With XM Satellite Radio announcing a long term factory install relationship for factory installed satellite radios in Honda and Toyota one would think that the news would have set a spark underneath the equity. Especially considering the big jump that came to the market after the fed made his announcement.
No Dice!!!!
Clearly the shine of satellite radio has dimmed, and only major news or several quarters of outstanding financial performance will seem to lift either Sirius or XM.
New content like Jamie Foxx. Great for SDARS, but nary an impact on the equity.
Honda through 2016. Great news for SDARS, but no impact on the equity
Toyota through 2017. Again, great news and no umph to move the price of the stock.
THE ONLY NEWS THAT HAS MOVED THESE EQUITIES IS MERGER NEWS.
It seems that the street has accepted that great talent will come to SDARS, and that OEM installs will become more common. This news carries no impact anymore. The Street is looking for something bigger and better, and only a track record of good financial performance as "stand alones", or a merger announcement will do the trick. At least that is how things look now.
If investors have to wait for the financial performance of these equities to bear out, it could be a very neutral year for satellite radio stock prices. It will take an established track record of lower losses, and a crystal clear path to profits, and that only comes by stacking three or four quarters in a row were the bottom line looks good.
So, what is happening on the merger front? As of now things remain the same. Analysts and investors alike share opinions on whether it will happen, and given the number of reports, investors see a pile of gold at the end of the merger rainbow. It is little wonder that other news seems to take a virtual back seat.
In my opinion, if a merger is being considered, the deal should be announced sooner rather than later. Merger news could breathe fresh life into these equities. Synergies would start to be considered, and the dollars expended on competing with each other could instead be used in promoting the concept of SDARS on a much broader scale.
Investor sentiment seems to be quite clear, and investors should make efforts to stay on top of the news. The risk here is that there is an anticipation that news on a merger may be forthcoming. So far that has been enough to limit the down side of the stock price. Should definitive information for a merger be announced, we would see instant appreciation in stock price in my opinion. The danger here is that if definitive information against a merger is delivered, I can picture some very tough trading days. With a merger sitting in the balance, it makes it a bit tough to go long or short these equites.
It is a shame that positive news is no longer enough stabilize the SDARSequities, but that is the environment that Sirius and XM are in these days.
The Bridge Ratings Consumer Trend Report: Satellite Radio Q4 Subscriber Trending Updated Wednesday January 31, 2007
Satellite Retail Off Pace with Q3 2006 - The Year's Softest Quarter
This Week's Update: 2006 ended with the satellite radio sector delivering an additional 4.5 million new subscribers for a composite total of 13.6 million for both companies. Though this was down from their original sector estimates of 15 million, the number marks a quite respectable 48% increase year over year. With Sirius off 200,000 and XM off an additional 1.4 million the year of growth for the satellite radio sector belonged to Sirius - at least from a numbers perspective. The kick-start for Sirius was Howard Stern who officially joined the company on January 1, 2006, but nevertheless promoted Sirius for a full 12 months once Stern announced his deal on his terrestrial radio show in October 2004. Bridge Ratings' tracking of Sirius subscriptions from that moment on clearly reflected a turbo-injection of interest and awareness that was helped by Stern...read more: here
Orbitcast reports today that A popular comedy segment on XM's channel 150 will be offering a podcast. This is an exciting feature for fans of the program, and enables fans to access the show any time they desire.
Orbitcast Excerpt:
XM Satellite Radio's comedy channel XM Comedy (ch 150) is now airing the popular Brian Scolaro's "A Complete Waste of Time," podcast. Launched only four months ago, "A Complete Waste of Time," is a short-form program that trys to take on serious issues of the day... but never gets it done........MORE HERE VIA ORBITCAST
While the explosion such as yesterdays loss of the NSS-8 satellite and Sea Launch Zenit-3SL vehicle are rare, they do happen. Sea Launch had the following statement:
Sea Launch Experiences Anomaly during NSS-8 Launch Long Beach, Calif., January 30, 2007 –A Sea Launch Zenit-3SL vehicle, carrying the NSS-8 satellite, experienced an anomaly today during launch operations. Sea Launch will establish a Failure Review Oversight Board to determine the root cause of this anomaly. Please call the Sea Launch Hot Line for further information, as it becomes available. We will also post updates on the Sea Launch website at http://www.sea-launch.com/.
Again, this type of event is rare, but is something satellite radio investors should be aware of. To be clear, this event had nothing to do with Sirius or XM satellites.
Sea Launch most recently launched XM4, which was an overwhelming success. Sirius contracts launches with ILS. The video above is located on YouTube
While this article speaks to SDARS in relation to Toyota, it is also applicable to other OEM's, as well as retail.
There are two methods in satellite radio installs as far as Toyota is concerned. There is the "PUSH" model and there is the "PULL" model. Simply stated, a factory install program is a "PUSH" and Port Installs are a "PULL"
PUSH
Push is where an OEM such as Toyota makes a decision to integrate satellite radio into their cars at the factory level. Installations happen, and the cars are shipped with ready to operate satellite radio receivers complete with three months of service. The concept of satellite radio, and XM specifically, is "PUSHED" out into the market place. The upside of this practice is that XM Satellite Radio gains an opportunity to get their service in front of the ears of many consumers. The downside is that there is a percentage of those consumers who will not have an interest in the product, yet the subsidy expense for XM has already happened. The key to a “PUSH” system is that the benefit obtained by those that keep the service outweighs the expense of the program. Typically OEM take rates seem to hover between 50% and 55%. For the purposes of this article, and simplicity we are assuming 50% as a take rate.
So, if we assume a factory install level of 350,000 units by Toyota in 2008, then realistically speaking, the takers will number 175,000, and those that do not keep the service will number 175,000.
If we assume costs of $75 per radio (marketing, subsidy, etc.), those 350,000 installations will cost $26,250,000. At the end of 3 months 175,000 will keep the service. Using an ARPU (Average Revenue Per User) of $11 per month, it would take 13.64 months of continued service to break even on the investment.
Factory installation also offers some synergies with other vehicle options and capabilities. Pull installations will typically lag behind before those synergies can be incorporated.
PULL
Pull is where the consumer asks for a service to be installed on their vehicle. Regarding Toyota, there is actually a combination of PUSH and PULL. From the standpoint of PUSH, dealers such as Penske have deals with Sirius, and they install Sirius in their vehicles. This type of installation is PUSH, because it still is not the end user that makes the decision as to whether or not the installation happens. Likely, the take rate on these Sirius installs is similar in nature to the XM factory installs. The difference between a port install and a factory install is transparent to the consumer.
The Pull aspect of the port install deal Sirius has is that consumers can request that Sirius be installed in their vehicle. If consumers request it enough, dealer always have the option of ordering cars with the radio already installed so as to have an inventory of Sirius equipped cars on their lots.
The disadvantage of PULL is that it relies on the consumer to be aware that Sirius is an option, and the likelihood of some consumers to “give it a try” may not be as strong. In other words, Sirius loses the ability to make an attempt to market their service unless the consumer is a willing participant. By nature, PULL radios begin to represent what the demand for satellite radio is. The advantage of the PULL method is that you are better able to control expenditures, and the take rate should be substantially higher than 50% (because the consumer is making the request). Thus, each radio you install pays for itself faster. If 100,000 radios were requested by consumers, and Sirius the cost to Sirius was $75 each, then the investment into these consumers would be $7,500,000. If we can assume an 85% take rate (remember, these are consumers that made the request to have Sirius), then there would be 85,000 radios at a cost of $7,500,000. At an ARPU of $11, it would take Sirius 8 months to recoup their investment.
A big factor in PULL is that Sirius needs to ensure that consumers are aware of the option. If Sirius can create a large enough PULL, then the PUSH factor of the dealer ordering equipped cars can increase.
The point of this article is not to say that one method is better than the other. It is to highlight out the advantages and disadvantages of each type of install. Where PUSH generates volume, PULL generates cost efficiencies, etc.
From an investors standpoint, the PUSH strategy at least gives people a reasonable understanding of what kind of numbers to expect. The PULL numbers seem to be shrouded in mystery, and thus it is hard to contemplate how “valuable” the port install deal between Sirius and Toyota is.
In a perfect world, the subsidy would be inexpensive, and a consumer could simply get either or both services to try. SDARS is not there yet.
Just as the buzz around a merger between Sirius and XM seemed to have calmed down a bit, a new report has been issued. This report from James Dix of Deutsche Bank, was quite extensive (40 pages), and details various aspects of a merger including the possibility of it happening and the regulatory hurdles that may be faced.
Report Excerpt:
Audio Signals
Cloudy crystal ball on regulators at this time hurts the risk/reward
Based on our review of the legal landscape and current developments in mobile audio, we conclude that there is a reasonable risk that the regulators would not approve a merger between Sirius and XM, or would approve one only with substantial conditions including potential spectrum divestiture. We continue to recommend investors substantially discount the prospect of a merger, but maintain our Buy ratings based on longer-term fundamentals.
Be quick, but don't hurry
We believe investors may underestimate the practical difficulties the satellite radio companies would face in winning timely regulatory approval. In its order in DirecTV-EchoStar, the FCC repeatedly noted that the merging companies had not met the burden of making their case. If Sirius and XM have to rush to file a merger proposal due to potential changes to the FCC in the 2008 election cycle, they may have less ability to make their own case. We have reviewed the satellite radio license grants, the 2002 FCC ruling in the DirecTV-EchoStar proceeding, and 1997 and 2006 DOJ/FTC guidance on horizontal mergers. We base much of our assessment of the competitive landscape, central to determining the relevant market and competitive impact of a merger, on takeaways from our four days at CES earlier this month and discussions with DB's wireless equipment team.
Keys: defining relevant market and gauging timing/impact of new entrants
While satellite radio faces substantial competition for the consumer's attention and entertainment dollar from a host of products and services that did not exist 10 years ago, such competition by itself might not justify allowing Sirius and XM to merge. Rather, we believe that regulators would focus on the incremental impact on competition in the relevant market from a potential satellite radio merger, and would have to handicap the timing and impact of the rollout of potential new products like HD radio, smart phones, auto consumer electronics, 3G and WiMax.
Will there be a 2007 rate increase?
Sirius' prior public statements on the potential for a rate increase suggest that it does not currently feel substantially constrained even by competition with XM from being able to raise rates. However, we wonder whether the potential for a merger makes it less likely that either company raises rates this year. The ability to increase prices without substantial churn might suggest to the FCC that the relevant market for assessing a merger is satellite radio, not something broader.
Maintain Buy ratings, with 12-month TPs of $20 on XM and $5.75 on Sirius
There are obviously other legal analyses and facts that could determine a regulatory decision in this case than the ones we present here, and we are not offering a legal opinion on what any regulator might decide. We use a DCF through 2020, WACC of 13-14%, and TVG of 4% to support our target prices. Risks to our investment theses and TPs include changing market risk tolerance for tech-driven businesses, subscriber growth volatility, competing technologies, rising costs, deal risk and adverse regulatory developments.
As we here at SSG have expressed before, the definition of the market is a key element for these companies should they decide to attempt a merger. With the advent of new competition from the MP3 market, cell phones with audio capability, HD Radio, and internet radio, it becomes important for Sirius and XM to demonstrate that the marketplace is substantially broader than it was only 6 or 7 years ago.
XM Announces Extension of Agreement With Toyota as Factory-Installed Satellite Radio Provider, With More Than One Million XM-Equipped Vehicles Expected Annually by 2010
New Agreement Extends Current Partnership through 2017
WASHINGTON, Jan. 31 /PRNewswire-FirstCall/ -- XM Satellite Radio, the nation's leading provider of satellite radio with more than 7.6 million subscribers, announced today that Toyota Motor Sales, U.S.A., Inc. has extended its agreement with XM as its factory-installed satellite radio provider for Toyota and Lexus vehicle models. The new agreement extends the current partnership between the two companies through 2017. Toyota's annual factory production of XM-equipped vehicles is expected to exceed one million by 2010.
"We're pleased to extend our agreement with Toyota through 2017, making XM available as the sole provider of factory-installed satellite radio for one of the world's largest and most successful auto manufacturers," said Nate Davis, president, XM Satellite Radio. "XM looks forward to broadening our reach to millions of loyal Toyota and Lexus customers."
"XM provides exceptional entertainment programming and innovative data services like real-time traffic, recently launched on the all-new Lexus LS. Our agreement with XM will help us continue to provide these services and develop additional in-vehicle applications for future products," said Dave Danzer, group vice president of strategy and product planning for Toyota Motor Sales, U.S.A., Inc. "XM will be available as a factory-installed service on Toyota and Lexus vehicles."
In 2006, Lexus introduced factory-installed XM as a standard feature on the new 2007 Lexus LS 460 L. XM Radio is also available in the 2007 LS 460, which includes the service in its navigation packages. Later this year, Lexus will provide factory-installed XM as standard equipment on the upcoming luxury hybrid, LS 600h L.
Every Toyota and Lexus vehicle equipped with factory-installed XM comes standard with a 90-day trial subscription.
Form SC 13D/A XM SATELLITE RADIO HOLDINGS INC - XMSR Filed: January 30, 2007 (period: ) An amendment to a SC 13D filing
This Amendment No. 11 to Schedule 13D amends or amends and restates, where indicated, the statement on Schedule 13D relating to the Class A Common Stock of the Issuer filed by American Honda with the Securities and Exchange Commission on August 22, 2000, as amended prior hereto (as so amended, the “ Initial Schedule 13D ”). Capitalized terms used in this Amendment No. 11 but not otherwise defined herein have the meanings given to them in the Initial Schedule 13D.
As of January 26, 2007, pursuant to the obligation of American Honda under a forward sale agreement (the “Forward Sale Agreement”) dated May 2005 with Bank of America, N.A. (“ Bank of America ”), American Honda sold $33,249,084 in principal amount as of December 31, 2005 and through maturity of the 10% Convertible Notes (the “ Hedged Notes ”). The Hedged Notes were convertible into 10,455,687 shares of the Issuer’s Class A Common Stock. Under the terms of the Forward Sale Agreement, American Honda received from Bank of America, as payment for the Hedged Notes, a purchase price equal to $27 per share for each of the 10,455,687 shares of the Issuer’s Class A Common Stock underlying the Hedged Notes, or $282,303,549 in aggregate.
American Honda continues to hold approximately 20.4 million shares of the Issuer’s Class A Common Stock, approximately 6.7% of the outstanding Class A Common Stock of Issuer. Under long-term agreements, recently extended to 2016, American Honda factories install XM radios in numerous Honda and Acura models and integrates data services delivered over the XM Satellite Radio system.
Except as otherwise set forth herein, this Amendment No. 11 does not modify any of the information previously reported by American Honda in the Initial Schedule 13D...read more: here
New York City is a centerpiece to many things and many people, and it is little wonder that there is "Star Power" at Sirius. On my own tour of the facility, there were numerous stars doing their shows, and I remember thinking that having this much fame in such close proximity is not a normal thing for radio.
Today the Associated Press published a piece on all of the stars that can be found at Sirius.
Article Excerpt:
Sirius Satellite Radio Draws Stars
Tuesday January 30, 1:34 pm ET By Larry Mcshane, Associated Press Writer
Sirius Stars Turn Out at Satellite Radio Headquarters
NEW YORK (AP) -- Shortly after making his entrance, Oscar winner Jamie Foxx found model Janice Dickinson and her ample cleavage pressed tightly against him. Foxx posed for a photo-op with hip-hop legend Grandmaster Flash, and later traded handshakes and hugs with New York Giants linebacker LaVar Arrington.
The VIP lounge at Lotus? The red carpet at the Grammys?
Try the star-studded offices of Sirius Satellite Radio Inc., a haven for bold-faced names found 36 floors above Manhattan in a Rockefeller Center skyscraper.
The company headquarters draws an eclectic collection of celebrities, sports stars, musicians and Martha Stewart, often simultaneously, with many wandering casually through the halls on their way to or from a studio.
The diversity of talent is best summed up this way: Howard Stern and Cardinal Edward Egan do their shows a few hundred feet apart. Only here could "The King of All Media" and a prince of the church cross paths -- uncensored, of course.
"You walk through the halls here, and it's absolutely mind-blowing," Stern said. "There's energy, and there's synergy. You walk out after a show and wind up hanging out. ... It's like a big old kibbutz."
A somewhat typical morning found Foxx announcing his new Sirius channel as singer Evan Dando performed live in a nearby studio. National Football League All-Pro Tiki Barber fielded questions for the NFL Network, and author/Sirius host Candace Bushnell of "Sex and the City" fame quizzed Dickinson.
At the end of a hallway, Stewart's daughter Alexis sat on the floor, kicking around ideas for her upcoming program. And Sean Avery of the Los Angeles Kings took advantage of the National Hockey League All-Star break to do an interview in yet another studio.
"It's neat -- it's a mosh pit, a melting pot, and we're all here doing the same thing," said Barber, the recently retired Giants star who co-hosts a Sirius show with twin brother Ronde......MORE HERE
DJ's on music channels have fans as well as critics. More often than not, I enjoy a little interjection by a person with a quick anecdote or story between songs. To me DJ's help to tell a story and draw people deeper into the music.....but that is simply my opinion.
Columnist Frank Barnaco of Internet Daily is reporting that the removal; of DJ's is a cost cutting move to facilitate other non-music talent such as Jamie Foxx. Whether that is right or wrong is unknown, but likely the first channels a genres to suffer when it comes to cost cutting or making room for new talent are the least popular.
In the end the thing that holds true is that you can not please all of the people all of the time.
Article Excerpt:
The cost cutting continues at Sirius Satellite Radio, according to messages posted on a New York radio broadcasting Web forum. Sirius has eliminated live disc jockeys from its '50s channel and two other feeds, said a posting by Fred Richards. A consensus of comments was that Sirius has given up on listeners over the age of 50.
The Sirius Web site lists only one disc jockey on the '50s channel now, Norm N. Nite, who broadcasts weekend afternoons. A Canadian Web page for the channel list, but the US version has only Nite.
Richards said saving money by eliminating live talent on the channel was "making the grievous error of chasing people like me back to our FM sets."
"If this is how Sirius is managing the cost of doing business, they essentially become a satellite-based iPod/MP3 player," commented Phil Seely. "It's such a pitifully small drop in the change bucket (cutting disc jockey staff) that even bean counters must wonder 'why bother' when the dog (Sirius' mascot) continues to give away large bounties to non-radio talent like Jamie Foxx," who was just hired to help produce an urban comedy/entertainment channel......MORE HERE
Musicians Rally for Digital Freedom Artists and Record Labels Embrace Digital Freedom Campaign Bill of Rights WASHINGTON, Jan 30, 2007 /PRNewswire-USNewswire via COMTEX
The Digital Freedom Campaign today announced that more than 50 new bands have joined the nationwide movement to protect the rights of artists, consumers and innovators in the digital age. The Digital Freedom Campaign's mission is to ensure that all Americans can enjoy new digital technologies free of unnecessary government restrictions and costly lawsuits that restrict consumers' ability to use lawfully acquired content on digital devices. The Internet and new digital technologies like satellite radio have enabled individual artists, musicians and groups both big and small to be heard, enabling them to find, cultivate and grow new audiences and an interested fan base. No longer solely dependent on big recording conglomerates for the promotion and distribution of their music, musicians can use cutting edge technology to reach those audiences themselves...read more: here
RadioShack shares hit 1-yr. high, Goldman ups rating, target By Tomi Kilgore, Jan 30, 2007, MarketWatch
Shares of RadioShack (RSH) rallied nearly 5%, and reached a one-year high in intraday trading, after Goldman Sachs upgraded the consumer electronics retailer. Analyst Matthew Fassler lifted his rating to buy from neutral and his price target from $25 from $19. "RadioShack shares are only beginning to discount the earnings potential we see from a powerful turnaround, driven by improved retail processes and, in particular, aggressive cost control," Fassler said in a research note. The stock was last up 94 cents, or 4.5%, at $21.76. It reached a high of $22.20 earlier in the session, the highest price seen since Jan. 31...read more: here
American Honda and XM Expand Relationship Through 2016
WASHINGTON, Jan. 30 /PRNewswire-FirstCall/ -- XM (Nasdaq: XMSR - News), the nation's leading provider of satellite radio, today announced that it has extended its relationship with American Honda Motor Co., Inc. under a 10-year agreement through 2016.
XM is the exclusive satellite radio provider for American Honda, which markets both Honda and Acura vehicles. An original strategic partner in the launch of XM, American Honda introduced its first factory-installed XM vehicles in 2003 and is projecting production of 650,000 factory-installed XM units for 2007 model vehicles. American Honda has produced more than 1.5 million cars with XM factory-installed to date.
"XM is the leader in providing satellite radio to the new car market and Honda is one of the world's most successful automobile manufacturers, which has exposed millions of consumers to XM through its dealerships and XM- equipped vehicle sales," said Steve Cook, executive vice president, Automotive, XM. "We are pleased to continue this relationship with American Honda through 2016, broadening our reach to their loyal customers."
"The roll-out of XM in our vehicles has been one of the fastest in the car industry and over the years XM has become an increasingly important entertainment service to our customers. We look forward to providing XM's great content for many years to come," said John Mendel, senior vice president, automobile operations of American Honda Motor Co., Inc.
XM Satellite Radio is available as a factory-installed feature on 2007 Honda models including the Civic, Civic Hybrid, CR-V, Ridgeline, Accord, Accord Hybrid, Pilot, Odyssey and Element.
XM is also a standard factory-installed feature on every 2007 Acura model including the RL, TL and TSX performance luxury sedans as well as the MDX and RDX luxury SUVs. XM NavTraffic, XM's real-time traffic information service, is standard on all 2007 Acura vehicles equipped with the AcuraLink(TM) satellite communication system.
Every American Honda vehicle with factory-installed XM also comes standard with a three-month complimentary subscription.
American Honda and XM also recently launched satellite radio trial programs for Honda Certified Used Cars and for Acura Certified Pre-Owned Vehicles equipped with XM Satellite Radio.
In their most recent report dated January 27, www.BridgeRatings.com proclaims: "Listening to internet radio streams will continue to have explosive growth. We are now projecting almost 150 million overall weekly listeners to this medium by 2010. As terrestrial radio continues to develop custom internet channels and successfully markets its main channel streams, our forecast is for these terrestrial radio simulcasts to become a larger part of all internet listening growing from about 20% of all internet listening in 2006 to 40% by 2020"
XM Radio Online Available With Windows Vista WASHINGTON, Jan. 29 /PRNewswire-FirstCall/ --
XM, the nation's leading satellite radio company, today announced that XM Radio Online will be included in Microsoft's new operating system, Windows Vista.
