Thursday, January 11, 2007

Sirius At Citigroup Yesterday

Summary of yesterday's presentation at Citigroup:

Mel said that they had a great year and that business is "very strong".

Sirius expects to double advertising revenues in 2007 (from $30 to $60 million), target: 10% of revenue.

Mel commented on Howard's compensation structure, said that the deal was made before he began, but he would have made the same deal, said it has been extremely profitable for Sirius. The company gave Stern an $83 million stock bonus after the company passed a 2006 subscriber target that was set more than two years ago based on analysts' consensus estimates.

Sirius is open to the possibility of a rate hike, although it's not currently on the table. Mel said that Sirius is the market leader in Canada, despite higher rates.

He doesn't forsee any major (ie, expensive) content deals. Very happy with current slate of programming, although there are minor deals to be made.

Mel said that portable devices are not a significant revenue driver, but feels Sirius has to be involved in case he's wrong. He understands that the MP3 market is big, which is why this feature was included in Stiletto design.

On the issue of RIAA, Sirius pays 2-3% royalties now, RIAA wants 10%, Sirius thinks it is worth less than 1%. When Sirius was launched, music content was a more significant driver of subs, but now the mix has shifted. He hopes to have an agreement/court decision by the end of 2007.

Sirius said it closed the year with six million subscribers. The company had originally raised expectation to 6.3 million, but then lowered expectations after experiencing slower "Black Friday" sales. Mel claimed full responsibility for this, and even apologized.

Karmazin said he expects comparisons to be difficult into the first quarter, due to Stern, but emphasized that growth overall continues to be very healthy.

I was surprised that questions were asked about a wireless deal like XM-Cingular (although iPhone quelled a bit of enthusiasm), and that no questions were asked about how Sirius Nascar programming would differ from XM's (I understand that Sirius is doing live driver-to-cockpit action).

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1/11/2007 11:59:00 AM

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