subscribers do not get the attention of analysts and investors, but they should, especially considering the fast growth that AMTC is producing in this area for Sirius Satellite Radio.

9/01/2006 11:34:00 AM

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