Windows Vista, which will be broadly available on January 30, will offer XM Radio Online as part of its digital music hub. XM Radio Online delivers more than 80 radio channels, including commercial-free music, the Oprah & Friends talk and lifestyle channel, "The Bob Edwards Show," "Opie & Anthony," stand-up comedy, and children's programming...read more: here
Verizon Said No Thanks To Apple's iPhone January 29, 2007, www.fmqb.com
After it was reported that Apple teamed with Cingular Wireless to distribute its new iPhone, the news has surfaced that Verizon actually passed on the deal two years ago. Verizon squashed the deal because of Apple's rich financial terms and other demands, according to USA Today. Apple reportedly wanted a percentage of the monthly cell phone fees, decision making power over how and where iPhones could be sold, and control of the relationship with iPhone customers. "We said no. We have nothing bad to say about the Apple iPhone. We just couldn't reach a deal that was mutually beneficial," said Jim Gerace, a Verizon VP, according to USA Today. Gerace also said that customer service was another bone of contention, because if an iPhone malfunctioned, Apple wanted sole discretion over whether to replace or repair the phone. "They would have been stepping in between us and our customers to the point where we would have almost had to take a back seat… on hardware and service support," said Gerace. Cingular has not revealed the financial terms of the deal or how long it is allowed to exclusively distribute the iPhone, but sources told USA Today that it's a five-year contract. The device will ship in the U.S. in June and will arrive in Europe later in 2007 and in Asia in 2008...read more: here
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If you have XM Satellite Radio and love Air America, there is news that will be of interest to you.
1 - Air America looks to be avoiding bankruptcy.
2. Al Frankens last day is February 14, 2007.
Associated Press
Air America Radio Reaches Deal for Sale
Air America Radio Reaches Tentative Agreement to Be Sold to Stephen Green; Al Franken to Exit
NEW YORK (AP) -- Air America Radio, a liberal talk radio network, said Monday that it had reached a tentative agreement to be sold to the founder of a New York area real estate company. The network also said that Al Franken, its longtime headline personality, would depart next month.
The agreement with Stephen Green, the founder and chairman of SL Green Realty Corp., appears to rescue the struggling network, which has been seeking a buyer since last fall when it filed for bankruptcy reorganization after reaching an impasse with one of its creditors. No terms of the sale agreement were disclosed. Any sale would have to be approved by the bankruptcy court. ..... More HERE
NASCAR Driver Juan Pablo Montoya to Speak Weekly to SIRIUS Listeners
Montoya will be heard every Monday on 'SIRIUS Speedway' exclusively on SIRIUS NASCAR Radio
SIRIUS Satellite Radio, the Official Satellite Radio Partner of NASCAR, announced today that Juan Pablo Montoya, the former Formula One star who will drive the No. 42 Texaco/Havoline Dodge in the NASCAR NEXTEL Cup and NASCAR Busch Series in 2007 for Chip Ganassi Racing with Felix Sabates, will participate weekly in an exclusive interview spot heard only on SIRIUS NASCAR Radio, the new 24/7 year-round radio channel dedicated to NASCAR.
Starting January 29, Montoya will be heard every Monday on SIRIUS Speedway, the exclusive talk show hosted by Dave Moody that airs weekdays (3- 7pm ET) on SIRIUS NASCAR Radio / ch. 128. Montoya, the first F1 driver ever to jump full time into the NASCAR NEXTEL Cup Series, will provide updates on the No. 42 team and comment weekly on his experiences in NASCAR as he transitions from open-wheel racing to stock car racing.
"I'm really excited to be on SIRIUS every week talking to the fans about all my experiences in NASCAR," said Montoya. "I'm going to have a lot of fun this year, on the racetrack and on the radio."
"We're thrilled to welcome an international racing star like Juan Pablo to the SIRIUS NASCAR Radio family and we look forward to his first full season in NASCAR," said Steve Cohen, SIRIUS' Vice President of Sports Programming. "Each week our listeners will get first-hand updates on his progress, hear his insights into the differences between open-wheel and stock car racing and get his feedback on all the races."
Montoya, who is originally from Colombia, raced in Formula One, the pinnacle of open-wheel racing, from 2001 to 2006, compiling seven Grand Prix wins including the sport's blue ribbon event -- the Monaco Grand Prix. Prior to that he drove for Chip Ganassi Racing in the CART series from 1999 to 2000 where he won the CART Championship Series in 1999 as a rookie, and in his first attempt, won the Indianapolis 500 in dominating fashion in 2000. Montoya, 31, decided last year to jump full-time into NASCAR, competing in two ARCA events, four NASCAR Busch Series races and the NASCAR NEXTEL Cup finale at Homestead-Miami Speedway in preparation for a full assault on the Nextel Cup Series in 2007.
SIRIUS is the satellite radio home of every NASCAR NEXTEL Cup Series, NASCAR Busch Series and NASCAR Craftsman Truck Series race. SIRIUS NASCAR Radio, channel 128, which launched January 1, features the races plus exclusive original talk shows with up-to-the-minute news, expert analysis and exclusive interviews with NASCAR insiders.
All NASCAR content is provided to SIRIUS customers at no additional cost over SIRIUS' monthly subscription fee. For more information visit www.sirius.com.
While Sirius is not specifically mentioned, the image of Homer Simpson's plug an play satellite radio looks strikingly similar to the Sirius Sportster.
Sam Simon, creator of the cartoon classic known as the Simpson's happens to be a Howard Stern fan, and even created a radio sitcom featuring the "better half" of Stern Show staffers. The title of the radio sitcom was "The Bitter Half".
Satellite radio has garnered a presence on several television shows and video games, but to this point, it seems to be the first time the digital medium has been included in a cartoon.
So, how long before we see Homer Simpson's presets on the Sirius web page?
SIRIUS is the Satellite Radio Home of Super Bowl XLIMonday
January 29, 8:00 am ET
SIRIUS to air ten game broadcasts in seven languages SIRIUS NFL Radio ch. 124 to broadcast live from Miami Beach Chicago Bears and Indianapolis Colts home radio feeds to air nationally
SIRIUS Satellite Radio, the Official Satellite Radio Partner of the NFL, will provide the most comprehensive radio coverage of Super Bowl XLI, with multiple live game broadcasts, live day-long news and analysis every day of Super Bowl Week.
On Super Bowl Sunday, February 4, SIRIUS will air an expanded lineup of live play-by-play broadcasts of Super Bowl XLI to its growing subscriber base. SIRIUS will offer ten different game calls in seven languages, including both teams' local radio broadcasts and the national Westwood One/CBS Radio Sports broadcast. SIRIUS subscribers can choose from:
* Indianapolis Colts team broadcast - channel 125 * Chicago Bears team broadcast - channel 123 * Westwood One/CBS Radio Sports broadcast - channel 124 * Westwood One Spanish broadcast (Spanish-Latin America) - channel 181 * Canal + Spain broadcast (Spanish-Spain) - channel 147 * NTV + Russia broadcast (Russian) - channel 143 * France 2 broadcast (French) - channel 110 * NHK Japan broadcast (Japanese) - channel 107 * SMG broadcast (Mandarin Chinese) - channel 119 * ARD broadcast (German) - channel 130
From Monday, January 29 through Super Bowl Sunday, SIRIUS NFL Radio ch. 124, SIRIUS' 24/7 year-round NFL talk radio channel, will broadcast live every day from Radio Row at the Miami Beach Convention Center and will be streamed live and free of charge on the NFL's official game site www.superbowl.com.
Source: SIRIUS Satellite Radio
SIRIUS NFL Radio will provide up-to-the-minute news and analysis from a panel of expert hosts that includes Jerry Rice, Cris Carter, Tim Ryan, Pat Kirwan, Gil Brandt, Jim Miller, Carl Banks, Bob Papa and Adam Schein. SIRIUS NFL Radio will broadcast live from Dolphin Stadium on Media Day, Tuesday, January 30, from 10am to 3pm ET. Media Day shows will feature one-on-one interviews with players and coaches from the Indianapolis Colts and Chicago Bears. On Saturday, Feb. 3 from 2pm to 6pm ET, SIRIUS will have live coverage as the Pro Football Hall of Fame's Class of 2007 is announced at the Miami Beach Convention Center. Coverage will be hosted by Gil Brandt and Bryan McGovern and will feature the live announcement and one-on-one interviews with newly elected Hall of Famers.
SIRIUS NFL Radio Daily Schedule:
Monday - Friday * 8 am - 10 am ET: The Opening Drive with Bob Papa, Cris Carter, Carl Banks, Daryl Johnston and Gil Brandt.
* 10 am - 1 pm ET: Movin' The Chains with Tim Ryan and Pat Kirwan.
* 1 pm - 3 pm ET: The Red Zone with Bruce Murray, Cris Carter and Gil Brandt.
* 3 pm - 7 pm ET: The Afternoon Blitz with Jerry Rice, Adam Schein and Jim Miller.
* 8 am - 11 am ET: The Weekend Kickoff with Paul Allen and Jeff Dubay.
* 11 am - 2 pm ET: Press Coverage with Vic Carucci and Dan Leberfeld.
* 2 pm - 6 pm ET: Live Hall of Fame Election Coverage hosted by Gil Brandt and Bryan McGovern and featuring interviews with newly elected Hall of Famers.
* 6 pm - 8 pm ET: Chalk Talk. Highlights from Super Bowl Week on SIRIUS NFL Radio.
Super Bowl Sunday
* 9 am - noon ET: The SIRIUS Tailgate Show with Adam Schein, John Madden, Gil Brandt and Steve Cohen.
* Noon - 4 pm ET: The End Zone with Bryan McGovern.
* 4 pm ET: Westwood One/CBS Radio Sports Super Bowl XLI coverage * Postgame coverage live from Dolphin Stadium with Pat Kirwan and Jack Arute.
SIRIUS listeners in the Miami area during Super Bowl Week can also monitor traffic and weather conditions by tuning in to SIRIUS First Traffic and Weather for Miami on channel 153. As the Official Satellite Radio Partner of the NFL, SIRIUS broadcasts live nationwide every pre-, regular, and post-season game of the NFL season, plus the Super Bowl and Pro Bowl. Listeners can hear Westwood One/CBS Radio Sports' broadcasts and Spanish-language broadcasts for select games. Fans can also tune into SIRIUS NFL Radio, channel 124, for the only 24/7/365 radio channel dedicated entirely to pro football talk.
In addition to being the Official Satellite Radio Partner of the NFL, NASCAR, NBA, NHL, CFL, Wimbledon Championships and Barclays English Premier League soccer, SIRIUS broadcasts play-by-play for more than 150 colleges, including the entire NCAA® Division I Men's Basketball Championship (March 13 - April 2, 2007), plus several of the year's top thoroughbred horse races.
Noble Roman Inc. of Indianapolis, IN, the national franchisor of Noble Roman's Pizza and Tuscano's Italian Style Subs locations, has chosen SIRIUSBusiness as its preferred supplier of background music. Applied Media Technologies Corporation will provide SIRIUSBusiness for $24.95 per month, with no contract, along with all necessary sound equipment.
"The SIRIUS equipment will be programmed to the channels that fit our customer base," said Libby Springer, Marketing Coordinator for Noble Roman's Inc. "Quality control is very important at Noble Roman's, whether it's our pizza, subs or music. SIRIUSBusiness offers that control."
"Everyone loves great pizza and great subs, from kids to grandparents. Noble Roman's has a wide range of customers, so they needed a music service with a wide variety of channels. SIRIUS is the perfect solution," said Jason Nash, Account Executive for AMTC. Noble Roman's Inc. has a proud history of over 30 years in the foodservice industry, providing the experience and know-how to achieve the goal of a successful business. Noble Roman's offers two exciting franchise opportunities: Noble Roman’s Pizza and Tuscano’s Italian Style Subs. For additional information, visit www.nobleromans.com.
Privately-held AMTC is headquartered in Clearwater, FL. AMTC is the exclusive provider of SIRIUS Satellite Radio (NASDAQ: SIRI) for business use, under the brand name SIRIUSBusiness. SIRIUSBusiness includes 69 channels of 24-hour, commercial-free music, with all music royalties paid, and presents the first meaningful competition for Muzak in the business music arena. AMTC also manufactures a full line of professional sound equipment and provides TelAdvantage, the world’s most recognized brand of telephone "on hold" messaging products and services. Since 1991, AMTC has served over 20,000 customers around the globe, including names like Bally Total Fitness, Bridgestone-Firestone, Continental Airlines, DaimlerChrysler, Ford Motor Company, Morgan Stanley, Wendy's and Yum! Brands. For further information on SIRIUSBusiness or TelAdvantage, visit http://www.amtc.com/.
Restaurants, a fast-growing chicken wing franchise famous for cooked-to-order wings, has selected SIRIUSBusiness as the background music for its more than 500 restaurants open or under development throughout the United States. SIRIUSBusiness, provided by Applied Media Technologies Corporation (AMTC), consists of 69 channels of 24-hour, commercial-free music from SIRIUS Satellite Radio (NASDAQ: SIRI). Under the agreement, AMTC will also provide sound equipment to the company’s locations.
Wingstop was chosen as the best overall wing company at the fifth annual National Buffalo Wing Festival in Buffalo, N.Y. “It makes sense that the best wing company in the country would choose to partner with the best background music service,” remarked Dan Hecht, Director of Special Programs for AMTC. “With a $24.95 monthly price, and no contract required, this service represents both high quality and great value.”
“Just as Wingstop has stuck to what we know best—wings, SIRIUSBusinessis a background music provider that keeps excelling at what it knows—music,” commented Bill Knight, Wingstop’s Chief Operating Officer. “We are so pleased to offer commercial-free music on our menu, making Wingstop even more attractive to our customers.”
Mike Sutter, Director of Training for Wingstop, agrees, “When a brand partner opens a new Wingstop, they have a lot to do. AMTC makes the process easy for our partners by providing timely professional installation and technical support post-installation.”
Wingstop Restaurants, founded in 1994, are designed featuring a nostalgic, aviation-themed atmosphere. All of our stores are outfitted with 1930's - 1940's, pre-jet engine aviation décor and artifacts. The entire family will feel welcome in our comfortable and inviting surroundings. Wingstop features nine proprietary wing flavors, including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian Barbeque, Garlic Parmesan, and Hickory Smoked BBQ. The wings are always made fresh-to-order and served steaming-hot. Wingstop also offers a variety of delicious sides including fresh-cut fries, soft drinks, beers and wine.
Privately-held AMTC is headquartered in Clearwater, FL. AMTC is the exclusive provider of SIRIUS Satellite Radio (NASDAQ: SIRI) for business use, under the brand name SIRIUSBusiness. SIRIUSBusiness includes 69 channels of 24-hour, commercial-free music, with all music royalties paid, and presents the first meaningful competition for Muzak in the business music arena. AMTC also manufactures a full line of professional sound equipment and provides TelAdvantage, the world’s most recognized brand of telephone "on hold" messaging products and services. Since 1991, AMTC has served over 20,000 customers around the globe, including names like Bally Total Fitness, Bridgestone-Firestone, Continental Airlines, DaimlerChrysler, Ford Motor Company, Morgan Stanley, Wendy's and Yum! Brands. For further information on SIRIUSBusiness or TelAdvantage, visit www.amtc.com
Well, not really, but take a vacation anyway. We have a three bedroom lock-off unit at the luxurious 5 Star Westgate Lakes Resort in Orlando Florida, and this year will only be using the two bedroom side of our unit. This leaves a 1 bedroom "studio" unit with kitchenette, jacuzzi tub and spacious private patio available for use by someone else.
The week available is Sunday June 24, 2007 through Sunday July 1, 2007. The unit has a king size bed and is perfect for a couple, but can sleep up to 4 (via a leather sofa bed). Westgate Lakes resort is conveniently located between Disney, Universal, and Sea World. If you want you can simply relax at scenic lakefront setting, use one of the numerous swimming pools, enjoy water sports, fishing, basketball and volleyball courts or participate in a full schedule of family activities. You can even relax on the lake shore and catch some of Disney's Fireworks.
This year is "The Year of A Million Dreams" at Disney. Why not kick back and come to Florida to participate in the magical event.
This vacation studio villa is being made available for less than the cost of most hotel rooms, and there are no catches whatsoever. We are simply making the independent studio side of our unit available. Check in is Sunday, June 24, 2007, and checkout is Sunday July 1, 2007. The cost for this stay..........$500 (less than $75 per night). If you are interested in this vacation getaway, and even want to chat a bit about satellite radio (I would be happy to chat, but remember that this is a vacation), send an e-mail tosatellitestandard@gmail.comWe will answer e-mails on a first come first served basis.
Resort amenities include: - 1 Hour Photo - 18 Hole Miniature Golf Course - 24 Hour Business Center - Activities Program - Arcade - Basketball - Bicycle rentals - Disney Planning Center - Fine Gifts Outlet - Heated Swimming Pools - Kids Club - Marina - Marketplace and Deli - Papillion Full Service Spa - Pizza Hut Express with room delivery - Tennis Courts - Volleyball Courts - Smokehouse Grill Restaurant
In an earlier article I spoke about content, choices and freedom that satellite radio offers. As part of that article I outlined a theoretical concept of the creation of "cards" to act as the mechanism for subscriptions. The article garnered some comments, and I felt it would be a good topic for an article.
The term "card" I am referring is not a credit card type device, but rather a device along the lines of the XM passport that is used with their Nexus units. Picture if you will a standardized “card”, such as an SD memory card, that had the subscribers subscription attached to it.
For the purposes of this segment, we will assume two separate satellite radio entities with no merger.
The "SiriusCard" and the "XMCard"
The SiriusCard and the XMCard would be small devices that carry with them a subscription for satellite radio. Devices such as plug and play units, and OEM receivers would be "dumb" and inoperable unless a card is inserted into a slot in the device. The insertion of the card makes the device a "smart device" that can then receive a satellite radio signal, provided that the card is activated and the device is capable of delivering the service requested. In this scenario, some devices may be Sirius only or XM only, but the OEM head units would be capable of receiving either card. Cards would retail for $30 and would require activation by the subscriber.
The "SatChoice" Card
The "SatChoice" card would be similar in nature to the individual cards, but would be capable of delivering either or both services to the consumer. "SatChoice" cards would work in "SatChoice" capable receivers and all OEM receivers would be "SatChoice" capable. A "SatChoice" card will also work in segregated receivers, but an "XMCard" receiver for example would only deliver XM content. Sirius and XM could develop a line of "SatChoice" receivers for both the OEM and the retail markets, and "SatChoice" as a standard would phase out the individual Sirius Cards and XMCards over time. A "SatChoice" card would retail for $45 and would require a subscription to one or both companies in order to operate.
All receivers going forward would be based on the "card" technology, and thus upgrades by consumers will happen naturally over time.
The Benefits for Consumers:
- Consumers would be able to take their subscription with them from the car to other devices such as a wearable device or home receiver.
- The technology could be adapted to other devices such as cell phones, PDA’s, etc. A "SatChoice" card becomes more valuable to a consumer that has a wide variety of applications.
- The need for multiple subscriptions simply for convenience goes away.
- Consumers can seek out and buy devices that are "SatChoice" ready. The need to understand and comprehend the individual services technology goes away, and the consumer can sample each service prior to making their decision.
- Because of the ease with which a satellite radio consumer can switch, the services both will have a focus on bettering their content offering. Consumers choice will be based on the content.
The Benefits for Sirius and XM:
- A simplified platform for OEM's to implement without the worry of attaching themselves to the coat-tails of one service or the other. The installation rate could grow substantially.
- The ability to market satellite radio as a medium and focus on the choices and variety satellite radio has to offer.
- Because of flexibility, there would be a small sacrifice in "family plans", but not so much so that it would carry a dramatic impact. The freedom that "SatChoice" cards offer would easily enable a modest subscription price rate hike.
- Cards could be marketed with a free month of service (perhaps up to 3 months), giving a consumer buying an car (new or used) the ability to try satellite radio inexpensively, without obligation, and without the difficulty of installing hardware, antennas, etc.
- The marketing of satellite radio could center on the "SatChoice" tag line. Car Makers could tout their cars are "SatChoice" ready or "SatChoice" Standard, and the concept gets consumers to first accept the concept of satellite radio as a whole prior to making a provider selection.
- The numbers of people who will at least try satellite radio would increase, especially if they are seeing value in the card because of a trial period. The cards themselves become the focal point to the consumer, not the hardware. Having a "SatChoice" card simplifies the concept in the eyes of the consumer.
- The switch to such a system would carry benefits such that existing consumers would be compelled to upgrade on their own accord. This minimizes the satellite radio providers having to subsidize the upgrades. There will be a period of time where the older receivers will need to be upgraded, but the benefits received from "SatCard" implementation will far outweigh the costs of upgrading an older piece of equipment.
In my opinion, there is potential here for satellite radio to literally re-invent itself in the eyes of the consumer. Should a merger happen, much of what is stated above is still very applicable, and the opportunities get even better, such as every "SatChoice" card coming with immediate and permanent access to a sampling of commercial based channels for free. Think about a consumer, for a one time cost of $45 (to buy a "SatChoice"card), getting access to the satellite radio concept via 10 channels of commercial based or commercially sponsored music (less commercials than AM or FM). Suddenly something such as a "SatChoice" card becomes a revenue generator.
All of this is simply a concept at this point, and some may argue that these companies can "go-it-alone", but in my mind there is a huge untapped potential in a "SatChoice" card concept, and the acceptance and proliferation of satellite radio would expand exponentially.
Ford Motor Company, a satellite radio partner of Sirius, posted their worst loss on record. The loss of $5.8 Billion as compared to a loss of $74 Million a year ago. Slumping sales and employee buyouts account for large parts of the loss. Ford, similar to other U.S. Auto Makers is in a battle for market share, while trying to restructure at the same time. While assumptions that this will impact Sirius are often made, thatopinion is ill conceived. Fords production has only been trimmed by 10,000 for Q1, and they anticipate more production for 2007 than they had in 2006. Further, Ford targets a specific number of installs for satellite radio in order to earn warrants, and thus it would be in their best interest to install enough receivers. In the past Ford has bundled longer term Sirius subscription plans (as long as 3 years) as an incentive for buyers.
Reuters Story Excerpt:
DETROIT (Reuters) - Ford Motor Co (NYSE:F - news) on Thursday capped the worst year in its 103-year history with a deeper-than-expected fourth quarter loss and said it would cut its production for the current quarter and lose market share through September.
The No. 2 U.S. automaker posted a fourth-quarter net loss of almost $5.8 billion, or $3.05 per share, on declining sales of its profitable trucks and charges for employee buyouts. That compared to a loss of $74 million, or 4 cents per share, a year ago.
Ford's loss from continuing operations was $1.10 cents a share, which was wider than the average Wall Street analyst expectations of a loss of 94 cents per share as tracked by Reuters Estimates.
The company posted a record loss of $12.7 billion for 2006, leaping past Ford's previous record net loss of $7.39 in 1992.
Ford shares slipped initially in pre-market trade and then recovered to be unchanged from Wednesday's close of $8.20 on the New York Stock Exchange.
Ford, which is in the early stages of a four-year turnaround plan that includes closing 16 plants and cutting up to 45,000 jobs in North America, said charges reduced fourth-quarter results by $3.7 billion after taxes, or $1.95 per share.
Ford expects its U.S. market share will fall through the third quarter as it pulls back from sales to car rental companies and other fleet operators.
The company suspended its practice of providing detailed financial forecasts a year ago.
The Dearborn, Michigan-based automaker also said its production would be down through the first half of the year but increase on a year-over-year basis in the second half.
Ford cut its previously-announced first quarter production target in North America by 10,000 units to 740,000 vehicles, a 15.5 percent decline from the same quarter a year ago. MORE HERE
One of my biggest issues and concerns with satellite radio has always been the OEM side of the equation. I have always been of the opinion that the exclusive OEM deals, while they may seem attractive to the respective companies has cased a major delay in the adoption of satellite radio.
Consider for a moment if the exclusive install deals were not existent, and interoperable radios (even as simple as both chipsets being installed behind the dash) were utilized. Factory installation of satellite radios would have evolved much faster, and installation penetration would have been much deeper more quickly.
By nature, consumers do not like certain things dictated to them. What they watch and listen to is high on the list.
What if instead of exclusive install deals the exclusiveness was on the marketing side of the equation? You buy a GM and both XM and Sirius are available. GM automatically comes with three free months, and GM promotes XM in their advertising, etc. However, the receiver is capable of receiving Sirius, and the consumer, should they choose to do so, can make a call and activate the service they want. What if Chrysler did something similar, and so on down the line?
Should a consumer be denied the service they really want? Should a Ford buyer who wants XM be forced into an aftermarket situation, or to order a port or dealer install? A GM buyer that wants Sirius? Are Sirius and XM really happy that this segment of their base is not necessarily there by choice, but rather dictation? I would venture to say that the adoption rate of satellite radio as a sector would show impressive improvement over current take rates if the consumer was not boxed into a decision. Wouldn’t it be better if the option was already there, and the consumer only needed to make a phone call?
I remember the days when loyalty to a cell phone company was based on the fact that the consumer did not want to give up their phone number. Now, consumers have the freedom to take their number to any carrier they want. The consumers decision rests with coverage area, hardware prices, reliability, marketing, and contract terms rather than the phone number.
Satellite Radio is about freedom. It is about unprecedented content offerings available to consumers on a nation-wide basis. It is about being a country music fan in New York City, and having the ability to listen to several channels of that content. It is about being a Hip-Hop fan in the middle of Kansas and having the ability to catch the latest tunes. It is about being able to take Fox News with you as you leave the house and start your commute. It is about being a Howard Stern fan or an Opie and Anthony fan and having access to them wherever you might be.
Why should something that represents so much freedom and choice be restricted when it comes to the car you buy? There exists a DISCONNECT in this situation. As an investor I would rather see 10,000,000 "satellite-choice" cars a year with a 65% take rate than 5,000,000 "restricted-choice" cars with a 50% take rate. Imagine the tag line "Satellite-Choice Comes Standard". They would be marketing the concept of satellite radio, and at the same time expressing the freedom that the consumer has with satellite radio.
As a consumer I would love to see something along the lines of what XM has done with the Passport applied to satellite radio as a whole, and implemented (particularly in the OEM side of satellite radio). I would love to see all satellite radios carry a slot by which the consumer can insert either a "SiriusCard", and "XMCard", or a dual mode "SATCard". These cards would be standardized in size and the consumers subscription(s) would tie to the card. A satellite radio consumer could buy the card for a nominal charge ($30 for a Sirius or XM card and $45 for a dual card), and that card could be inserted into a slot in the dash receiver of the car, into a plug and play device, into a home receiver, or virtually any other application. This would solve the other consumer issue of the subscription being tied to the car. Personally, I am a plug and play consumer, who prefers the ability to take my subscription with me to the house, the condo, the boat, etc., and would be a consumer that would fall into the bad side of the "take rate" category even though I have 3 satellite radio subscriptions on my account. Simply put, I see more value in a plug and play receiver than I do an OEM receiver tied to the car. The "SATCard" solution would be a great benefit to the sector as a whole in my opinion. I actually would not mind the OEM’s offering one "SATCard" over the other so long as I had an easy and viable option to obtain the content I want. If such a device existed, I would have a dual subscription.
It has often been said that it is the speakers that "make" the stereo system. A great stereo with sub par speakers will sounds sub par. Satellite Radio is about freedom, content and choices. Market it that way in the OEM channel and you will have better adoption, more installations, and a healthier sector.
With all of the speculation about a merger, we may well wind up with something such as this anyway, but only time will tell.
With all of the merger speculation, various opinions will surface as to how likely it is and what the hurdles would be. One popular opinion out there is that Sirius and XM will "try" a merger, but really will not want to merge, and in the end, the merger will fall through.
There are several problems with this opinion.
When companies decide to merge, or a buyout is decided, all of the details of the deal are worked out prior to the announcement. In other words, the terms of the deal have already been negotiated, and cast in stone. At that point the merger or buyout is announced, and it goes to the appropriate governmental agencies for approval. If approved, the deal goes through, and everything moves forward. If not approved, the deal does not go through.
These companies are publicly traded, and the boards carry a fiduciary responsibility to the shareholders. To attempt a "merger ruse" where the companies seek out approval for a merger without the intention of merging would be not only irresponsible, but would likely land several people in prison. Further, the risk would be huge whereby they would be relying on the government to act one way or the other, and there is no guarantee that the government would move in the desired direction (opinions of our government in action aside).
Thus, the "trial balloon" of a merger is what is happening now. The companies can gage shareholder sentiment, gage the likelihood of government approval, and negotiate in the best interests of their respective shareholders. If such negotiations are taking place, once an agreement is reached, it is a "done deal" as far as the terms go, and from that point forward becomes an all-or-nothing scenario.
An interesting aspect of this potential deal is that in the case of XM Satellite Radio, only about 10 shareholders would need to be contacted (although all would have voting power). About 60% of XM’s stock is held by roughly 10 entities. For Sirius, the retail investor carries the stick with roughly 70% of the shares being held by retail investors.
Whether negotiations are being held is unknown, but comments regarding the subject have been made by both Sirius and XM management, and merger scenarios are being developed at a feverish pace by analysts covering the sector.
If a merger were to be announced, the window is fast approaching. At this point speculation is that approval could take as long as 1 year. With an election happening in November of 2008, many government agencies grind to a virtual halt on anything that requires a decision by about June (5 or 6 months prior to election). Taking this into consideration, and if these companies are considering a merger, the prudent move would be to leave enough time for the current administration to consider and decide on the issue. A 3 month cushion would be about the smallest cushion you would want, and would mean some sort of announcement by the end of March. Obviously, a bigger cushion would mean an earlier announcement.
In my opinion, if this is being considered by Sirius and XM, the window to announce is between now and the end of February, and if they are going to attempt it, the earlier they announce the better.
Stifel analyst Kit Spring has issued a note on XM Satellite Radio in reference to the RIIA suit. Springs doubts that the suit will have a negative impact on the enterprise value of XM.
Report Excerpts:
- XMSR lost round one as a defendant in a lawsuit by the recording industry: Last May, the recording industry (RIAA) filed a lawsuit against XM alleging copyright infringements, essentially saying new radios with recording functions are like iPods, which require a higher licensing fee. XM believes these devices are legal based on the Audio Home Recording Act of 1992, similar to TiVo. The RIAA seeks $150k per song or $35B - 5 times the enterprise value of XMSR, an amount that seems completely divorced from economic reality. Last Friday, judge Deborah Batts ruled against XM's dismissal request. She will hear the case. See our Stifel regulatory team's note this a.m. for more detail
Springs sates, "We doubt the liability will be material to XMSR's enterprise value for the following reasons::
- Based on our analysis of NPD data and other retail channels, these devices haven't been very popular. To date, we estimate XM has sold only about 125k radios (vs.7.7MM subs) with the advanced recording features in question (Pioneer Inno and Samsung Helix allow for disaggregation of shadow recoding).
- Unlike an iPod, you can't take songs off these devices, so maximum economic damage is likely limited to both the number of devices and the average useful life of the devices, perhaps 3.5 years. These qualities lead to enormous differences in the economic damage relative to Internet file sharing, which has a viral/exponential effect. We'd also point out that the number of songs downloaded on iTunes per iPod is only about 20, another statistic that points to limited economic damage.
- Sirius negotiated separate licenses with the record companies for their recording capabilities, which we believe were around $9 per radio upon manufacture for recording consistent with the AHRA and$25 per radio (incremental $16) for advanced recording features. Sirius was the manufacturer of its advanced recording radios. We believe XM/Pioneer/Samsung are paying only the$9. If XM settled for 5 times what Sirius is paying, that equates to damages of $10MM, an immaterial amount, in our view
- In our view, the RIAA is incentivized to improve its economics versus XM, but at the same time not to materially harm the company. Satellite radio pays a total of7% of its revenues to record companies and artists combined, versus3% from terrestrial radio. So, record companies should prefer that satellite radio takes off, unless they conclude that radio in general (both satellite and terrestrial) is bad for record sales.
- Advanced recording will likely remain a niche product until manufacturing costs plummet: Looked at another way, we believe an incremental $16 fee for future radios with advanced recording features would be a slight detriment to adoption if manufacturers tried to pass all of the cost to consumers. If XM had to bear the full cost of advanced recording, as opposed to sharing it with manufacturers and/or consumers, this would represent a reduction to the economics per sub with advance recording features. If XM wanted advanced recording for every radio and fully subsidized it, we estimate this would cost XM an incremental $25 in SAC/CPGA (42%/25% increase). We doubt that XM will need to do this because competing technologies will also be restricted in terms of what they can offer. We believe that advanced recording features will remain a niche product for consumers that want to pay the extra $9-25, until manufacturing costs plummet. We do not belive the Street has baked in high assumptions for recording products.
Maintain Buy rating on XMSR: We continue to believe long-term forecasts for satellite radio are achievable based on the projected ramp of new car installations (from about 20% of new cars today to70% by decade end) and relatively high-take rates in new cars today (55%). We think SIRI and XMSR will attempt a merger in 2007 and see $7B of merger synergies. Of course, there is also a possibility that no merger occurs. Our $18 target is derived from a DCF, which assumes 9x 2011 EBITDA and a 10.5% WACC.
Satellite Standard Readers have become familiar with Applied Media Technologies Corporation (AMTC), the official source for SiriusBusiness. SSG has covered several press releases from AMTC including some of the biggest franchise names in the U.S. We recently caught up with Matt Holden, the Public Relations and Sales Support Lead for AMTC. Matt was kind enough to give us his time, and bring us up to speed on what AMTC is all about, as well as some outlooks for 2007.
SSG - Matt, thank you for taking the time to chat with us. Can you tell us a bit about your role at AMTC?
M.H. - Sure! Thanks for having me. I'm the Public Relations and Sales Support lead for AMTC. My team and I handle all of the advertising and marketing support tasks, including arranging and implementing new special programs (the corporate-level deals you've been seeing reported), maintaining AMTC's web sites, issuing press releases, and chatting with folks like you!
SSG - AMTC launched in 1991 with a core business of telephone hold systems. How important has TelAdvantage been to AMTC's business model?
M.H. - Very - without it, we wouldn't be in business! For the first twelve years of AMTC's existence, it was our only business. As AMTC grew, we fine-tuned our company's entire makeup, from the sales force and marketing to manufacturing and technical support, to support the unique needs of business owners. This successful track record and the facilities and staff that made it possible were key factors in SIRIUS' selection of AMTC as the provider for SIRIUSBusiness. TelAdvantage is still generating a very substantial portion of AMTC's revenue, a trend we don't see slowing down. Our Creative Services department, the folks who write and produce TelAdvantage messaging in our in-house studios, are probably the busiest people at AMTC.
Going into 2007, we are getting into new technologies and new models which allow SIRIUSBusiness and TelAdvantage to take even greater advantage of their natural synergy. For example, we're now offering storecasting, which is what you hear when you go into a store, music is playing, and occasionally the music fades out and an advertising message runs. Using our TelAdvantage messaging technology in conjunction with SIRIUSBusiness' music stream, AMTC's storecasting offering gives our customers the best in the business on both sides of the equation at a fraction of the cost of other vendors.
SSG - One aspect of music in business is the laws surrounding royalties. Many people do not understand that playing FM radio or CDs in a business is almost always illegal, and additional royalties need to be paid. Can you explain the laws in an easy to understand way, and why contracting through a company such as AMTC resolves those issues?
M.H. - Playing music in a business environment is considered a "public performance" of the work. While there are certain exemptions to the law which permit playing broadcast radio in the smallest of business without paying royalties under very specific circumstances, no exemption is made for CDs, iPods, or any other music source (including satellite radio). Most businesses are well beyond the limits of these exceptions.
Each musician is represented by one or more of the three performing rights agencies: ASCAP, BMI, and SESAC. In order to be completely covered, a business owner needs to pay royalties to all three agencies in addition to whatever fees the music source itself incurs. Each agency requires its own signup questionnaire and has its own requirements and pricing schedules. It's a complex and overwhelming process.
SIRIUSBusiness dramatically simplifies the process. For just $24.95 per month, we not only provide the SIRIUS subscription, but also pay all three performing rights agencies on the customer's behalf. The business owner doesn't need to worry about what square footage his store is or what she serves in her restaurant; each customer pays the same flat fee as a part of the subscription.
SSG - Why did SIRIUS Satellite Radio choose to partner with AMTC for its commercial subscribers, as opposed to handling them internally?
M.H. - SIRIUS, like XM, is a company geared toward consumers. Their marketing, sales, and R&D efforts are focused on building better products for your car, your boat, and so forth. SIRIUS realized it would be inefficient for them to try to create an entirely new sales division, marketing campaign, and product line to address the needs of business owners. Instead, they turned to AMTC. As an industry leader in another media technology, it was a perfect fit.
AMTC's partnership allows SIRIUS to focus on the consumer side, while providing commercial subscribers with support from a company used to the unique challenges business owners face. For example, AMTC coordinates professional installation and sells commercial sound equipment (including speakers, amplifiers, et cetera), both of which are crucial to a business owner.
SSG - What does AMTC do to help its customers get the SIRIUSBusiness equipment installed in their businesses?
M.H. - We have a nationwide network of certified installers that work with us. When a customer requests professional installation, our installation department pairs him or her up with a local installer. All AMTC-certified installers adhere to a very competitive labor rate schedule created by AMTC. In most cases, installation is completed within 14 days from the date of purchase.
SSG - SIRIUSBusiness seems to fill a market sector that before now was untapped by AMTC. How important has SIRIUSBusiness become in AMTC's operations? Do you find that SIRIUSBusiness helps you sell TelAdvantage, and vice versa?
M.H. - The two products definitely go hand-in-hand, and a very strong percentage of our customers use both SIRIUSBusiness and TelAdvantage. In fact, we offer a 10% discount when they do. The great thing about our two product lines is that they have a big "the whole is greater than the sum of its parts" benefit. With just a TelAdvantage digital player, a business gets on-hold messaging. SIRIUSBusiness obviously gives the business background music. When the packages are combined, other opportunities arise - for example, storecasting. The reverse is also true; many of our customers play a combination of TelAdvantage messaging and SIRIUS music programming when their callers are on hold.
SSG - One concern that businesses always have is the "down-time" where service is not available, or not working. What "up-time" do customers experience with SIRIUSBusiness and TelAdvantage?
M.H. - With other satellite music services, such as Muzak, there is a dish that has to be aimed precisely at the satellite to get signal. That dish is a wind trap, and frequently gets blown out of alignment, causing loss of signal. Another huge problem for dish-based providers is weather. When it rains or snows, you lose your music. We even had a customer a few months ago whose Muzak reception died when an endangered pelican built a nest in his satellite dish! SIRIUS doesn't require a dish, but instead uses a tiny, 10” tall antenna, so our signal isn't affected by the weather.
Satellite reception is also tricky in certain geographical and urban regions. For example, customers in the Rocky Mountain states often have issues with Muzak's reception, as the mountains block the line of sight to the satellite. Since SIRIUS' satellites orbit over the Rockies, this doesn't happen to SIRIUS subscribers. In urban areas, large buildings can block visibility to the Muzak satellite. With SIRIUS, that's not an issue either. SIRIUS has installed terrestrial repeaters in virtually every major US city. If your business is near a repeater, you'll receive maximum signal strength regardless of the surrounding structures.
TelAdvantage players don't need to be permanently connected to any service; as long as they are plugged in, they're ready to go. All the messages are stored on and played from local media, such as the iQueue II's CompactFlash card.
SSG - AMTC offers customized solutions for telephone on hold systems, where the client can insert messages regarding their products and services. Do most businesses take advantage of this type of solution? How affordable is it? How fast do you turn around these solutions for your clients?
M.H. - Absolutely. AMTC's messaging offering is two-fold. First is the custom messaging - customers submit a script questionnaire, and we write a script and have a message available for download within five business days. The vast majority of our clients do utilize these custom messages, announcing their addresses, hours, and so forth. Custom recording is sold by the minute, and is available for as little as $25 per minute. The standard TelAdvantage package retails for $349.
Most of our TelAdvantage sales efforts focus on what we call "special programs". We create a package specifically targeted to the dealers, agents, franchisees, etc. of a large multi-location company. We have hundreds of these special programs, including corporately-endorsed programs for Chrysler, Ford, Volkswagen, Allstate, Nationwide Insurance, and Morgan Stanley, to name just a few. As part of a special program, we build a library of “standard” messages.
For example, when we built our program for Ford Motor Company, we recorded messages about all their car and truck models, their warranties, their service and parts department, popular features in their vehicles (such as SIRIUS Satellite Radio), and so forth. Since every Ford dealer in the country would want those kinds of messages, we record them on our dime. Then, every Ford dealer that buys a TelAdvantage package gets access to all those messages as part of their standard HoldDirect subscription, which is less expensive than even one minute of recording. Standard messages save our customers a ton of money.
Additionally, standard messages make it easier for us to work with regulated companies such as securities or brokerage firms. These firms require their franchisees, agents, dealers, or whatnot to obtain corporate approval for the material they play on hold. They typically call it "compliance approval". AMTC works with the corporate headquarters to make sure the standard messages are approved by the compliance departments, and then we know they're approved for any agent to use. Even for companies without compliance requirements, there is something to be said for a level of brand consistency such that if you call a Ford dealer in Florida or Alaska, you will hear the same messaging.
SSG - SIRIUSBusiness is still fairly new in the business audio solutions world. Have you seen great interest in the product?
M.H. - Definitely! As you've seen from our press releases, we're signing with new franchisors and major corporations all the time, typically one or more a week. That's in addition to all the individual stores, hotels, restaurants, offices, and auto dealerships that are "getting SIRIUS" every day.
When directly selling against Muzak, our primary competitor, we almost never lose a deal on a level playing field. The problem is, Muzak locks its customers into 3-year or 5-year contracts. The businesses we speak to often can't wait to make the switch to SIRIUS, but are stuck in contracts. As the word gets out about SIRIUS, though, business owners are starting to circle their contract end dates on their calendars. Each month, we add more new subscribers not only through our own marketing efforts, but through prospects that are finally getting out of background music jail and regaining their freedom to choose a new vendor.
SSG - What do your clients that sign up for SIRIUSBusiness find as the most compelling reason for joining?
M.H. - It's different for everybody. Obviously, the fact that SIRIUSBusiness is available at a third or in some cases even a quarter of what prospects are paying for Muzak plays a big part, as is the fact that we don't require a contract. The signal reliability is another big one, as I mentioned earlier. Many of our clients choose SIRIUS to "get legal" after they've heard from ASCAP, BMI, or SESAC about playing the radio or some other consumer music service. Folks playing the radio also come to SIRIUS to escape commercials - we've even had a few people sign up after a competitor's commercial played in their store!
We also hear a lot of our customers complain that Muzak in particular is extremely repetitive. Employees of businesses playing Muzak tell us that they can set their watches by what time certain songs will play. SIRIUS has a song library of well over a half-million songs, and each of the 67 music channels we carry has a dedicated, full-time program director whose sole responsibility is to choose fresh, varied songs each day.
Other deals (for example, our recent Pizza Ranch agreement) are keyed on the support services we offer. Pizza Ranch was evaluating SIRIUSBusiness and XM's business offering, and chose to go with us because we could provide installation and technical support. We also provide the sound equipment for new stores, which makes AMTC a one-stop shop for music. When a new business is opening, the owner has a million things they're trying to get done. We do everything we can to make the process easy, from purchasing to installation and post-installation technical support.
SSG - One thing that businesses consider is the length of contract and hardware costs. Can you break that down for SIRIUSBusiness and TelAdvantage?
M.H. - Certainly. The contract part is easy - there isn't one! AMTC's policy has always been that if you provide a good service at a fair price, there's no need to lock a customer into a contract. They will keep coming back on their own.
Our SIRIUSBusiness Equipment Kit contains everything a business needs to connect SIRIUS to an existing sound system: the receiver, a commercial-grade outdoor antenna, and all the requisite cabling and so forth. It retails for $239. For a new business that has no sound equipment, our sales representatives can build a custom sound system for the space for the lowest price in the industry. A nice sound system for a small business can run as little as a couple hundred dollars. We also offer leasing options to help reduce up-front costs on sound equipment, with a $1 buyout option when the lease term is up. Muzak's leases are usually structured such that businesses rent the equipment forever - you never own it.
TelAdvantage is sold as a turnkey messaging bundle, which consists of the iQueue II digital player, a CompactFlash card, and a USB reader/writer. The bundle also includes one minute of custom recording and a year's subscription to HoldDirect.com. The complete package is $349. As with SIRIUSBusiness, there is no contract whatsoever.
Customers who sign up for both TelAdvantage and SIRIUSBusinessreceive a 10% discount, as well. Additionally, we offer rebates to companies which have named AMTC their endorsed vendor, which reduce the price even further.
SSG - How well does the brand of SIRIUS Satellite Radio resonate with potential clients?
M.H. - SIRIUS is one of the hottest brands in America. The buzz has given us almost universal recognition. I can't tell you how often we hear, "I've got SIRIUS in my car, and I love it!" Some businesses are a little concerned at first because they equate SIRIUS with Howard Stern, but they quickly relax when we let them know that Stern's programming isn't included with the SIRIUSBusinesssubscription.
SSG - A common misconception is that a service such as TelAdvantage and SIRIUSBusiness are only for the "big companies". Does AMTC cater to the small business?
M.H. - Before we came along, both business music and on-hold messaging were cost-prohibitive for all but the largest companies. We've revolutionized the markets for these services by slashing prices by more than half and getting rid of contract commitments. We've also simplified things by manufacturing plug-and-play products that are easy to use, offering professional installation, and constantly using our customers' feedback to improve our service and our equipment.
For the first time, you don't need to be a Fortune 500 company with a technician on staff in order to utilize these types of services.
SSG - What types of businesses utilize services such as yours?
M.H. - All types! SIRIUSBusiness is playing in every industry you can imagine - retail stores, warehouses, hotels, restaurants, auto dealers, doctor's offices and hospitals, gyms, miniature golf courses, arcades, and even the locker rooms and training facilities of a few professional sports teams. Likewise, TelAdvantage is a great solution for any business with a high call volume. Some of our highest-volume TelAdvantage industries include insurance agencies, moving companies, hotels, airlines and cruise lines, automotive repair shops, financial planning offices and staffing services.
SSG - Can you give us an outlook for 2007? Should we expect to see growth and more announcements regarding SIRIUSBusiness?
M.H. - 2007 is going to be a banner year for AMTC. We've got countless more corporate endorsements and nationwide rollouts in the pipeline, several of which are already signed and simply aren't public knowledge yet. We had $3.85 million in revenue for 2006 and we're on pace to shatter our goal of $5 million for 2007.
As a company, AMTC is in a major growth surge. We're increasing our sales staff by more than 50% for 2007, including opening a satellite office, and are also ramping up staffing in other key departments to handle our increased volume. We've got some very ambitious plans in the works for new internal tools and procedures to make AMTC an even more efficient operation, which translates into better customer service and ultimately higher production. Some of these tools are already becoming available to AMTC staff, so the benefits are already being realized. 2007 is also going to be an extremely exciting year on the research and development side of things. Every one of our product lines will be receiving at least one major new product. We've got new SIRIUS hardware coming soon, several very significant new sound equipment products, and a few new messaging players.
SSG - If readers and businesses are interested in TelAdvantage, SIRIUSBusiness or other products and services you offer how would they go about contacting AMTC?
M.H. - AMTC can be reached at (800) 741-AMTC, or on the Web at http://www.amtc.com.
SSG - Thank You for speaking with us today, is there anything additional that AMTC would like to add?
M.H. - I'd just like to say that all of us at AMTC are extremely excited about the coming year, and all the buzz that's starting about who we are and what we do. The satellite radio blogging and forum communities online have been a huge part of that, and we truly appreciate it. We're looking forward to generating a lot more interesting stuff for you all to talk about!
Blair Levin of Stifel issued a note regarding the XM Copyright Suit. Report Excerpts are as follows:
A federal judge last Friday rejected an XM request to dismiss a recording industry copyright suit against
"XM + MP3," which allows customers to store, record, and retain the satellite radio provider's programming.
• While it is difficult to win a motion to dismiss at this stage, the ruling was a blow to XM, as not only does it face the prospect of the lawsuit going to trial, but the judge indicated general sympathy for the copyright infringement arguments of the recording industry parties, which include Sony BMG, Warner Brothers, and Atlantic.
• XM may decide to seek to "certify" the legal question immediately to an appeals court, but there is no guarantee the court would agree to take the question.
• If the case does go to trial, we believe it would take more than a year to arrive at a ruling on the merits. If it loses, XM could face significant financial penalties as well as an injunction against a new product meant to compete with iTunes and other services.
• In the meantime, the broader battle continues, with negotiations over satellite radio copyright royalty payments, debate in Congress over legislative proposals, and speculation that XM could try to merge with Sirius, which was not sued because it negotiated a separate license.
Congratulations to Honda on their announcement to initiate a program for Certified Used Cars with factory-installed XM Satellite Radio. The pre-owned market is a hugedistribution opportunity as previously posted on SSG. As these type of announcements accelerate (and they will), I believe analysts will begin to boost their subscriber estimates.
Bear Stearns' Bob Peck, a highly respected analyst in the satellite radio sector, issued a note this morning estimating merger synergies and establishing 2007 EOY subscriber levels. Key points of the report are as follows:
$6.7B in Synergies.
With anticipation building that the DARS companies may be getting closer to an attempted merger, we wanted to quantify what the value of a MergeCo could be. In taking several simplifying and sometimes conservative assumptions, we believe the NPV of savings / synergies could reach $6.7B.
No Major Rev Benefits.
- Our assumptions conservatively include no revenue from additional services benefits, as we believe that MergeCo would need to operate both satellite systems for the near term to avoid shutting off one system's subscribers. We think longer term, potential additional revenues could augment our synergies estimate meaningfully. On cost savings, we believe the largest contributor would come from OEM & Programming. For the most part, we assume premier content costs will not be adjusted significantly after coming off contract, as DARS will still compete with other delivery technologies.
Stock Implications.
- We intrinsically value XM at $17 by YE 2007 and a fair value estimate for Sirius at $4. Assuming a "merger of equals", the MergeCo could be worth $20B or approximately $27 per share for XM and $6 per share for Sirius by the end of the year. We believe that only 2% of the potential synergy benefit is incorporated by the market into today's stock prices (down from 25% a week ago).
Merger Talk to Drive Stocks.
- We continue to believe that merger anticipation will continue to drive the stocks in the NT, outweighing fundamentals. Hence we have a positive bias on the names. However, we underscore that we are unclear if a deal would overcome the regulatory hurdle, which could prove insurmountable
Setting 2007 Sub Est.
- We have also reviewed our model to adjust for recent trends (weaker retail). We now estimate XM and Sirius will end 2007 with 9.2-9.3M and 8.1-8.2M subs respectively, down from 10M and 8.5M, respectively.
XM and Honda Launch Satellite Radio Program for Honda Certified Used Cars
WASHINGTON, Jan 23, 2007 /PRNewswire-FirstCall via COMTEX
XMSR, the nation's leading satellite radio service, and American Honda Motor Co., Inc. today launched a satellite radio trial program for Honda Certified Used Cars with factory-installed XM Satellite Radio.
Under this new program, all certified pre-owned Honda models equipped with XM Satellite Radio will be available with three months of complimentary XM service and a waived activation fee. Honda models equipped with XM include the Accord, Accord Hybrid, Civic, Civic Hybrid, CR-V, Element, Odyssey, Pilot, and Ridgeline.
XM and Acura recently announced a similar program that introduces XM to customers who purchase an Acura Certified Pre-Owned Vehicle equipped with XM Satellite Radio. Combined with the Acura program, XM's partnership with American Honda Certified Programs will make XM available in more than 35,000 of these certified vehicles in 2007, and grow to more than 55,000 vehicles in 2008. The XM marketing program for certified pre-owned vehicles will continue to expand with the increasing availability of factory-installed XM Satellite Radio across both vehicle model lineups.
"XM's program for previously owned Honda models introduces XM to a new and growing category of car buyers, as more Honda vehicles are equipped with XM each year," said Marisa Uchin, Manager of Remarketing, Automotive, XM. "Honda Certified Used Car buyers can now conveniently experience XM's 170 plus channels of music, talk, sports and entertainment."
"Honda customers have increasingly come to expect the availability of XM satellite radio in their vehicles," said Dan Crowe, Automobile Remarketing Manager for Honda. "This program offers Honda Certified Used Car customers added value, and further differentiates certified used cars from run-of-the- mill used cars."
All Honda Certified Used Cars come standard with a 7-year/100,000-mile powertrain warranty and a 12-month/12,000-mile limited non-powertrain warranty.
Jamie Foxx to Launch Exclusive Urban Comedy, Entertainment and Lifestyle Channel on SIRIUS Satellite Radio
Tuesday January 23, 12:01 am ET
Jamie Foxx presents 'The Foxxhole,' groundbreaking channel of comedy, variety, music, radio theater and entertainment
Foxx will be heard on the channel daily with a segment featuring dispatches from Jamie no matter where he is in the world. Also, Foxx and his team of contributors will host a weekly show on the channel. The show will feature original comedy bits and a new approach to radio theater.
NEW YORK, Jan. 23 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio (Nasdaq: SIRI - News) today announced that it will launch The Foxxhole, an exclusive urban comedy, entertainment and lifestyle channel with Academy Award-winning actor, American Music Award-winning and GRAMMY®-nominated artist, and comedian Jamie Foxx. Foxx won the 2005 Academy Award for Best Actor for his performance in Ray and is currently starring in the award-winning smash hit movie Dreamgirls...read more: here
Try to say Schlotzsky's three times fast and you'll have your hands full. Visit a Schlotzsky's and you will have a mouth full of delectable food offerings and an ear full of great music thanks to AMTC and SiriusBusiness.
For Immediate Release
Schlotzsky's SIRIUS Sandwich
Clearwater, FL, January 18, 2007 - The deli chain that created The Original sandwich has found another original way to satisfy its customers - SIRIUSBusiness.
"Just as we bake fresh bread everyday for our customers, we wanted music that was fresh," said Darrell Kolinek, Vice President of Restaurant Operations for Schlotzsky's. "SIRIUSBusiness allows our stores to customize their music to what suits their discerning customers."
Schlotzsky's has agreed to provide SIRIUSBusiness to its delis across the United States. SIRIUSBusiness, provided by Applied Media Technologies Corporation, includes 67 commercial-free music channels for just $24.95 per month. AMTC will also provide sound equipment for all Schlotzsky's franchises.
"Schlotzsky's provides high quality, innovative food to a discriminating consumer. With SIRIUS, Schlotzsky's can provide high quality, innovative music without spending a lot of money or locking into a long-term contract," said Jason Nash, Account Executive for AMTC.
Since 1971, Schlotzsky's has been the home of The Original toasted sandwich. The menu has evolved with customers' tastes to include the highest quality sandwiches, pizzas, salads, and soups available today. With approximately 365 locations worldwide generating $210 million in system-wide sales, Schlotzsky's is the fast-casual choice for a quick, healthful, and fresh dining experience. For additional information and locations near you, visit http://www.schlotzskys.com/.
Privately-held AMTC is headquartered in Clearwater, FL. AMTC is the exclusive provider of SIRIUS Satellite Radio (NASDAQ: SIRI) for business use, under the brand name SIRIUSBusiness. SIRIUSBusiness includes 69 channels of 24-hour, commercial-free music, with all music royalties paid, and presents the first meaningful competition for Muzak in the business music arena. AMTC also manufactures a full line of professional sound equipment and provides TelAdvantage, the world’s most recognized brand of telephone "on hold" messaging products and services. Since 1991, AMTC has served over 20,000 customers around the globe, including names like Bally Total Fitness, Bridgestone-Firestone, Continental Airlines, DaimlerChrysler, Ford Motor Company, Morgan Stanley, Wendy's and Yum! Brands. For further information on SIRIUSBusiness or TelAdvantage, visit http://www.amtc.com/.
Technology, Sour Note for XM By Scott Moritz, Senior Writer, TheStreet.com, 1/22/2007 12:06 PM
Suddenly XM's (XMSR) iPod killer isn't looking quite as menacing. U.S. District Judge Deborah Batts denied XM's request to throw out a copyright lawsuit brought by a group of music companies. At issue is a hybrid satellite radio and MP3 device called the Inno that allows users to record music. XM's Inno allows users to select artists and songs for recording. Those audio files can be indexed with other MP3s to create music libraries. In May, the Recording Industry Association of America -- a trade group representing music companies such as Warner Music (WMG) , EMI, Vivendi's Universal Music and Sony (SNE) -- filed a lawsuit in New York, charging that XM's Inno portable radio violates copyrights by recording selected songs. The judge cleared the way Friday for the case to go to trial. The music companies "sufficiently allege that the device gives XM added commercial benefit as a satellite radio broadcaster," Batts said in her 23-page order. "By broadcasting and storing this copyrighted music ... for later recording by the consumer, XM is both a broadcaster and a distributor, but is only paying to be a broadcaster," Batts wrote in the order. XM argues that use of the device is protected by the Audio Home Recording Act of 1992 and that it is no different than a tape recorder that legally allows users to record material of their choice. Rival Sirius (SIRI) settled a similar case with the music companies early last year after it introduced its S50 radio with MP3 recording and playback features...read more: here
It's the Talent, Stupid Radio must improve content and market itself to stay competitive Mark Lefkowitz, MediaWeek, JANUARY 22, 2007
The Radio industry is glad to see 2006 come to an end. It was the second consecutive year without any revenue growth. Over the past four years, radio has averaged revenue growth of less than 1 percent. During that time, radio has also seen its share of audience erode. Time spent listening is down 10 percent over the past eight years. The industry has been slow to react, allowing itself to be portrayed as a third-tier medium. The major radio operating companies (Clear Channel, CBS, Cumulus, Citadel etc....) need to be doing much more if they wish to remain a significant part of the advertising media-landscape.
Radio has embarked on a major initiative to develop and promote high definition or "HD" radio. As retail prices for the units have dropped, there has been an increase in the purchases of HD radios, but, at present, that number remains very small. Radio has been negotiating—with little success—with automobile manufacturers to get HD radios installed in new cars. Without HD radio as a standard option in cars, it seems unlikely that these radios will reach critical mass anytime soon...read more: here
Chad Bartley of Pacific Crest issued the following note on XM:
Deteriorating Fundamentals and Valuation Prompt Downgrade
- Fundamentals in retail channel continue to weaken. Despite ample inventory levels, enhanced marketing and holiday seasonality, XM's challenges at retail persisted in Q4, and the company continued to lose share to Sirius. Equally alarming, demand for satellite radio in general also weakened significantly.
- Estimates drop, but a downward bias persists. We are lowering our 2007 and longer-term revenue, earnings and subscriber forecasts for XM due to the weak retail demand. However, there is still a downward bias due to the challenges at retail and a potentially slower-than-expected rollout of radios at Toyota.
- Merger is still unlikely; even if approved, combination would be difficult. We still believe neither the DOJ nor the FCC would approve a proposed merger of XM and Sirius. That said, any approval process would be lengthy and could distract management, and potential synergies would likely take years to realize.
- XMSR shares are near full value; downgrading to Sector Perform. Based on our lower estimates, we believe fair value of XMSR shares is $16 to $17. Speculation of a merger with Sirius has driven XM's share price to within roughly 5% of fair value, and we believe that material appreciation from these levels is unlikely.
GM and Chrysler have slashed ad spending in print media. The story, covered in AdAge, centers around the advertising aspect of the issue. We thought we would look at other ramifications as they relate to satellite radio.
One item to note is who is decreasing print ad spending, who is increasing spending, and where the averages now lay. Detroit companies seem to have been behind the curve with regards to advertising in a digital world, just shifting major dollars to the medium in the last year. With automakers considering new strategies, can satellite radio benefit? The answer is that Sirius and XM can benefit, but they have tied their hands a bit in the process with exclusive deals?
How likely is GM to advertise heavily on Sirius, or Chrysler on XM, particularly if the ad includes satellite radio spots? If satellite radio exclusivity did not exist, one advertisement could be used by a auto manufacturer on both carriers, reaching a growing and loyal audience.
Satellite Radio should make efforts to grab advertising dollars that are falling away from the newstand media.
Looking deeper, how do the advertising habits and budgets of OEM's impact satellite radio in general. Is it coincidence that the companies losing the most share are the ones cutting budgets? Can some meaningful information relative to production and sales rates be extrapolated from this? Can that information then be transcribed into installations of satellite radio? The simple answer is that most satellite radio installations are not standard equipment, and the numbers of installs tie to specific numbers rather than to a percentage of production. However, it begins to appear more likely that satellite radio could become more of a standardized feature. At that point, production matters a lot to SDARS.
The information in the AdAge piece does not really change the landscape for SDARS, but it is interesting to see which companies are doing what in the OEM market place, and which satellite radio manufacturer those OEM's are aligned with.
ADAge Excerpt:
Time Inc. Bleeds as Detroit Automakers Gut Magazine Ad Spending GM, Chrysler Lopped $100 Million Off Budgets; Pain Spreading to Publisher
By Nat Ives
Published: January 22, 2007
NEW YORK (AdAge.com) -- Blame it on Detroit. While many are looking to the digital future to explain why Time Inc. fired 289 people last week, they'd do just as well to look at the present -- particularly at the changing marketing habits of the domestic auto industry.
Shifting out of print While the story of magazines' ongoing battle to adapt to the web world is well-documented, the untold story is of Detroit's beleaguered carmakers, long pillars of print advertising, which are cutting their costs and, when they are spending, often seek more direct and interactive connections with their customers.
Detroit automakers slashed spending with Time Inc. a total of more than $100 million last year. General Motors, formerly Time Inc.'s biggest advertiser, cut its spending by 29%, or $47.8 million, according to estimates by TNS Media Intelligence. GM added no new Time Inc. magazines to its media plan and completely dropped All You, Baby Talk, Motorboating and Salt Water Sportsman.
Massive Chrysler cuts DaimlerChrysler, while not quite as big an advertiser, was equally aggressive, slashing its spending with Time Inc. from $93.5 million in 2005 to just $39.7 million last year. Ford Motor Co. also reduced spending, albeit much less dramatically, trimming its Time Inc. outlay from $106.7 million to $101 million.
But there were some auto-marketing success stories for Time Inc. Fast-growing Toyota increased its Time Inc. spending to $87.9 million last year from $80.1 million in 2005, and Honda grew its spending to $62.9 million from $58.1 million. However, these increases clearly do not offset the cuts from the domestic players.
Detroit is shifting some money to the web, but even if Time Inc. owned lots of internet properties considered perfect vehicles for the carmakers, ad rates there remain too low to make up for the magazines' losses, which goes a long way toward explaining why the publisher is still talking about the promise of a digital "future.".........READ MORE HERE
I am a fan of satellite radio, and think their services provide huge benefits to consumers, so I am NOT impartial, but nor is the RIAA. They have a huge bias TOWARDS terrestrial radio and an obvious set of double standards. I give credit to XM for standing up to the RIAA, but am concerned about the risk of trial. Ultimately, I think a jury would be sympathetic to satellite radio over the RIAA, but is the overhang of uncertainty through resolution worth it?
Perhaps a merger with Sirius is a graceful way to for XM to exit this situation. Sirius already has an agreement with the RIAA as mentioned in our JAN. 20 post regarding recordable devices, and theoretically, XM could assume this arrangement in a negotiated settlement.
When is the RIAA going to realize that they are biting the hands that feed them? Satellite radio provides the best way to spontaneously and effortlessly introduce listeners to new music. The labels should evaluate their excessive contracts with talent, payola costs, etc. to understand what's behind their falling profits
Ford, Toyota See Alliance Potential Executives Envision Limited Tie-Up, Sharing of Hybrid Technology By NORIHIKO SHIROUZU and JEFFREY MCCRACKEN, January 22, 2007; Page A9, WSJ
Toyota Motor Corp. and Ford Motor Co. are sending more signals that they may want to establish deeper ties. But the cautious courtship between the two auto giants suggests a more modest, and less painful, approach than the megamergers of the late 1990s or the three-way alliance proposed last year among General Motors Corp., Nissan Motor Co. and Renault SA. Speculation that Toyota and Ford might be edging toward some form of alliance has heated up since a meeting in mid-December between Ford Chief Executive Alan Mulally and Toyota Chairman Fujio Cho. Both companies scrambled to play down the significance of that encounter, calling it a mere "courtesy." They stressed the talks produced no specific deals...read more: here
CONTRACT HIT$ By PETER LAURIA, Jan 21, The New York Post
If any more money from Sirius Satellite Radio comes Howard Stern's way, he should take it. So should Martha Stewart, Oprah Winfrey, the major sports leagues and any other content provider that has a deal with Sirius or XM Satellite Radio. That's because the lucrative contracts Sirius and XM have been doling out for programming are drying up. Fast. Beginning with the Stern deal in 2004 - which has a total value of around $700 million over five years, including stock bonuses - Sirius and XM have viewed content as a key way to differentiate each other and have spent lavishly to lure key talent to their respective companies. But spiraling stock prices, slowing growth, soaring costs and a struggle to get into the black suggest that the rich paydays will expire when the contracts do...read more: here
First things first. I feel that the XM Inno and Helix fall within the current laws regarding fair use, and hope that XM Satellite Radio prevails in their suit with the RIAA.
That being said, I feel that the risk XM Satellite Radio has taken is far too big, and the potential outfall has not been worth it.
The first thing we need to consider is the benefit that XM received from the creation of the Inno and Helix units.
Lets assume for a moment that 200,000 units were sold. The question is this:
How many would have been sold if the features that the RIAA takes exception to were never implemented? In other words, if Artist Seek, Song Seek, and Desegregated Recording Capabilities were not in the unit, how many would have sold?
Lets assume that those features directly accounted for 10% of the sales. This would mean that those features were responsible for 20,000 units out of the 200,000 sold. Is satisfying a recording capability that before now was unknown worth it? What type of return does XM get for those 20,000 or si subscribers that bought the devices because of those capabilities?
If an average subscriber lasts 3 years, those 20,000 subscribers would generate $9,324,000 in subscriber revenue (20,000 * $12.95 * 36 months). That same subscriber would also generate some advertising revenue that needs to be considered. Looking at a best case estimate, the 20,000 subscribers would net XM somewhere in the neighborhood of $10,000,000 ver a three year period.
Now, in order to better understand the issue, and the risk involved, I would like to step away from XM to clarify what Sirius has done, and why the RIAA does not have a suit against Sirius.
Sirius' Stiletto does not have the artist or song seek feature. Sirius Stiletto can record in blocks similar to XM’s units, but the device will not give you a readable listing of the recorded content that you can pick and choose songs from. You can save individual songs, but the way for doing that is if you are actually hearing them "LIVE" when you decide to save them. For the Stiletto to have these capabilities, Sirius pays a $15 bounty to the RIAA for each unit sold.
Understanding the deal between Sirius and the RIAA is important because it establishes the likely minimum that the RIAA would negotiate to.
Thus, the theoretical starting point would be $15 per unit AND the removal of the features that the RIAA takes exception to.
So, assuming 200,000 units sold, we are looking at a minimum of $3,000,000 to get to the point where XM can match the Sirius deal ($15 per unit sold), and that would most likely require XM to sacrifice some capabilities on the units.
The next component rests with what happens to the 200,000 units that have capabilities outside of the deal. Can the units be brought into RIAA acceptable compliance via a firmware update? If so, what becomes of the consumers who now are losing features? Do they get made whole somehow? If a firmware update does not work, or for some reason the update does not satisfy the RIAA, how much of an additional penalty on top of the $15 per unit will clear the slate to settle this out of court?
The RIAA is seeking $150,000 per song downloaded onto these devices. If each Inno/Helix sold, assuming 200,000, had only 1 downloaded song the RIAA would be seeking $30,000,000,000 (Thirty BILLION Dollars). If the penalty was $15 per song, the price is tag is $3,000,000.
The Incremental Benefits:
Subscriber Revenue - $9,324,000 – (20,000 subs who bought the Inno or Helix specifically for the disputed features)
Ad Revenue - $932,400 (assumes ad revenue at 10% of subscriber revenue)
TOTAL BENEFIT - $10,256,400
The Risks:
A loss in court with the judge allowing the RIAA’s full request at $150,000 per song downloaded. A loss could be very costly or have very little cost, but what is known is that there is risk involved
Being labeled as the company that brought on tighter restrictions in the form of potential case law, or being known as the company that propelled the RIAA into trying to get more restrictive legislation passed.
Looking at this suit reasonably, there is no way that the RIAA would settle for anything less than the reduced capabilities, and the $15 per unit that Sirius pays, and there is likely no way that the RIAA would accept current units being operated outside those parameters. Thus, a reasonable base point for the risk in my opinion should be established at $15 per unit sold plus a contingency for either paying additional money to the RIAA, or paying making subscribers with these devices "whole" should their devices be required to be updated.
As an investor my bone of contention with this whole issue centers around the risk vs. reward ratio. Had XM released the Inno and Helix with recording capabilities set up in the manner of the Sirius deal, they likely still would have sold roughly the same number of devices. Thus, the benefits of this issue realized by XM are very minimal, while the risks can be potentially devastating. The fact that XM went forward with the knowledge that the RIAA was going to take exception to these devices is disturbing, especially considering the low level of benefit that could be realized.
Sometimes the principal of a subject is worth while. Sometimes it is not. I believe that the XM is correct on principal, but I also believe that there were other ways to get that point across without taking on so much risk.
With the recent denial of XM’s "Motion To Dismiss", the negotiating power of XM has decreased, and the stakes have gotten higher. This case is now set to go to court. In reading the case, there were statements made by all parties that I do not agree with (inclusive of the judge). That however does not change the course that this issue is currently on. I worry that the XM case, and other cases, such as the All of MP3 case that we recently wrote about, have the potential to set some precedents that may not be well accepted by the consumers, and may bolster the idea that the proposed legislation should pass.
To date, special interest groups and lobbyists who have the interests of the RIAA in mind are controlling the path of legislation. Satellite radio users do not have a unified voice to get their opinions known. XM and Sirius stand virtually alone in their fight against the legislation, and XM stands alone in their suit against the RIAA.
I must stress again that I feel that XM is within the laws regarding fair use, and I hope to see them win in their suit. I must also stress that in my opinion the capabilities of the Inno and Helix make it easy for an end user to stretch the fair use laws into a gray area, and it is this point that gives the RIAA their strongest argument. As an investor I am frustrated, and always have been, with the decision made by XM regarding these capabilities. End users have the ability to build play lists already with capabilities such as that in the Stiletto or S50 and those capabilities have not generated law suits.
Having used the Inno, Stiletto and the S50, I can speak to the issue quite clearly. Building a 100 song playlist on the Inno can happen faster than on the Stiletto, but not so much so that it makes a world of difference, and to me that little benefit was not worth the risk taken.
For, now, we have to wait on the law suit. However, we can act on the legislation. This site and others have links to "Digital Freedom" (Their links are on this site free of any charges). I would strongly suggest that if you are a satellite radio consumer that you go to that site and read about the issue. GET INVOLVED. DO NOT LET DECISIONS SIMPLY HAPPEN. MAKE SURE THAT YOUR VIEWS ARE EXPRESSED AND KNOWN.
Talking Business I Want My Howard Stern and Oprah By JOE NOCERA, Jan 20, 2007, The New Times
On Wednesday, I was in the middle of a long phone conversation with Craig Moffett, the Wall Street analyst who follows broadcasting for Sanford C. Bernstein & Company. His purview includes the country’s two satellite radio companies, XM and Sirius. Although Mr. Moffett is more positive on XM than Sirius, he sounded a little sheepish when I asked him whether he was bullish on the sector.
“It’s hard to say,” he replied. “It’s a very good product but the stocks have been such dogs.” He continued: “These guys have real challenges.”
For months now, Wall Street has been promoting a seemingly simple solution to the problems facing XM and Sirius, including mounting losses, enormous fixed costs and a slowdown in subscriber growth. (Each charges subscribers $12.95 a month.) The Street would like to see the two companies merge.
Merger speculation has been stoked, in part, by the Sirius chief executive, Mel Karmazin, who has made a number of public comments suggesting that a deal would be good for shareholders. More recently, XM has also seemed to warm up to the idea. Neither company would talk to me about the merger possibility; but just a few weeks ago, a rumor gained currency that XM and Sirius would announce at the Detroit auto show that they were combining. (The rumor was false.)
Just as Mr. Moffett was describing the benefits of an XM-Sirius merger for me, he was interrupted by another call. He put me on hold. When he got back to the phone, he said, “I just heard that Chairman Martin made some negative merger comments.”
That would be Kevin J. Martin, the chairman of the Federal Communications Commission, which will have a lot to say about whether the two companies can merge. In response to a question at the end of an F.C.C. meeting, Mr. Martin pointed out that a commission rule forbade one company from owning both satellite radio licenses.
Almost as soon as the news hit the wire, the stocks of the two companies began tanking.
AS it turns out, Mr. Martin’s comments were not as definitive as the early reports suggested. As a commission spokesman pointed out to me — and as a number of Wall Street analysts wrote to their clients — Mr. Martin was simply answering a straightforward question about whether such a rule existed. But he also said that if the companies tried to merge, the F.C.C. would take a close look at it.
“The commission can and does change its rules,” noted Kenneth Ferree, a former senior commission official now with the law firm of Sheppard, Mullin, Richter & Hampton. Naturally, the stocks of the two companies started to rise again.
It is impossible to know whether the commission would ultimately approve a merger that would allow the satellite radio duopoly to become a monopoly. Normally, any right-thinking person would instinctively be opposed to such a move — don’t we have antitrust laws to prevent mergers that would give companies monopoly power? But the situation with satellite radio raises a question that is becoming more and more important these days: when it comes to new and emerging technologies, what exactly constitutes competition?...
...Reed Hundt, the former F.C.C. chairman back when the commission passed its rule preventing a satellite radio merger, told me that when they were preparing to auction the spectrum for satellite radio in the 1990s, it wasn’t clear that satellite radio would compete with local terrestrial radio. So the commission wanted to be sure that there were two companies that could compete with each other. But now it is quite clear that satellite radio and terrestrial radio do, in fact, compete. One reason Sirius has never raised its rates — and XM has done so only once — is that the competition from free radio keeps prices in check.
And so do other forms of competition, especially iPods. “You can buy an iPod and download music and then plug it into your car,” Mr. Hundt said. “How is that different from satellite radio?” Eventually, cars will come equipped with wireless Internet, which will mean all kinds of options for streaming audio content. Once that happens, it seems to me that satellite radio is going to be just another technology fighting to keep pace with the Internet.
Which is also why, somewhat to my surprise, Mr. Hundt believes that the rule he helped formulate should be repealed. “I think we did the right thing to begin with,” he said. “You wouldn’t want to change it if it weren’t for the fact that it is so obvious that you can get content in so many different ways. That wasn’t really true then.” As Mr. Levin put it, “Circumstances have changed.” ...read more: here
SIRIUS Satellite Radio to Launch 'Barbara Walters' Best of the Very Best' Broadcasting icon Barbara Walters' extraordinary interviews spanning the past 30 years featured in exclusive weekly show on SIRIUS Stars NEW YORK, Jan. 19 /PRNewswire-FirstCall
SIRIUS Satellite Radio (NASDAQ: SIRI) announced today the launch of Barbara Walters' Best of the Very Best, a one-hour exclusive weekly radio show featuring the very best of Barbara Walters' interviews with world leaders, newsmakers, and the greatest entertainers over the past 30 years. The premiere broadcast of Barbara Walters' Best of the Very Best will air January 22, 2007 on SIRIUS Stars, channel 102 from 6:00 - 7:00 am ET, and then rebroadcast at 11:00 am, 1:00 pm, 6:00 pm, 8:00 pm and 10:00 pm (all times ET). The show will air every Monday during these times on SIRIUS Stars. The theme of the debut show is "Leading Ladies," and will feature Walters' interviews with Audrey Hepburn, Diane Keaton, and Sophia Loren. In these interviews Walters delves into the lives and loves of Hollywood legends Hepburn, Keaton, and Loren: Hepburn confesses that she fell in love with all of her leading men such as Gary Cooper and Peter O'Toole, and wants to be remembered for her work in her first film Roman Holiday; Keaton reveals that although she's had relationships with such notables as Woody Allen, Warren Beatty and Al Pacino no one has ever asked to marry her; and Loren explains her choice to marry Carlo Ponti over Cary Grant. Barbara Walters' Best of the Very Best will include dynamic interviews with famous people ranging from Hillary Clinton to Muhammad Ali to Tom Hanks to Lance Armstrong, to name only a few...read more: here
This lawsuit pertains to recording features on the XM Helix, Nexus and Inno portable units. The RIAA did not WIN the lawsuit, rather, XM lost the motion to DISMISS.
Sirius has an agreement in place with the RIAA regarding their portable units, the Stiletto (100 and 10) and the S50, giving Sirius further advantage in the retail space.
US Judge Denies XM Satellite Bid To Dismiss Rights Suit 10:46 AM EST January 19, 2007, By Chad Bray Of DOW JONES NEWSWIRES NEW YORK
A federal judge in Manhattan denied a bid Friday by XM Satellite Radio Holdings Inc. (XMSR) to have a copyright lawsuit by the major recording companies over its digital download subscription service thrown out. In an order issued Friday, U.S. District Judge Deborah A. Batts denied a motion by XM to have the lawsuit dismissed. The major record labels, including Atlantic Recording Corp., Capitol Records Inc., Sony BMG Music Entertainment and Warner Bros. Records Inc., sued XM last year, alleging XM's digital download service distributes their copyrighted works without their authority. The complaint claims XM is violating their licensing agreement to broadcast copyrighted songs because it allows customers with special receivers that include MP3 players to record audio files broadcast on XM, rather than just to hear live broadcasts.
XM issued this statement: "At this stage of the proceeding, the court's ruling is required to be based on the false characterizations set forth in the plaintiffs' complaint. The real facts strongly support our view that the lawsuit is barred by the Audio Home Recording Act. We look forward to making our case in court."
Singer Kelly Clarkson partners with NASCAR Associated Press, Jan 18, LOS ANGELES
Kelly Clarkson will soon be showing her racing stripes in the biggest partnership NASCAR has ever made with a music artist, the sports franchise announced Thursday. "Anyone who knows me knows I'm a race fan and love NASCAR," the former "American Idol" and Grammy-winning singer said in a NASCAR press release. "I look forward to hanging out with the fans, drivers and the entire NASCAR community." Clarkson will be "integrated into all aspects of NASCAR," including television spots, charitable events and NASCAR's awards dinner in New York City in December, NASCAR said...read more: here
Cramer's 'Mad Money' Recap: Piggybackers Go to MarketPage 3, MadMoney, Jan 18
Sell Block In his "Sell Block" segment, Cramer said it's time for viewers to celebrate profits. After recommending Guess? (GES - news - Cramer's Take - Rating) on Oct. 9 and reaping 38.7% in gains, he said it was time to sell the stock. Cramer also advised ringing the register with XM Satellite Radio (XMSR - news - Cramer's Take - Rating) because he believes "it has run out of steam" and has no more upside potential...read more: here
HD Radio Perceptual Study - Awareness & Interest 2007 Units Sold Estimates Reduced Jan 17, www.bridgeratings.com
Despite the increase in awareness, knowledge of what the medium is has actually fallen from our original 2006 study. 15% of the total sample were able to tell us at least that HD Radio was a radio technology that "improves sound quality, offers additional digital interactivity and required a special radio." This number is down from 19% in June of 2006.
Based on the results of this study and analysis performed by Bridge Ratings, we have reduced our original projections for full year 2007 HD radio sales from 2.1 million total HD radio units sold to 1.5 million. Our models anticipate HD Radio market penetration to grow slowly through 2010 when we optimistically project 12 million sold (U.S.)...read more: here
SIRI Share Gains Ahead Of Expectations, Stern Peak
- SIRI market share was 66% up from approximately 59% share in November. SIRI 4Q market share grew approximately 5% from 1Q06 (where SIRI benefited from the first quarter of Howard Stern). We believe this strong share performance is largely due to a programming and product advantage over XM. Looking to 2007 we do not see any reason market share levels at retail necessarily move back to parity. YoY December sales declines of 40.3% and 54.9% for SIRI and XMSR respectively highlight difficult YoY comps and a generally more competitive consumer electronics holiday selling season.
- December NPD results displayed retail category sales declining ~46% YoY- roughly 14% greater than our retail estimates. As both XMSR and SIRI have already announced 4Q net additions of 439K and 905K, respectively, we believe NPD's results highlight better sat radio sales trends experienced by large wholesalers such as Wal-Mart and Costco, which are not included in NPD results. Market share levels for the year were 60% for SIRI and 40% for XM according to NPD.
- Continued share gains at retail by SIRI point to a clear and sustained marketing and programming advantage relative to XM. We do not believe heavily discounted radios materially impacted share levels in either direction. Although not visible through the NPD results, we believe SIRI 4Q sub growth may have benefited from the sale of second or "family plan" subscriptions. SIRI ended 3Q06 with 14% family plan penetration relative to XM of 21%. However, we note that NPD does not capture direct online sales, where much of the second radio sales might occur.
Toyota may work more with Ford Detroit Free Press (via.www.theflyonthewall.com)
Toyota (TM) doesn't rule out a partnership with Ford (F) if the U.S. automaker proposes a mutually beneficial plan, says Toyota president Katsuaki Watanabe. He says anypartnership likely would be technological. Ford already uses some Toyota patents in its hybrid system.
James Dix from Deutsche Industry Bulletin Research
- FCC Chairman's comments benign on surface, but hint at real problem At a press conference on Wednesday, in response to a question about the possibility of an XM-Sirius merger, Chairman Martin pointed out that the SDARS license grants prohibit a single entity from owning both the satellite radio licenses.
This would not be an insurmountable hurdle to a deal. The FCC could modify such a prohibition if it thought that a merger were in the public interest. That said, discussions we have had with regulatory experts suggest that the FCC's original commitment to having some competition among the satellite operators may trump arguments (reasonable though they appear to be) that the competitive impact of a merger on the audio market would be not be great, given abundant new media audio options. After all, the FCC previously rejected the DirecTV/Echostar merger despite arguments that satellite TV should not be considered a separate market.
Need for high confidence in approval also weighs against a deal. We estimate that it could take at least 6-9 months for the regulators, chiefly antitrust and the FCC, to pass muster on a proposed transaction. We believe that XM and Sirius would want to be fairly confident of approval before they announced a transaction. Given the prospect of FCC turnover or at least delay if the process extended into 2008, these factors indicate that the satellite radio operators have only a few months to get the necessary comfort on the regulatory front. With opposition likely from the NAB among others, such quick comfort may be hard to come by.
Stocks already near “no-merger” support level, in our view. In line with our note last week (see "Post-CES first takes: is sat rad merger 'musthave' feature?" dated 1/11/07), we hypothesize that, absent a merger, and taking the view that the satellite radio industry's growth might be on a riskier trajectory than believed, we think XM could trade near-term at roughly $15 and SIRI at roughly\n$4. We caution that, post-CES, strong fundamental catalysts may not appear until 2H when the OEM channel starts to accelerate. We note, for example, that the Consumer Electronics Association currently forecasts just 2% retail category growth for satellite radio for 2007. Our 12-month target prices for XMSR and SIRI are $20 and $5.75, respectively. We use a DCF through 2010, WACC of 13%-14%, and TVG of 4% to support our target prices.
- FCC's Martin's statement that current rules prohibit one company from owning both satellite radio licenses rattled XM/SIRI stocks. In our view, Martin was simply stating a known fact, not taking a position on merger, as FCC rules can be changed.
- We continue to feel both parties remain interested a merger. Still, hurdles to get to an agreement remain, and chance of approval from FCC remains a big unknown.
- NPD data shows steep December industry decline of (46%) at retail. 1Q07 is likely to be another difficult qtr, with some downside risk, but should be near term bottom.
- SIRI: (40%) decline is better than Nov's (45%), but still down sharply due to weak demand and tough comps. 66% Dec mkt share is highest ever for SIRI.
- XM: (55%) decline in Dec was worse than Nov's (45%) drop. XM retail sales have declined 10 straight months, and have accelerated for the past 3 months.
- Maintain Buys on XMSR and SIRI due to return to positive OEM-driven sub growth in 2007, good risk/reward, and nearing positive FCF.
EV Gap Narrowed and FCC Comments Overblown: Upgrading to Peer Perform
- We downgraded Sirius in early December (please see our note Sirius: "Downgrading to Underperform from Outperform" dated December 5, 2006), on the premise that Sirius' premium of approximately 15% to XM on EV basis was unwarranted, particularly due to Sirius' revised 4Q guidance.
-As the two stocks currently trade virtually at parity, which we think is more reasonable, we think the two stocks likely should trade more in tandem near-term. Further, we believe the two stocks will be driven more in the short term by merger speculation, and Sirius will trade more in-line with its peer; hence, we are upgrading Sirius to Peer Perform.
- Yesterday, Sirius and XM fell significantly based on comments made by FCC Chairman Kevin Martin at the January 2007 Open Commission Meeting. Based on contacts who are familiar with exactly what transpired, we believe no incremental information or potential intention was offered by the\ncomments. Hence, with the citing of the rule 25.118, we believe that Kevin Martin merely acknowledged what has already been widely discussed in the market place. Hence, we think the\nreaction was overdone, providing a better entry point for Sirius.
- We underscore there are significant hurdles for Sirius and XM to overcome should they pursue a merger. However, we believe the short term movement of Sirius' stock price will be more impacted by the mere pursuit of a merger should they attempt one. Lastly, we point out any attempted merger could take up to 12 months to be approved and would still need to pass the DOJ.
- Lastly, yesterday, NPD released its retail market share data for December 2006, indicating continued share gains for Sirius reaching 66% in December.
(theflyonthewall.com) Satellite Radio: FCC's Martin stated a known fact, rules can be changed@SBSH - Citigroup believes Martin was not taking Satellite Radio: FCC's Martin stated a known fact, rules can be changed@SBSH - Citigroup believes Martin was not taking a position on the merger and they continue to feel both companies are interested in a merger. The broker maintains Buy ratings on both XMSR and SIRI.
Oppenheimer:
F.C.C. Chairman comment negative for satellite radio merger - Oppenheimer Oppenheimer says recent satellite stock appreciation (due, they expect to anticipation of a merger between SIRI and XMSR) was eclipsed today as the F.C.C. Chairman commented on regulations banning both satellite licenses (or services) being combined into one company. With the pullback of the equities, firm recommends investors buy the SIRI and XMSR shares on the basis of improving fundamentals. Although 4Q06 subscriber results were disappointing, fundamental subscriber growth seems to be improving. Looking at 2007 and beyond, firm says O.E.M. subscriber growth should deepen materially as satellite radio becomes standard for an increasing share of automakers.
Bear Stearns:
01/18/2007 : JAGNote by Bear Stearns & Co., Inc SIRI: Upgraded - The firm upgraded shares from Underperform to Peer Performciting valuation. Sirius Satellite upgrade details (3.86 ) As mentioned earlier, Bear Stearns upgraded SIRI to Peer Perform from Underperform, noting that yesterday SIRI and XMSR fell significantly based on comments made by FCC Chairman Kevin Martin at the Jan 2007 Open Commission Meeting. Yet firm believes that no incremental information or potential intention was offered by the comments, and with the citing of the rule 25.118, they believe that Kevin Martin merely acknowledged what has already been widely discussed in the marketplace. Hence, firm thinks the reaction was overdone, providing a better entry point for SIRI. Firm believes that SIRI and XMSR will be driven more in the short-term by merger speculation, and thinks SIRI will trade more in-line with its peer.
The Stern Effect was a hot topic of discussion a year ago. Stern had just started with Sirius, and many were trying to determine what type of effect his arrival would have on Sirius.
The detractors said the Stern effect would be short lived and that it would be over in January. January 2006 passed, and Sirius reported a 66% NPD share, up an impressive 24 points from January 2005. "Surely this is the end", the detractors were heard to say, "Stern brought everyone he is going to bring in December and January."
February 2006 NPD came in and Sirius carried a 56% NPD share. The Stern detractors saw this as confirmation that indeed the Stern Effect was short lived. They neglected to consider that February 2006 represented an 18 point jump from February 2005.
March 2006 was much the same. Sirius garnered a 56% share, and the detractors raised their fists in the air in a sign of victory citing that indeed the Stern Effect was dead. It was the second wave of proclamation of the demise of Stern, but that did not matter to them. All that mattered was that in their mind the Stern Effect was dead.
April 2006 brought another feather into the cap for the "Stern Effect Is Dead" crowd. Sirius NPD retail share dropped by 2 points to 54%. Once again, these people shouted that the Stern Effect was dead. Now, for the third time, they were proclaiming their same mantra, oblivious to the fact that Sirius was still well above the prior years April numbers, and ignoring the fact that Sirius was maintaining an NPD advantage.
In May 2006, the Stern detractors saw the 54% NPD retail share as sure and solid confirmation that whatever Stern was going to deliver to Sirius has already happened. The Stern Effect is dead they proclaimed. "Look at the market share" they touted. It went from 66% to 56% to 54%....It is dropping, and will continue to drop until the share reverts back to previous levels.
Then came June 2006 and the first big holiday in the world of satellite radio (Fathers Day). Sirius came in with an NPD share at 61%. Those that called the Stern Effect dead for the four previous months were perplexed. It appeared that Howard Stern had more lives than the famous Montey Python's Black Knight! "Surely there was some explanation" they thought. It could not possibly be Howard Stern, after all, they had proclaimed his influence dead four previous times.
July 2006 brought about a 58% share. Three points less than June. The detractors now came up with their reasoning. "The Fathers day sales the month prior are mostly for men, and Sterns audience is mostly men, and thus the 61% in June 2006 was an aberration, and clearly we can see that market share will once again fall off for Sirius, because after all, the Stern Effect is dead."
August 2006 showed a Sirius NPD share of 55%. The detractors once again celebrated. This drop in market share shows quite clearly that the Stern Effect is dead. The last six times were crystal clear, but this 55% market share is crystal-crystal clear. The Stern Effect is dead.
September 2006 saw Sirius’ NPD share rise to 57%. The detractors were once again perplexed. There had to be some other reason besides Stern that the share jumped. After all, it could not be Stern, the Stern Effect has been confirmed as dead since February. Perhaps the new radios accounted for the bump in share, or people got the Oprah Effect and the Stern Effect confused.
October 2006 brought a dip in Sirius NPD share to 56%. The detractors jumped for joy. Surely the Stern Effect is dead. Sirius Internet Radio had the widely promoted free weekend and Stern was a big part of it! All that marketing and Sirius lost a point in retail. This became the crystal-crystal-crystal clear indicator that the Stern Effect was dead. Somehow the Stern detractors failed to consider that the Sirius Internet Radio promotion took place at the end of the month, and the retail spike would follow the promotion, but might I digress.
November 2006 brought with it a 59% NPD share for Sirius. Their highest level since June and the Fathers Day push. "It’s inconceivable" the perplexed detractors spoke much like Vizzini in The Princess Bride, but the message was not as strong as it had been. Shouts of the Stern Effect being dead turned into mumbles that did not seem to have passion. November 2006 was two points lower than November 2005, but that is not much consolation after months of speaking so strongly that the Stern Effect was dead all year long.
Now the December 2006 NPD numbers are out. Sirius' share came in at 66%, matching that of January 2006, and actually four points higher than December of 2005 when Stern Fever was everywhere. What do we have?
SILENCE FROM THE DETRACTORS.
The numbers have spoken for themselves. It is crystal clear that the arrival of Stern has caused a shift not only in satellite radio, but in content challenged terrestrial radio as well. Sirius market share at retail continues to climb, as does their overall market share. Ratings for terrestrial radio continue to slump, and formats seem to shift as often as the seasons.
What is now known by most everyone is that the Stern Effect was much greater and longer lasting than the detractors thought. The Stern Effect is not a one time thing. The Stern Effect is about the most well known radio personality calling Sirius home. It is about brand awareness. It is about cross promotion. Sterns Effect is far greater than channel 100 and channel 101. Stern's Effect impacts other aspects of Sirius. Be it news, sports programming or womens programming, Stern brought the Sirius brand to the forefront, and the entire Sirius line-up benefits from it.
The Stern Effect is here, it has been planted, and will continue to grow. It is CRYSTAL-CRYSTAL-CRYSTAL CLEAR. With that established, lets move on to the on again off again merger speculation………sorry, that is another article altogether.
Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. wouldn't win approval of a merger under current U.S. Federal Communications Commission rules, agency Chairman Kevin Martin said today. A ban on a single owner for both satellite services was written into regulations that authorized the two nationwide licenses in 1997, Martin told reporters after an FCC meeting. "There is a prohibition on one entity owning both of these businesses,'' Martin said.
The comments suggest that the companies will have significant regulatory hurdles in any combination, after the heads of XM and Sirius said a combination makes sense. XM, the largest pay radio company, and its smaller rival Sirius have lost billions of dollars competing with each other and subscriber growth slowed last year. Martin, a Republican who heads a 3-2 majority on the commission, didn't say whether he favors a merger between the two companies or address prospects for a rule change. A merger would also require approvals from antitrust regulators.
Shares of Washington-based XM fell $1.67, or 9.7 percent, to $15.47 at 3:49 p.m. New York time in Nasdaq Stock Market composite trading. New York-based Sirius fell 25 cents, or 6 percent, to $3.90. Shares of both companies jumped earlier this month after Chief Executive Officer Mel Karmazin and XM Chairman Gary Parsons fueled speculation month about a possible combination. XM shares have fallen 41 percent in the past year through yesterday, while Sirius dropped 34 percent.
`Easygoing'
The FCC might defer to the U.S. Department of Justice, which could approve a merger if the market included audio products such as Apple Inc.'s iPods, cell phones and free broadcast radio, RBC Capital Markets analyst David Bank said in a Jan. 12 research note. "This is the most easygoing antitrust division since the Sherman Act was written,'' Reed Hundt, an antitrust attorney and former Federal Communications Commission chairman, said in an interview this month. ``In my eyes the combination of two satellite radio firms would not significantly reduce choice in the music business.''
Analysts disagree on how big an obstacle regulators present. The FCC's rule lowers the probability of approval to below 50 percent, analyst Jonathan Jacoby at Banc of America Securities said in a research note yesterday. Bryan Kraft at Credit Suisse put chances clearance at 50 percent, according to his research note yesterday.
Rule Change
The FCC rule can be changed, Blair Levin, a Washington-based analyst with Stifel Nicolaus & Co. Market developments are making it easier to obtain approval, he said in a Dec. 1 research note. ``The analysis that this is a condition and therefore the merger is a non-starter is just wrong,'' Levin said today in an interview. The companies should attempt to combine before 2008, Bank, who is based in New York, said in his note. An FCC helmed by a Democrat or less-receptive Republican administration than President George W. Bush would offer much greater resistance, hew rote.
--With reporting by Don Jeffrey in New York. Editor: Palazzo.
To contact the reporter on this story: Christopher Stern in Washington at +1-202-624-1966 or cstern3@bloomberg.net.
The Federal Communications Commission said on Wednesday licenses held by XM Satellite Radio Holdings Inc. (XMSR.O: Quote, Profile , Research) and Sirius Satellite Radio (SIRI.O: Quote, Profile , Research) prevent them from combining, but one industry expert said they could ask for the licenses to be modified.
"There's a prohibition on one entity owning both of those licenses," FCC Chairman Kevin Martin told reporters during a news conference after an agency meeting. However, Martin also said the FCC would examine any transaction submitted to it...read more: here
December 2006 retail sales, as tracked by NPD, for satellite radio have come in (Click Chart To Enlarge). For the month of December Sirius Satellite Radio Satellite Radio picked 7 points in share over last month, finishing with a 66% NPD share for December 2006. This represents 16 consecutive months that Sirius has outperformed XM in NPD tracking.
Overall, year over year (December 2006 compared to December 2005) sales showed a decline. The sector saw a decline of 46%, with XM seeing a 55% decline vs. 40% for Sirius.
For the quarter the share was 63% for Sirius vs. 37% for XM
Year to date the retail share finished with Sirius at 60% vs. 40% for XM.
Overall, 2006 NPD tracked sales were off last years pace by 18.5% as compared to 2005. Sirius NPD tracked sales fell off the 2005 pace by 11.6%. For XM the fall off was 28%.
The satellite radio sector has been buzzing with merger speculation for a while now, and the subject has received a lot of coverage. Proponents of a merger cite the potential synergies that would be brought about, and that can not be debated. Opponents of a merger cite the current language in the licenses that speaks specifically to a merger not being an being allowed.
So what has happened?
The real answer is nothing. The comments by Kevin Martin were exactly the response that he could give on the subject.
FOR EXAMPLE:
If Martin was asked, "Are there rules in place that prevent a merger of XM and Sirius?"
His answer would have to be YES
If Martin were asked, "Can the existing rules be changed and/or modified to facilitate a merger between XM and Sirius?"
His answer would likely be that he does not have a case in front of him, but he and the commission would have a responsibility to review such a matter if one was presented
Without having been presented the outline for a potential merger, the FCC Chairman is very limited in what he can and can not say regarding the subject. He has to speak in a manner that relates only to the facts as they exist today. He can offer very little in terms of speculation, and takes on a big risk if he does delve into speculation.
WHERE DOES THIS LEAVE INVESTORS?
First, for the time being it leaves investors in a holding pattern having to weigh and consider all of the possibilities that could play out. As we stated earlier in the week, there are many things to consider, and one of those things was what would happen in the event a merger did not happen.
Second, it helps a savvy investor understand what type of premium the merger speculation has on each equity.
The bottom line here is that there is no substantial news that happened with the subject. Martin commented in basically the only way he could, and shy of any type of follow-up questions, that is likely all he will say at this point.
The subject of a merger will remain speculation until such a time that a next step can be taken. That next step is either nothing, or an announcement that Sirius and XM intend to try to Merge. Until that happens, speculation will rule the day, and the comment of the moment will cause the price of these equities to swing.
About a month ago the folks at VH1 announced the launch of a new reality show titled The (White) Rapper Show. Now, to be perfectly honest, Hip-Hop is not typically my cup of tea, and as with anyone, I was familiar with and enjoyed the Hip-Hop and Rap songs that were crossovers to Pop or Rock, but because they advertised the show here on SSG, and the promotions seemed interesting, I decided to watch the show. Here was the promotion for the second show:
Premier Episode 2:Nine remaining rappers embark on a hip-hop history tour including sightings of Old School pioneers Kurtis Blow and Grandmaster Caz. But the biggest surprise awaits at tour's end as the emcees face a musical onslaught that leaves their heads spinning. Afterwards, one rapper's low self-esteem imperils the future of the fellow housemates. With things heating up during the competition, strong emotions spill over into everyone's personal lives as well... with one lucky fellow meeting Misfit under the sheets. But will he close the deal?
As I sat down to watch, I was unsure that the show would have appeal to me. As someone who does not follow Hip-Hop and Rap, I felt that I would be lost trying to understand the language, and artists that would certainly be the subject matter of the show.
I was wrong.
The (White) Rapper Show breaks through the stereotypes and offers a compelling look into the world of Hip-Hop. I was expecting the HIP-Hop version of American Idol or Survivor. Instead, I was treated to a show that was part reality show and part documentary. The show does a wonderful job showing where Hip-Hop and Rap came from, what the roots of the music are, and how people use Hip-Hop and Rap to communicate their thoughts and feelings.
The typical items one might expect are there, but there is something compelling about seeing these individuals interact and learning more about their personality. No longer did I see a kid with a hat on sideways and baggy pants. I saw beyond that because I was exposed to his personality. It is this aspect of the show that was most appealing to me.
The show is a competition, but is laced with history and respect for the artists that came before that are legends in the world of Hip-Hop. The show points out the sacrifice that needs to be made in order to become a successful artist, and shows that rap, like any other music is an expression of ones surroundings and experiences.
While The (White) Rapper will not change my musical taste, it did broaden my knowledge of the music, and did show me something beyond the stereotypes that were ingrained into me, and perhaps others. I was impressed that in a 1 hour timeframe that I could be enlightened so much regarding this segment of the musical world, and also impressed with how little race came into play in the show. It really is not about color, it is about culture.
The (White) Rapper Show is now included on my season pass for Tivo, and the lesson learned is that reaching beyond your comfort level to experience and learn new things is an enriching activity.
The issue of downloaded music is on the forefront of the broadcasting and entertainment sector. With more and more devices coming to market capable of downloading music, and fair use laws being challenged, it is little wonder that the subject gets so much press.
Jane Wardell, an AP writer composed a story relating to the download subject, and notes that although the download business model is growing, it is failing to make up for the slump in CD sales. In my opinion, people used to buy an entire CD simply to get access to 1 or 2 tracks. These days, people are far more selective, and buy the tracks that they want via downloading. Thus, while the downloading falls short of making up the gap in CD sales, one needs to remember that the business has become much more a la carte now.
Digital Music Sales Doubled in 2006
By Jane Wardell, AP Business Writer
Digital Music Sales Doubled in 2006, but Failed to Compensate for Drop in CD Sales
LONDON (AP) -- Global digital music sales almost doubled in 2006 to around $2 billion, or around 10 percent of all sales, but failed to compensate for an overall decline in sales of CDs, the global music industry trade body said Wednesday.
The International Federation of the Phonographic Industry, or the IFPI, said it expected digital sales to account for a quarter of all sales worldwide by 2010.
"We don't have the holy grail of digital offsetting the decline of CDs as yet," IFPI Chairman John Kennedy said in London after the release of the group's 2007 Digital Music Report. The report did not give details on the size of the overall music market in 2006, but Kennedy said it had fallen approximately 3 percent.
In early 2006, the IFPI said it believed growth of digital music formats such as mobile would be such that they would compensate globally for the declines........
Interested readers can catch the whole story can read it HERE
SIRIUS Satellite Radio to Carry CNN OnlineWednesday January 17, 8:00 am ET
News channel programming expands to online for subscribers 24/7
NEW YORK, Jan. 17 SIRIUS Satellite Radio today announced that SIRIUS subscribers are now able to listen to a simulcast of CNN as part of Sirius' online listening lineup.
As of January 16, 2007, CNN now streams online to SIRIUS subscribers 24/7. SIRIUS also broadcasts CNN on its satellite radio channel 132. SIRIUS simulcasts the programming from CNN's powerful television lineup, featuring shows such as American Morning, The Situation Room, Lou Dobbs Tonight, Paula Zahn Now, Anderson Cooper 360, and Larry King Live. CNN offers round-the-clock coverage of breaking news and is home to experienced journalists, such as Wolf Blitzer, Dr. Sanjay Gupta, Soledad O'Brien and Miles O'Brien.
Subscribers to SIRIUS Satellite Radio can access online all of SIRIUS' 100% commercial-free music channels, a combination of talk entertainment such as Howard Stern, Maxim, Cosmo Radio, political talk shows, and comedy channels, as well as exclusive sports talk programming. Subscribers to SIRIUS Internet Radio (SIR), Sirius' CD-quality, internet-only service, can hear CNN also. With SIR, subscribers anywhere in the world can hear CNN online, without the need for a radio, along with talk, news, sports and 100% commercial-free music programming, for a monthly subscription fee of $12.95.
In addition, SIRIUS airs Headline News on its satellite radio channel 133 and CNN en Espanol on its satellite radio channel 182.
Anticompetitive Hurdles Loom Before Any XM, Sirius Merger By SARAH MCBRIDE and AMY SCHATZ, January 17, 2007, The Wall Street Journal
With speculation on the upswing about a possible merger between satellite-radio rivals Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., the companies face a serious obstacle: Federal Communications Commission regulations that appear to specifically forbid a merger. Winning approval for any deal, from both the FCC and the Justice Department, may rest in persuading regulators that the two companies face many more competitors than just each other. Competing technologies that have helped damp satellite radio's growth -- like iPods, podcasts and Internet radio -- may give the companies ammunition to persuade regulators that a merger of the only two satellite-radio players isn't a threat to competition.
Merger rumors involving the companies have surfaced periodically over the last year, stoked by Sirius officials like Chief Executive Mel Karmazin, who has said he would be interested in buying XM. Officials at XM typically dismissed the possibility.
But in recent weeks, XM has notably softened its stance. While XM still stops short of saying it is exploring a deal, it no longer rules out the possibility. That has given new life to hopes for a deal. Since the beginning of the year, XM's stock has risen almost 19% and Sirius's 17%.
"I think that absolutely [XM executives] have softened their public posture," says Barton Crockett, an analyst at J.P. Morgan who upgraded both companies to "overweight" positions yesterday. "To my mind, that is a strong indication that they are open to this, at least attempting it."
An XM-Sirius merger is gaining more urgency in the industry as both companies struggle to win consumers. While both firms add new listeners each quarter, neither is reaching the lofty subscriber levels that were expected a few years ago.
The merger talk, to some, seems like a trial balloon intended to gauge the reaction of both investors and regulators. Such advance work may be necessary given that any deal would face significant hurdles.
The companies would need to persuade the Justice Department that a merger wouldn't be anticompetitive, even though it would likely result in higher subscription rates and less consumer choice. The companies, however, say thinking about satellite radio on its own defines the options too narrowly.
"I don't know how you come up with a market definition so that we and they compete only against each other," says David Frear, chief financial officer at Sirius. "We see ourselves competing primarily with terrestrial radio as well as this plethora of new services, including MP3s, Internet radio and cellphones."
Indeed, when satellite radio was first conceived, it was difficult to imagine it would compete with a device like the iPod, which offers the kind of broader listening choice that was the heart of satellite radio's appeal. Much like satellite radio, iPods offer hours of advertisement-free music. The companies would also need to make a case at the FCC, where there are several regulatory hurdles facing a potential deal. Primary among them is an FCC rule that on the face of it appears to prohibit the two companies from merging. In 1997, when the companies won their licenses, the FCC stipulated that one satellite-radio company wouldn't be permitted to "acquire control" of the other license. The prohibition "will help assure sufficient continuing competition," the regulation states.
Communications lawyers say that the rule could be overturned after a public comment period. Mr. Crockett, the J.P. Morgan analyst, suggested in a report yesterday that the FCC could also permit XM, of Washington, and Sirius, of New York, to hold their licenses in two separate companies while consolidating operating and financial efficiencies.
FCC chairman Kevin Martin hasn't said how he might view a deal, but he could be leaning toward a stricter definition of competition in the satellite-radio arena. When asked about a potential XM-Sirius deal last week at the Consumer Electronics Show in Las Vegas, Mr. Martin pointed to how the agency viewed competition in the satellite-television market during its review of EchoStar Communications Corp. and DirecTV Group Inc.'s failed merger attempt a few years ago. In that case, the FCC took a narrow approach to defining the market for video competition.
Mr. Martin's support for a deal would be critical to its success. The political climate at the Republican-controlled commission has been more strained than usual since Democrats took control of Congress, and it isn't clear that the five-member commission's two Democrats could be persuaded to support a further consolidation of the market, given their staunch opposition to relaxing media-ownership rules.
So far, XM and Sirius don't appear to be lobbying regulators or lawmakers directly to allow a merger. While both companies meet regularly with the FCC to discuss various issues, commission officials say they haven't been meeting with satellite-radio companies or their representatives to discuss a potential merger. Staffers at some key congressional offices -- such as Democrats who oversee commerce and antitrust issues -- also say they haven't taken meetings to discuss a merger.
Some communications lawyers say that if the Justice Department decided not to block a merger, the FCC could likely fall in line, as it has with some recent telecommunications mergers. Of course, issues between XM and Sirius themselves could be difficult to resolve. Those include how to value each company and which company would end up with more control. Even if they merged, cost savings wouldn't necessarily be as good as investors believe, in large part because each company is locked into long-term contracts with talent such as Sirius's Howard Stern and XM's Oprah Winfrey.
RBC Capital Markets' David Bank says programming costs could fall 50%, but not until 2010; because the companies use different encoding technologies, it would be difficult to merge operating platforms. By 2015, he believes the companies would be saving $360 million annually in costs including advertising and subsidies.
In order to merge, the companies would need to act fast. Lawyers say they would need to get a proposal before the FCC within the next couple of months so the heavy lifting would be finished by the time the 2008 election cycle kicks in. If a Democrat took the presidency, control of the FCC would also switch, making a merger that much harder to pull off...read more: here
- Stocks Offer Favorable Risk/Reward: We have revised our scenario analysis, assigning equal probabilities to our Bull, Bear, and Base Cases. As a result, we have increased our 12-month target price on XMSR to $23 (34% upside), and decreased our SIRI target price to $5 (22% upside). We believe that XM offers more upside than Sirius as a result of its higher OEM exposure, which should increase over time as Sirius partners Ford and Chrysler lose share to Japanese manufacturers aligned with XM.
- Updated Merger Model: We have updated our proforma merger model (originally published in September 2006) to incorporate our revised forecasts for the standalone entities. We estimate the NPV of synergies would be $10.5B. With a 50% arbitrage spread (reflecting regulatory risk) in a merger of equals this would imply a $25 stock price for XMSR and $5.40 for SIRI.
- Demand Forecast More OEM Centric: We project industry gross adds to increase 31% in 2007, comprised of a 43% increase in OEM channel gross adds and a 10% decline in retail gross adds. We project total churn to increase 20 BP over 2006 due to the impact of OEM non-conversion affecting a greater percentage of the subscriber mix. This translates into a 7% decline in industry net adds - an 11% decline for Sirius and flat vs 2006 for XMSR. 2007 will mark the first year that OEM gross and net additions exceed retail. The key changes to our long term subscriber forecast are more conservative retail demand, a more optimistic OEM gross add forecast, and lower OEM conversion rates as installation rates increase. Underlying demand and customer satisfaction with satellite radio are strong; the key barrier to adoption is trial, which should improve with increased consumer awareness and OEM installation rates."
-ARPU Growth Is An Opportunity: We forecast both companies to begin to implement price increases at some level during 2008. We believe that XM and Sirius have pricing power and are likely to exercise it in the future as they become less reliant on the retail channel for growth.
- SAC/CPGA Should Be Stable: We expect SAC at XMSR to be relatively flat in 2007 at $68, and down 24% for Sirius at $86. Sirius' SAC is continuing to benefit from the implementation of newer chipsets in its equipment
- As outlined in a separate industry note published this morning, we believe that recent rhetoric from XM and Sirius executives clearly indicate that they would like to merge the companies. Both sides have argued for substantial synergies, and that regulators could find grounds to approve a combination. We believe that the comments by managements at both XM and Sirius are likely trial balloons, making us conclude that a more formal merger proposal is possible before year-end.
- We see the most likely proposal as a stock-based merger of equals providing both companies' shareholders an equal stake in the new company, consistent with the market’s current valuation of both companies, which are trading near firm value parity. A merger of equals would also be consistent with our view that at this early stage the companies must be seen as near parity in total value, with XM holding a lead in Asian automaker distribution deals and current total subscribers (although we have Sirius with a lead by 2010), and Sirius leading in retail sales, brand, and better cash flow economics for its Ford and Chrysler deals relative to XM's GM deal. If executed, we see combined savings from a merger near $344m per year, based on 1) 30% reduction in combined G&A, 2) 20% reduction in combined subsidies and distribution and sales and marketing costs, and 3) a 10% reduction in programming costs.
- We believe that both XM and Sirius would continue to operate separate physical networks for many years (i.e., we are not assuming physical network consolidation) since XM and Sirius use different encoding technologies and have large installed bases of radios built into cars. The cost of swapping these radios out we believe would be prohibitive, so we believe if they merged the companies would continue to broadcast via separate satellite fleets (although there could be some consolidation of terrestrial repeater networks). However, we believe XM and Sirius could consolidate programming so that both systems beam identical best-of-breed content, putting, for instance, football and baseball and Howard Stern on both systems, as well as Oprah and Martha Stewart. The companies, however, could consolidate programming staff for music channels, which are largely duplicative. If we capitalize these $344m yearly savings at a 10x multiple, they would be worth $3.4b. If we provide 50% of this value each to XM and Sirius, it would be worth a quarter to a third of each company’s current share price, or $1.14 for Sirius and $5.24 for XM.
- The question mark is regulator approval, which we put at a 50/50 coin toss. Both Justice and the FCC would weigh in, but standard practice is for the FCC to defer to Justice on questions of antitrust, which we believe would be the principal issue. The deciding factor will be how Justice defines the market (subscription radio or in-car music and entertainment). Precedent (DirecTV/Echostar) suggests that Justice would view it as subscription radio, which would prompt a ruling against a merger. However, the trend we believe is for regulators to take a more expansive view of new media markets, which would tend to support approval of a deal. FCC policy, which has specifically called for two satellite radio systems as part of the spectrum licenses, is another problem. However, that could be dealt with potentially by putting licenses in separate companies, while consolidating content and operations, and thus complying with ownership restrictions but still achieving operating and financial efficiencies, like LMAs for terrestrial broadcasters.
J.P. Morgan upgraded Sirius Satellite Radio and rival XM Satellite Radio to overweight from neutral.
- The firm cited that the street now better understand competition and retail side of the sector.
- J.P. Morgan also stated that in their opinion, growth rates for the firms have peaked.
- Firm believes that Sirius will have 15,000,000 subscribers by 2010.
- Firm believes XM Satellite Radio will have 14,000,000 subscribers by 2010.
- Firm sees future OEM gearing towards satellite radio as a standard feature.
- Firm stated there is also the possibility that the two companies could attempt a merger in 2007, though regulatory approval would not be certain.
- Conservative assumptions should be beatable. In our new model, we assume long-term 5% declining retail gross adds, after sharper dips near term. We also assume OEM conversion rates slide to 40%, below guidance for rates near XM. Yet even with these cautious and beatable assumptions, we see Sirius with 15m+ subs by 2010, due mainly to automaker deals, enough to interest investors, in our opinion. We see Sirius exiting 2007 with 8.7m subs vs 9.3m previously. Our EBITDA loss estimate narrows to $236m from $303m.
- Merger potential supports shares. We believe Sirius and XM could potentially attempt a merger this year, with regulator approval a toss-up. If approved, we see savings of $344m/yr,worth $1.14 per Sirius share and $5.24 per XM share.
- Scenario analysis valuation support. Sirius has no earnings yet and is trading at a firm value of $6.6b. Valuation support is very sensitive to debatable long-term subscriber estimates. We outline bear, base and bull scenarios, and a probability
Banc of America Analyst Jonathan Jacoby has downgraded XM Satellite Radio to neutral from buy. According to Jacoby there is limited upside potential and significant downside if the firm does not merge with rival Sirius Satellite Radio. Jacoby also states that even in the event of a merger, many of the cost savings would not materialize until 2010, citing that the systems are not interoperable.
- A merger attempt appears more likely given recent commentary by managements and numerous press articles, and the value of synergies could be huge - $5B by our estimate. Recent comments made by managements for XM and Sirius at investor conferences suggest that both would be interested in pursuing a combination, though an agreement on pro forma ownership and newco management could remain elusive (both companies have expressed a need for their shareholders to have a majority stake in the newco). Our view is that a merger would have to be announced in the next 4-8 weeks if there is to be a reasonable chance of clearing regulatory hurdles before the '08 elections.
- BUT several factors suggest that the upside potential for XMSR stock is now limited, and if no merger occurs XM & Sirius have significant downside risk:
- Consensus subscriber estimates need to be reduced – suggesting that the intrinsic value of each standalone company is lower than perceived. We have revised our subscriber estimates lower for both companies. Our new yearend ’07 sub est for XM is 9.2M (from 9.7M). For Sirius, our new year-end ’07 subscriber estimate is 8.2M (from 8.7M). Our new standalone equity share ests. for XM & SIRI are $13.50 (from $17) and $2.50 (from $3.50), respectively.
- Full realization of synergies could take several years (making value estimates more uncertain), and current stock prices appear to have "baked in" much of this potential value. Most cost savings wouldn't be realized until the end of the decade.
- Our contacts in D.C. suggest that procedural hurdles could stop a deal from getting through the FCC. On competitive grounds, a merger probably would pass. BUT the Achilles heel for sat radio could prove to be the existence of a regulation that requires two satellite radio operators. The FCC might not be able to simply waive this, it seems that might have to be formally changed. This potential procedural hurdle + general FCC inertia reduces the probability of approval before 08 to something less than 50%, in our view.
- We estimate that XM stock is worth ~$19 if a merger deal with Sirius is closed, suggesting little potential upside remains; SIRI would be worth $4. If the newco equity is split 50/50, we estimate that XM shares would be worth ~$19. Although more bullish sentiment might cause both stocks to trade higher following an official announcement, we believe that investors should be cautious as underlying fundamentals continue to weaken and synergies will take years to materialize.
- We have downgraded our rating on XMSR to Neutral from Buy, but we still prefer XMSR to SIRI. Our price targets for XMSR and SIRI are unchanged at $17 and $3.50, respectively. In our view, SIRI still has less upside potential AND more downside risk than XMSR (attributable to its relative valuation premium). "
January 15, 2007 Today's New York Post Page Six article insuated that Artie might be leaving Sirius for a slot at Fox, but sources say that Artie's contract expiration coincides with Howard's which goes for at least another four years. If Artie gets a gig with Fox, this would theoretically enhance his exposure (to the benefit of Sirius).
For those invested in XM Satellite Radio, this will be welcomed news. Honda, who provides XM exclusively, is opening a new plant in India to help meet growing demand for their popular and reliable cars.
TOKYO (AP) -- Honda Motor Co. will invest $150 million to $200 million to build a second plant in India to meet growing demands for cars there, an official said Monday.
The Tokyo-based manufacturer of cars and motorcycles will locate the plant in the northwestern state of Rajasthan, according to Honda spokeswoman Yasuko Matsuura. Honda has yet to decide on the exact site of the new plant, but it will be selected in coming months, and construction is to begin later this year, Matsuura said.
That plant will begin operating in the first half of 2009 with an initial capacity of 50,000 cars a year, and Honda plans to increase it gradually, according to the spokeswoman. The company plans to find a site large enough to produce 200,000 cars annually, she said.
Honda has a plant in Uttar Pradesh with the production capacity of 50,000 cars. The company has announced to increase the production capacity 100,000 cars by the end of 2007.
The Problem Digital technologies allow everyone the freedom to be artists, innovators, producers and creators; to listen, watch and participate wherever, whenever and however they choose. But that freedom is in jeopardy today. The big labels and studios have launched an assault on your technology freedom, because they fear their antiquated business models are being threatened. They’re lobbying for government controls over new technology and filing lawsuits to do the same.
Their goal is to outlaw new digital technology and devices that allow individuals to enjoy digital music and videos at a convenient time and place. They want to severely limit— if not eliminate altogether— the technology-provided freedom to innovate, create, listen and see.
The Digital Freedom Campaign recognizes that new technologies are essential to the creativity and innovation that have allowed this nation to thrive. Allowing these new technologies the freedom to flourish is at the heart of The Digital Freedom Campaign. Digital technology enables would-be artists and hopeful innovators to produce music, create cutting edge films and videos that reach new audiences. It allows consumers to enjoy these legally acquired works whenever, wherever and however they choose. These basic freedom must be protected. The Digital Freedom Campaign is dedicated to defending the rights of artists, innovators, creators and consumers to use technology without fear of unreasonable government restrictions or costly lawsuits.
The Threat The fear of new technologies is hardly new:
" I foresee a marked deterioration in American music…and a host of other injuries to music in its artistic manifestations, by virtue—or rather by vice—of the multiplication of the various music-reproducing machines…"- John Philips Sousa on the Player Piano (1906)
"The public will not buy songs that it can hear almost at will by a brief manipulation of the radio dials."- Record Label Executive on FM Radio (1925)
"But now we are faced with a new and very troubling assault on our fiscal security, on our very economic life and we are facing it from a thing called the videocassette recorder…"- MPAA on the VCR (1982)
"These devices are just repositories for stolen music, and they all know it. So it's time to get paid for it."- Universal Music Group Chairman/CEO Doug Morris, November 10, 2006 The Nature of the FightThe United States Constitution grants a limited monopoly to the works of authors and artists as an incentive to create and innovate. That monopoly typically has granted creators a limited period of time in which their works cannot be copied, or otherwise appropriated, without permission and compensation. Fair Use of those works, however, gives an exemption to that monopoly by allowing certain unauthorized uses—for example, the right to discuss the work in a review or the ability to make a personal backup copy of a CD—as long as they don’t infringe on the creator’s rights. Because copyright, in some cases, limits free speech rights granted by the Bill of Rights (not allowing someone to read another author’s poem without permission on national television is arguably a limit on free speech), one Supreme Court Justice has stated that Fair Use is what keeps copyright Constitutional.
But today, Fair Use is under fierce attack by the entertainment industry, particularly the large recording labels and Hollywood studios, who contend that any unauthorized use of a CD or DVD somehow infringes on their copyrights. They are wrong. Fair Use protects most of the activities they seek to ban. Why shouldn't a student be able to use lawfully acquired music in a school project? Why can't someone use the song she bought on ITunes on a DVD she is making of her photos? Why can't a consumer make a favorite hits CD with music lawfully acquired? Why shouldn't a music teacher be able to assemble clips of sound recordings purchased by the school in order to better teach a class?
The entertainment industry would have you believe that this is about piracy. Again, they are wrong. The Digital Freedom Campaign has nothing to do with the unauthorized mass distribution of copyrighted materials. We all oppose that. In its 2005 Grokster decision, the Supreme Court gave the entertainment industry the legal ability to go after peer-to-peer networks that promote mass, indiscriminate redistribution of copyrighted works if those networks "induce" that behavior. In their arguments, the big recording labels repeatedly stated that their target was not the private and personal recording practices of law-abiding consumers. Yet, the industry made a concentrated push in 2006 to restrict in-home personal use of new technology. New technology is under the most serious assault since Hollywood almost succeeded in keeping consumer VCRs off the market 25 years ago. The entertainment industry is filing punitive lawsuits against legitimate and law-abiding businesses, and having bills introduced in Congress that would place absurd restrictions on lawful consumer practices. For more information on Fair Use and efforts to restrict it, please visit www.hrrc.org. The following are recent lawsuits threatening to restrict or ban new technology and limit Fair Use rights
TARGETED TECHNOLOGY: DIGITAL AUDIO RECORDERS Atlantic Records v. XM Satellite Radio The recording industry sued XM Satellite Radio for billions in potential damages, for marketing lawful products that allow subscribers to time-shift programs by recording them only for private, personal use such as listening to them at a more convenient time. The devices do not allow transferring music to computers or other players, nor do they permit burning permanent copies or distribution over the internet. This lawsuit has been pursued even though the Audio Home Recording Act of 1992 prohibits lawsuits based on the use of such products (on which the music industry already receives royalties under the AHRA).
TARGETED TECHNOLOGY: HOME VIDEO EDITING Macrovision v. Sima Products Sima's digital consumer video editing products allows consumers to improve the quality of certain non-commercial recordings, such as wedding videos, by stripping analog video recordings of the artificial noise and distortion that are a result of Macrovision's copy protection. A Federal District Court has enjoined the sale of these products under the Digital Millennium Copyright Act (DMCA) because the device doesn’t include a chip that generates copy protection – despite the fact that the copy protection would create some of the very viewing distortions that the editing products are meant to remedy.
TARGETED TECHNOLOGY: HOME NETWORKING OF DVDS DVD Copy Control Association (DVD CCA) v. Kaleidescape DVD CCA is suing Kaleidescape claiming that it is illegal for them to sell a home server which copies legally-purchased DVDs to a hard drive and sends them around the home network.
TARGET TECHNOLOGY: PLACE-SHIFTING OF DVDS MPAA v. LOAD 'N GO Video Inc.Load N' Go is a service that allows consumers to load DVDS, which they have purchased, onto their iPods. The movie studios' suit claims that this is illegal, because ripping a DVD (i.e., decrypting it and making a copy) is illegal under the DMCA. The suit also claims that this constitutes copyright infringement.
Other Threats to Fair Use Association of American Publishers v. Google The publishers are suing Google for digitizing libraries, even though the information publicly displayed is minimal (like a library card) and publishers can opt out. This service will make libraries and their books far more easily searchable and, because only short snippets are excerpted, does not provide a substitute for the book itself.
Google v. Perfect 10 The issue here is whether a search engine indexing a copyrighted image on an unauthorized site, and then creating and then delivering a thumbnail photo of that image constitutes an infringement. That Perfect 10 is an adult entertainment site does not diminish the threat here to the ability of consumers or libraries to rely on search engines to find content on the internet. Another Federal District Court held that Google’s linking to certain images, as a result of consumer searches, is not Fair Use – threatening personal use of a popular consumer tool for finding information and content.
Huntsman (Cleanflicks) v. Soderbergh The issue here is whether parents can utilize services that edit out adult scenes and language in movies. A U.S. District Court found that supplying consumers a version of a DVD in which objectionable content has been edited out is not Fair Use – even though the original version has been purchased and supplied to the consumer as well.
With a merger seeming to be the topic of the year so far in SDARS, investors should consider several things closely when considering your investment decisions, or even if you are contemplating a decision to get into the sector for the first time:
- Consider which satellite radio company you feel will see the biggest jump on news should a merger be announced.
- Consider what the impacts will be should a merger not be announced.
- Consider what will happen if a merger is announced, and the timeframe for approval/disapproval for a merger.
- Consider what a merger announcement followed by it being blocked would bring.
- Consider what opposition will be brought against a merger.
- Consider what may happen if a merger is announced and approved, and what actions a newly formed company would make. Would the stock be recapitalized? Would OEM and content deals be renegotiated? What would become of the negotiations with the RIAA?
- Consider how a merged company would spend marketing dollars, and how those dollars would be spent if the merger does not happen.
- Consider what is likely to happen in the time between a merger announcement and a decision by the FCC/DOJ. Will technical advances be placed on hold? Will these companies invest in joint hardware capable of receiving the full bandwidth? Will the CODEC's be aligned?
The bottom line is that investors have many things to consider regarding this subject. Invest in one company? Invest in both companies? Stay on the sidelines? Get out of a position? Switch positions? These are just some items that everyone following this sector needs to think about. In the meantime, opinions to the subject range across the spectrum. Prudent investors will gather as much information as possible, and consider all of the varied opinions prior to deciding on a course of action.
Investors in Sirius Satellite Radio have become familiar with Applied Media Media Technologies Corporation (AMTC). AMTC is the exclusive provider of SiriusBusiness services, and has inked many deals throughout 2006.
What many may not understand as yet is what exactly AMTC does, and how they incorporate SiriusBusiness into their operations.
AMTC was founded in 1991 and has grown to become one of Americas largest telephone on-hold messaging solutions providers. AMTC’s core business centers around the well known TelAdvantage platform.
While the issue of on-hold programming may seem simple, it goes far beyond what many people anticipate. Music on hold requires that the rights fees to organizations such as the ASCAP, BMI and SESAC are paid. Along with music, AMTC can provide scripted pre-recorded messages that speak to the services or goods that a TelAdvantage client sells or services. The combination of music and messages can make TelAdvantage a powerful tool that entertains and informs customers while they are on hold.
With a well established core business in place with their TelAdvantage service, the next logical step was to go beyond the phone system and into the background music business. AMTC already had working relationships with the organizations that hold the music copyrights, and expanding the business to this sector would seem a logical step.
Getting into the background music business meant going head to head with an industry giant. That giant is Muzak, and Muzak seemed to have a perpetual lock-up on the background music field. This is where Sirius Satellite Radio came into the picture. AMTC became the exclusive provider of SiriusBusiness, and in doing so, was able to offer business a less expensive, and more compelling option for background music. Comparison Chart for SiriusBusness and Muzak with a Muzak Attorney response is HERE
AMTC'sSiriusBusiness offers 69 channels of Sirius Satellite Radio for as low as $24.95 per month. With a cost that is far less expensive than the completition, and the ability to combine a telephone on-hold solution, business suddenly had options that simply were not available in the past. The ability for a total solution that costs less has had a dramatic appeal thus far. AMTC has signed nearly 2 dozen business to the service in 2006, and looks to continue with more additions in 2007.
Client testimonials are also impressive: "First, I would like to thank you for your crystal clear product. The sound is super and the selections are great. I have found that your service is superior to our previous provide, the sound is excellent and we appreciate your service." Sam Aldinger, Restaurant Manager, McDonald's - Troy, PA
"With a professional football team, you have many different tastes in music, and in the weight room, music is VERY important. Sirius allows us to pick different channels depending on who is in the weight room. It's amazing, nobody has turned on the radio or CD player since Sirius was installed seven weeks ago! The variety of music is fantastic and not having to listen to commercials is a big plus. We're "Siriusly" pleased with Sirius." Chet Fuhrman, Conditioning Coach, Pittsburgh Steelers
The bottom line is that AMTC seems to be a company on the move, and their combination of a telephone on-hold and background solution package seems to be a winning one.
January 14, 2007 -- FUNNYMAN Artie Lange is looking forward to a future that doesn't include riding on his pal Howard Stern's coattails. Lange just signed a major deal with Fox Television to star in either a primetime series or a new late-night show - a void that was created when the short-lived late show hosted by Spike Feresten was yanked before the holidays. Sources say Lange won't leave Stern's satellite radio show until Fox has something concrete. A rep for Lange didn't return calls...read more: here
Senator Feingold Addresses FCC Payola Proposal January 12, 2007, www.fmqb.com
Sen. Russ Feingold (D-WI) has written an open letter to FCC Chairman Kevin Martin, responding to yesterday's news that the commission is considering a proposal to resolve the ongoing payola investigation. In the letter, Feingold urges the FCC to not entrust an industry that "former Attorney General [Eliot] Spitzer has already shown to have violated payola rules" to police itself. Feingold urges Martin to "instead seek strong binding settlements that ensure future compliance with the law and reassure consumers they will have access to small, independent and local labels and artists via the public airwaves."...read more: here
The merger rumors are swirling. At first it was the press, but now, the tier-one analysts are chiming in, adding credibility to this idea. Even the management teams of both XM and Sirius seem open to suggestion.
There is no way to know if a merger would be approved or not by the FCC unless a firm deal is actually brought before the panel, so both companies would have to actually come to agreement before this happens. This could take time.
Is it time for shorts to cover? As long is there are merger rumors making the headlines, there is a risk of a squeeze.
December U.S. Retail Sales Rose More Than Expected Excluding Autos, Gasoline, Retail Sales Increased 0.7% By JEFF BATER AND ELIZABETH PRICE, January 12, 2007 9:36 a.m. Wall Street Journal
U.S. retail sales showed surprising strength during December, with a wide spectrum of businesses sharing holiday cheer, but demand the month before was lowered sharply.
A separate report showed U.S. import prices also rose more than expected last month, boosted by a recovery in imported petroleum prices.
Retail sales increased by a seasonally adjusted 0.9%, the Commerce Department said Friday. November sales rose by 0.6%, revised lower from a previously reported 1.0% advance. Wall Street expected a robust, yet smaller, increase in December sales. The median estimate of 21 economists surveyed by Dow Jones Newswires had overall sales rising 0.7% in the final month of fourth-quarter 2006...
...Sales rose 1.2% at health and personal care stores; 2.3% at restaurants and bars; 0.7% at food and beverage stores; 3.0% at electronics and appliance stores; 0.9% at general merchandise stores; 0.3% at mail-order and Internet retailers; 0.7% at furniture stores; and 0.6% at clothing stores. Sales fell 1.1% at building-material and garden stores and 0.1% at sporting goods, hobby and book stores....read more: here
(Both Aol and Napster have partnerships with XMSR)
AOL Names Napster as Exclusive Music Subscription Provider Integrated Into AOL Music LOS ANGELES, Jan 12, 2007 /PRNewswire-FirstCall via COMTEX AOL (TWX) announced today that Napster will become the exclusive music subscription provider integrated into AOL Music, replacing AOL Music Now(R). The two companies will work together to migrate approximately 350,000 paid subscribers of the Music Now service to Napster's award-winning digital music subscription service. Additionally, AOL will promote Napster with links to the Napster service throughout AOL's free music site, AOL Music ( http://www.aolmusic.com/), one of the top music destinations on the Web. Music Now customers are being notified that their music accounts will be migrated to Napster unless they opt out. In order to enjoy uninterrupted service, Music Now customers will be able to use their current member ID and password to access the Napster subscription service, and their billing information will be securely transferred directly to Napster. In addition, Napster will re-create migrating customers' existing personal Music Now music libraries, including any original playlists they have created and saved. Napster also will retain Music Now's current pricing tiers for migrating subscribers and transfer any pre-paid track credits they have in their accounts...read more: here
Ford Motor To Present At 2007 Auto Analysts Of New York Detroit Auto Show Conference; Webcast At 10:00 AM(Realtimetraders.com 01/12 08:25:28)
(RTTNews) - Ford Motor Com.(F) CEO Alan Mulally will host a presentation at the 2007 Auto Analysts of New York Detroit Auto Show Conference. The presentation is scheduled to begin at 10:00 am. To access a live webcast, log on to http://www.shareholder.ford.com/
Below is commentary that argues against a satellite radio merger. As we have stated, merger has center stage, and will continue to have it until the conference calls unless something bigger can topple the issue from the satellite radio headlines.
ARTICLE EXCERPT:
THOMAS KOSTIGEN'S ETHICS MONITOR XM-Sirius merger a bad idea Commentary: Monopoly never benefits public or, ultimately, investors
This update reflects the latest subscriber numbers for Sirius and XM.
SANTA MONICA, Calif. (MarketWatch) -- Talk of merger talk between XM Satellite Radio and Sirius is rampant, sending both stocks higher on the chatter. But this is shortsighted muse. The Federal Communications Commission won't likely allow a merger between the satellite radio media companies. As well it shouldn't.
Sure the deal makes sense for investors and would save an estimated $7 billion in costs between the two aspirants for satellite radio domination. The problem is that they are the only two aspirants for satellite domination. Give us one, and you can be sure it will take all. That means subscribers will take a beating and service will flag.
Competition, defined in Business 101, is good. Monopolies aren't. Well, monopolies aren't good for customers; they're great for investors short term. This is what the FCC should be focused on: what is good for the general public, not what is good for the investing public. They are two very distinct things whose lines can be blurred with glaring consequence.
Ask any one living in California during the rolling electricity blackouts of 2001, and they would probably steam. Ask any investor in the company responsible for the rolling blackouts at the time, and they would probably cheer. Service was down, but the stock price was up. People were at the mercy of a company that monopolized its position in the utility sector at the time. That company was Enron.........
Merger is the buzzword of satellite radio. With very little coming out of CES, and an as yet silent auto show, the driving force right now seems to be a merger. This will change in the coming weeks as the companies get ready to disclose operating results. If the auto shows remain silent, merger speculation will rule the press for this sector.
Latest Research from David Bank - RBC Capital Markets
Broadcasting & Cable TV:
XMSR and SIRI Should Act On Urge To Merge...NowWe Believe An XMSR/SIRI Merger Is Desirable And Feasible
- A Merger Between XM And Sirius Appears Both Desirable And Feasible-Given anemic retail channel growth, we believe managements at both companies now recognize longer-term operating leverage from a potential combination is key to generating long-term shareholder value. We also believe the current regulatory framework could allow for a combination, though not without major resistance.
- We Believe The NPV Of Potential Synergies In A Merger Could Be $5-$6bn-While potential synergies abound, some of the most powerful ones won't likely materialize until longer-term OEMs (who won't have two entities to play off each other anymore) contracts expire. While back office, retail incentives and advertising savings are possible near-term, only advertising synergies will likely drive savings by same order of magnitude as OEM and content savings. Also, given 2-3 year OEM planning cycle, XM/SIRI would probably need to maintain separate operating platforms for 24 months post-deal.
- Given Subscriber Base Size Differentials, We Believe XM Would Need to Be The Acquirer, Rather Than A Merger Of Equal Partner-Given XM's 7.6mm subscribers versus SIRI's 6.0mm at 12/31/2006, we believe XM's shareholders would need XMSR valuation at some premium to SIRI on enterprise value. For illustrative purposes, we assume 10% premium. We estimate $8.44/ $1.59 per share of respective synergies attributable to XM/SIRI .
- Approval Would Likely Hinge On Market Definition-Our sources indicate under current composition and political backdrop, the FCC would likely defer decision to grant or deny regulatory approval for such a transaction to the DOJ (though FCC would likely impose qualifying conditions). There are two potential avenues for DOJ regulatory approval. We believe the first, a failing company allowance (without the merger, neither company would be viable), seems unlikely. The second, the argument that market definition for subscription radio services includes competition beyond the merged entity, appears feasible, in our view.
- We Believe DOJ Would Likely Approve A Transaction Given Current Political Backdrop-The DOJ tends to frame competitive assessments around expected environment over the following 12-24 months, rather than the present. We believe that far out, regulators could envision an audio entertainment landscape defined by content distributed over a) cell phones, b) OEM integrated iPods (or a combination of the two in the iPhone), and c) WiMax.
- But Clock Is Ticking-We believe a Democratic helmed FCC (if a Democrat should be elected President) or even a less receptive Republican helmed FCC (expected potentially under McCain administration) could offer much greater resistance than the current regulatory framework. So we believe XM and Sirius need to act before risking the shift to a less favorable regulatory environment.
January 12, 2007 U.S. Scrutinizes Grant to Jobs Focus in Apple Case Is Cast on the Roles Of 3 Ex-Officials By STEVE STECKLOW and NICK WINGFIELD January 12, 2007; Wall Street Journal
Federal authorities are actively investigating a backdated stock-option grant awarded to Steve Jobs, Apple Inc.'s chief executive, that carried a false October 2001 date, people familiar with the matter say. Apple recently disclosed that records were "improperly" created to claim that the grant was approved at a special board meeting that month. But no board meeting took place then. Investigators are now focusing on the grant to Mr. Jobs for 7.5 million options that were finalized in December 2001, when Apple's share price was higher. The false dating increased the value of the grant to Mr. Jobs, and resulted in a retroactive $20 million charge to Apple's earnings when it was discovered by a special internal investigation. People familiar with the matter say the false documentation was created by an Apple attorney named Wendy Howell, whom the company quietly dismissed last month. Ms. Howell contends that Apple's general counsel at the time, Nancy Heinen, instructed her to create the false documentation, these people say. Thomas Carlucci, Ms. Howell's attorney, said that while at Apple "Ms. Howell acted as instructed by Apple management and with the company's best interest being paramount."...read more: here
The introduction of this bill in Congress is nothing new. It's been a fee bonanza for RIAA lobbyists. Will it pass? Highly unlikely, according to my sources...
Senate Bill Aimed At Satcasters January 11, 2007, www.fmqb.com
A bill has been introduced to Congress which would set new rules for satellite radio, creating new rates and content protection standards similar to those of Internet radio. The legislation was sponsored by Sens. Dianne Feinstein (D-CA), Lindsey Graham (R-SC), Joseph Biden (D-DE) and Lamar Alexander (R-TN). The bill is part of the ongoing debate over the ability of satellite radio subscribers to record high-quality, digital copies of songs directly from broadcasts. The RIAA and other organizations have spoken out against the possibility of recording directly from satellite broadcasts, and has asked for similar rules to be put into play that are in effect for Internet radio broadcasters...read more: here
EMI Ousts Execs, Issues Profit Warning Associated Press 01.12.07, 6:44 AM ET
Music company EMI Group PLC announced the departure of two top executives Friday and said it expects revenues to fall at its music division after disappointing Christmas sales. Its shares dropped more than 7 percent.
EMI Music Chief Executive Alain Levy and Vice-Chairman David Munns will leave the world's third-largest music company with immediate effect, EMI said.
The company, home to artists such as Coldplay and Robbie Williams, said in October that it expected the bulk of its full-year sales to be generated in the second half of the financial year ending March 30...read more: here
Satellite Static Businessweek, Jan 12, Steve Rosenbush
XM and Sirius are being pressured to merge because of financial troubles and are discovering what others in the sector already know: It's a tough business
Investors are agitating for a merger of XM Satellite Radio (XMSR) and Sirius Satellite (SIRI), the two providers of radio via satellites that orbit the earth. Speculation about a deal began last summer and gained momentum in early December, when Sirius cut its subscriber forecast for 2006 from 6.3 million to between 5.9 million and 6.1 million (see BusinessWeek.com, 12/5/06, "Sirius Sings the Holiday Blues"). Over the course of 2006, shares of XM and Sirius plunged 62% and 54% respectively, as investors fretted that the potential market wasn't big enough for two players. Later in December, stock market pundit Jim Cramer proclaimed, in an interview with BusinessWeek Editor-in-Chief Stephen Adler, that Sirius Chief Executive Mel Karmazin needed to do a deal with his rival. "If Mel Karmazin does not merge with XM, he will not make it. That company cannot stand alone," Cramer said (see BusinessWeek.com, 12/25/06, "But Jim, What Do You Really Think?"). And on Jan. 10, analyst Eileen Furukawa of Citigroup (C) issued a research report saying that top executives at XM seemed more open to a merger, sending shares in both XM and Sirius higher (see BusinessWeek.com, 1/10/07, "Wedding Bells for XM and Sirius?"). ..read more: here
Marketwatch posted an article today "XM-Sirius Merger A Bad Idea" by Thomas Kostigen, conveying his OPINION that a combination would create a monopoly and therefore, shaft the consumer with higher prices and lower quality services. In his FLAWED LOGIC, he compares satellite radio to the the rolling electricity blackouts of 2001 caused by monopolisitic practices (I thought it was deregulation), and even Enron! When one compares the sectors, one must note that electricity is a basic human need in today's society, satellite radio is not, particularly with iPod/MP3 adapters, AM/FM and HD radio vying for the dashboard.
Thomas references www.siriusbackstage.com stating that "It is a tough sell, and in 2002 the FCC blocked a merger between Dish Network and DirecTV due to the lack of competition outweighing any benefits." I think that 2002 was an entirely different climate for mergers. There are mergers all over the place now. If Dish and DirecTV were to try to merge, in 2007, the deal would have a better chance of being approved, especially with recently introduced competition, including TV content delivered via internet and telephone.
In summary, there are those in high places who think a merger will be approved, and those who don't. Surely, everybody is entitled to their opionions, but whatever the FCC outcome, you don't know until you try.
Interested in reaching a targeted audience of people who follow satellite radio, technology companies, and investing? Perhaps you should consider advertising on SSG.
SSG has a loyal following of readers who check the site often, and our audience is growing.
Live In Play, DCX DaimlerChrysler: Chrysler Group sold 116,604 Certified Pre-Owned Vehicles in 2006 (60.66 +0.60)
Co announces its Chrysler Group reported that its dealers sold a new year-to-date sales record of 116,604 Certified Pre-Owned Vehicles in 2006, an 8% increase above 2005 sales. Chrysler Group continues to outpace the C.P.O.V segment, which increased sales 2% for the year. Chrysler Group Q4 sales also rose 4% to 28,122 units, surpassing the Q4 sales record set in 2005. Compared against a record month of 10,441 units in December 2005, C.P.O.V sales fell 10% to 9,350 units in Dec 2006, which was still the third best Dec in the company's C.P.O.V brand's 5-year history.
Some changes have happened with the way subscribers are counted, and we thought it would be beneficial for investors if we reviewed some items:
It was announced last year that XM would not count subscribers for certain OEM's unless they became self paying subscribers after the promotional period. The metric that determines this ties to revenue. If XM receives revenue during the promotional period, the promotional subscriber will be counted in the subscriber count. If no revenue is received during the promotional period, the radio will not be counted as a subscriber.
To avoid confusion, we are creating a new category for the purposes of this, and perhaps future articles.
PROMOTIONAL INSTALLATIONS
We here at SSG define a promotional installation as "an installed radio activated to expose a consumer to the XM Satellite Radio service, but where no revenue is received by XM during the promotional period.These Are not counted in the subscriber totals"
In general terms, all installs except GM and Honda would fit into this category.
We feel it is very likely that XM will create a new category to account for these types of promotions so as to better let investors understand the metrics and the changes. XM will have subsidy costs for all of these radios, but the benefits of those installs will not be reflected anywhere until months down the road. By creating a category such as promotional installations, investors can get a feel for how many potential subscribers are being exposed to XM during that period. It will also help XM to explain the cost side of the business in a reasonable and understandable manner, since these OEM's will not be available to be used as a divisor on SAC accounting.
EXAMPLE
In general, a consumer who buys a Nissan with XM in January will begin a three month trial period for XM. That consumer will not be counted as a subscriber, but the impacts of the subsidy and other costs will already be impacting the company. The consumer will receive "free" XM for 3 months, and if we allow a month for marketing, it is reasonable to expect a result on that PROMOTIONAL INSTALLATION in April. If the consumer decides to keep the service, they will be counted as a subscriber. If the consumer decides to discontinue the service, they will not impact deactivation's or churn.
WHAT INVESTORS NEED TO BE AWARE OF
The key for investors is to understand that there will be costs booked in Q1 that do not really tie to a subscriber. This could skew metrics until the issue becomes balanced. By Q2, enough time should have passed that there will be PROMOTIONAL INSTALLATIONS that are becoming a part of the subscriber count, and this will begin to show the benefit of the monies invested into that radio in the previous quarter. By Q3, the issue should be fully stabilized provided there is not a substantial ramp-up that would once again skew the numbers. The key is to understand that the “benefits” of each installation are not realized for 3 to 4 months.
If XM does create a new category, investors will have a metric by which to gage progress. In theory, an investor could add the number of PROMOTIONAL INSTALLATIONS to the subscriber number for the period and divide by the SAC (or CPGA) to obtain a more apples to apples comparison with previous quarters or years.
A note of clarity is that there is an existing category called PROMOTIONAL SUBSCRIBERS. It is in that category that revenue generating promotional subscribers are placed (such as GM and Honda).
It is our hope that investors in XM find this helpful.
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).
Sat radio still full of life at CES - Janco www.Briefing.com, Live In Play, Jan 11, 11:33 AM
Janco believes that relative valuation differences and the FCC will stall out any merger possibilities between XMSR/SIRI. They think XM's body language was mixed on the issue. They don't believe that the cos could in fact come to terms on relative valuations of the business. On a subscriber basis, SIRI continues to trade at a premium; however, they believe at the ten thousand foot level they should at least be equal. That said, firm says they have no way of valuing each class of subscribers. They also say that it is these kinds of issues, which they believe prevent the cos from coming to terms with each other. The other issue is regulatory, on which, the firm heard that in a session yesterday that the FCC Chairman Martin essentially stated that they would not approve either a DBS merger or a Sat radio merger. Consequently, they say the clamor around the merger may become more of a sigh.
WASHINGTON, Jan 11, 2007 /PRNewswire-FirstCall via COMTEX/ --
XM, the nation's largest satellite radio service with more than 7.6 million subscribers, announced today that it will launch "GRAMMY Radio," a dedicated channel providing unmatched coverage of GRAMMY Week events. GRAMMY Radio will air on XM LIVE (XM 200) starting February 9 through February 11, the evening of the 49th Annual GRAMMY(R) Awards, featuring a mix of exclusive broadcast coverage of GRAMMY Week events along with every GRAMMY nominated song and artist. This dedicated channel is part of XM's multi-year programming and marketing partnership with The Recording Academy(R).
GRAMMY Radio will feature the first live broadcast of this year's pre- telecast GRAMMY Awards, as well as red-carpet interviews from the GRAMMY Awards and broadcasts of unforgettable performances by a "who's who" of superstar artists at the most exclusive events during GRAMMY Week. These include MusiCares(TM) Person of the Year Tribute honoring music legend Don Henley and the Lifetime Achievement and Trustee Awards Ceremony honoring Joan Baez, Booker T. & The MG's, Maria Callas, Ornette Coleman, the Doors, the Grateful Dead, Bob Wills and more, among other GRAMMY Week events.
"GRAMMY Radio will provide millions of XM subscribers the closest thing to red-carpet access and front-row seats at the music industry's most exclusive events, traditionally reserved only for music industry V.I.P.s," said Eric Logan, executive vice president of programming for XM Satellite Radio. "XM is the ideal platform to bring comprehensive coverage of GRAMMY Week events to the millions of music fans who listen to XM."
In addition to GRAMMY Radio and related GRAMMY specialty programming, XM recently launched "XM Star Treatment: A Night at The GRAMMYs" sweepstakes in conjunction with retail partner Circuit City. Consumers who purchase and activate an XM radio from Circuit City through January 27 will be eligible to win tickets to the GRAMMY Awards telecast on February 11, plus hotel and airfare, behind the scenes access and more.
A complete programming schedule of XM GRAMMY events, including GRAMMY Radio, and full details on XM's GRAMMY sweepstakes is available online at http://www.xmradio.com/grammys. GRAMMY Radio will also be available for streaming through XM Radio Online at http://xmro.xmradio.com/.
- The significant run up in both names yesterday likely was due to increased investor expectations regarding the potential for a merger. While both companies are trading virtually at parity on an EV basis, share prices in 2007 likely will be driven by two key themes, merger expectations and OEM adoption driving sub growth, in our view. However, the possibility of a merger has likely been the single most important factor impacting valuations recently.
- Although both operators agree that significant synergistic value would be created in a merger, and would be amenable to discussing any offers that would enhance shareholder value, the real questions are on relative valuations that would be acceptable to both shareholders and regulatory approval, both of which could prove to be insurmountable challenges.
- At the CES and other events, both companies discussed the particularly challenging YoY retail comps for 4Q06 and 1Q07. However, Sirius believes that its next leg of growth likely will be from the upcoming launch of NASCAR that will be exclusive to Sirius this year.
- The two companies also disclosed that they had remained disciplined with regard to sub growth during 4Q06. As a result, not only were SAC and CPGA in line with street expectations and previous guidance, but churn, OEM conversion, and cash flow metrics were all in line with street expectations.
- While retail will continue to drive innovation, especially for the portable devices and in-home entertainment systems, we believe satellite radio will increasingly become an OEM driven story, with auto shows potentially proving to be more important catalysts in the future. The next important events are the Chicago auto show in early Feb, and the New York auto show in early April.
Eileen Furukawa of Citigroup issued a note this morning following their conference. Key points are:
-With continued strong consumer satisfaction, SIRI reiterates that a price hike still remains a possibility. We think reaching positive FCF for '07 is achievable without a price hike - but any hike would make this goal even more easily attained.
-SIRI & XMSR remain in arbitration with RIAA over royalty fees with a deadline of Dec '7, but gap still remains btwn cur 2% rev share vs RIAA's 10% share wish.
-SIRI believes that NASCAR will be a meaningful source of subs since it had been one of the top 3 reasons (along with MLB and commercial free music) that XM subscribers gave as reasons consumers signed up with XM.
- SIRI expects ad revenue will double in '06 vs '07 aided by Stern and NASCAR, which is in line with our est for ad rev of $34M in '06 rising to $70M in '07. Longer term SIRI still thinks goal of ad revs at 10%+ of revs is reasonable.
The firm recommends going long SIRI and short XMSR as they believe the recentrise in shares of XMSR is primarily due to merger speculation. The firm alsobelieves that the comments from the FCC Chairman yesterday at CES lower thechances of a merger.
The merger buzz surrounding Sirius and XM continues to swirl. Analysts are releasing notes, and management of both companies talk about the synergies that would be created. With recent events, it seems more and more likely to many who follow the sector. The Fly on the wall even feels that there could be news delivered today on the subject due to the fact that the 30 "quiet period" is approaching.
Some items to note:
- These stocks now trade at near parity on an Enterprise value basis.
- A "buy-out" scenario is unlikely, and a "merger of equals" is more likely. However, one entity is typically the "surviving" entity.
- Many experts believe that regulatory hurdles are not as substantial as once thought, and that a merged company could get approval.
- The possibility of a merger has bolstered these equities, but at the same time ties their hands. Investors seem poised to jump in on the news of a merger. The more difficult gage is what the streets reaction will be if it does not happen.
- Neither company has set a date for the Q 4 earnings call. This is not out of the ordinary, as typically there has been a "waiting game" as to which company will report last. There has likely been enough time to generate pro-formas from which merger negotiations could take place, with audited results coming later to verify the basis.
- The Detroit Auto Show has been virtually devoid of news surrounding satellite radio.
- CES, although new items were displayed, was relatively quiet, and the biggest news out of the show was merger speculation.
With merger being the driving force in PPS action, and news, one has to wonder what will happen if the "carpet" gets pulled on such a deal. Opinions here differ regarding a merger, as they do elsewhere. My position has been that it is the responsibility of these companies to at least give the merger a serious look. That appears to be happening. Whether that serious look will bear fruit is yet to be seen.
Cramer's 'Mad Money Lightning Round': Bid on eBay By TheStreet.com Staff 1/10/2007 7:50 PM EST
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Wednesday evening:
Sirenza Microdevices (SMDI - news - Cramer's Take - Rating): "We recommended that in the midsingle digits ... sold it in the teens, and we never looked back ... radio frequency for the Sirius Satellites (SIRI - news - Cramer's Take - Rating) of the world. ... Sell Sirenza Micro and never look back."
Shares of both outfits climbed Wednesday as a Citigroup report appeared to fuel merger speculation Could XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI) actually move into the same orbit? A Citigroup analyst says odds are more likely now that a merger between the two companies could happen. Of course, the combination of the two players in what is basically a duopoly would face some hurdles. They'd need okays from the Department of Justice and the Federal Communications Commission, for example. The two rivals would have to resolve differences on key things like how they count their subscribers. And then there are other matters like pricing concerns. But Citigroup analyst Eileen Furukawa sees some possibilities. After an investor dinner with XM Chairman Gary Parsons and CFO Joe Euteneuer, Furukawa "sensed an increased openness from XM re: the possibility of merger with Sirius," she said in a research note Jan. 10. If such a deal did happen, she thinks it would take place before the Fall. (...read more: here
S&P: XM-Sirius Deal Wouldn't Fly 2:37p ET January 10, 2007 (S&P) From Standard&Poor's Equity Research.
XM Satellite Radio (XMSR) Maintains 2 STARS (sell) Analyst: Tuna Amobi, CPA, CFAAfter a comment at an investor conference, we think XM is up today on the inference that 2007 merger talks with Sirius (SIRI; 3 STARS, hold) are possible. Despite potential strong synergies, we do not think, given the FCC's recent comments, that the potential combination of satellite radio rivals would pass regulatory muster. Assuming satellite radio will keep its duopoly-like structure near term, we see any takeover premium as unwarranted. It is also not clear to us by how much a 2007 ramp of auto OEM units could help offset further fundamental contractions in the retail channel.
Sirius-XM merger makes sense Sirius CEO Mel Karmazin reiterates that consolidation in the satellite radio industry could happen, defends Howard Stern bonus. By Paul R. La Monica, CNNMoney.com editor at large, January 10 2007: 4:21 PM EST
NEW YORK (CNNMoney.com) -- The chief executive officer of Sirius Satellite Radio told investors Wednesday that he would be open to a combination with his company's top rival, XM Satellite Radio. Mel Karmazin, speaking at Citigroup's annual entertainment, media and telecommunications conference in Las Vegas said that a merger between Sirius (Charts) and XM (Charts) could be in the best interests of both companies. "One way you can create shareholder value is through consolidation, particularly in a fragmented industry like radio," he said. "Conceptually a deal makes sense and you could add value from synergies." ...read more: here
Howard Stern Listener Conversion Update Pool of Potential Active Stern Listeners Shrinking www.bridgeratings.com, Jan 10
For the first time since it began tracking interest in subscriptions to satellite radio by listeners of Howard Stern in the fall of 2004, Bridge Ratings & Research has accumulated enough on-going data to project the liklihood of Howard Stern's former terrestrial radio listeners to convert to Stern's show on satellite radio. Through December of 2006, we projected that Stern was directly responsible for converting approximately 1.6 million of his listeners from traditional radio to subscribers to Sirius satelltie radio. This amounts to 32% of the satcaster's total subscriber growth from just prior to Stern's announced move to Sirius in October 2004 through 2006. Based on Bridge Ratings estimates 57% of Stern's core (heavy) terrestrial radio listener base followed him to Sirius satellite radio. This is an extreme conversion rate among Stern's most loyal fans. His core audience composed approximately 20% of his total national terrestrial audience. Using a 2005 national terrestrial audience of 14 million, 2.8 million listeners represented this heavy listener base(minimum 2 hours per day listening) group. This heavy listener group provides Stern with his greatest potential for Stern channel growth. The untapped segment equals another 1.2 million listeners. While we believe it is unlikely that Stern will attract 100% of this former heavy listener base, it is very likely Sirius and Stern can attract an additional 600,000 of these fans based on three marketing scenarios that were presented to this potential audience during interview sessions in 2006...read more: HERE
Head's up: There is a Dow Jones story which has hit the wires essentially questioning the way XM and Sirius calculate CFBE.
"Where The Cash Flow Comes From At XM, Sirius
Both major satellite radio companies have reached a critical milestone in their effort to prove their long-term viability- but that doesn't mean that they're out of the woods"...MORE TO COME
If investors take a look at the current prices of Sirius and XM, they will see that these two companies are trading at parity on an Enterprise Value basis.
Take it for what you will, but there could be a number of theories about this.
Nothing really ground breaking at XM's presentation. The format was Q&A, rather than scripted.
Of course merger is on analysts minds, and seen as a catalyst to stock price movement. For the first time that I can remember, Parsons did not quash the idea. He said that he believed there could be substantial synergies and that the current regulatory environment is favorable for a merger of this type. He mentioned that he did not see Sirius as a competitor for the OEM dashbord, saying that once someone bought a GM, they were not likely to switch to Sirius, or vice versa, if someone bought a Ford, they were not likely to switch to XM. Essentially, he said that in the OEM market, XM and Sirius are aligned against iPods, MP3's, etc.
He was asked whether XM would be the buyer or seller, and his answer was neither... that if the deal was done it would be a merger, putting the two companies together, rather than one acquiring the other.
On upcoming devices, Parsons said there would be new products in the Spring, with more storage and battery life. He said they learned from their experience of Christmas in August of showing products before they were ready and that’s why they didn’t bring them to the CES this year.
I'm surprised that no questions were asked about how the much-hyped Apple iPhone might affect XM's venture with Cingular.
Howard's pay package is high by any standard, however, one thing to keep in mind: his compensation is budgeted to cover all costs of producing the content for two channels. That means that Howard, not Sirius, pays the salaries for Howard's full staff (including the wack packers), and costs of producing the content for both 24 hours/day, 7 days/week channels.
I think this is a great idea. When you don't have the time to watch late night TV, you can schedule a recording or listen on the way to work the next morning. The content translates well from visual to audio...this is programming direction that satellite radio should consider.
In Brief: Westwood One Plans Deals With Comedians The Wall Street Journal, January 10, 2007; Page B3
Westwood One Inc. is turning to late-night TV comedians in a bid to attract more radio stations to its programming and boost the company's long-suffering share price. The company, which syndicates radio programming, plans to announce deals to put former "Saturday Night Live" star Dennis Miller on the radio, along with snippets from "The Tonight Show With Jay Leno" and "Late Night With Conan O'Brien." Mr. Miller will host his own daily three-hour talk show, debuting in March...read more: here
