Sunday, February 04, 2007

Counting Subscribers

February 4, 2007

Some analysts and even XM themselves point out that subscriber growth in the first half of 2007 will not be particularly strong. Those statements left alone without further understanding can be a bit dangerous. This is particularly true given a change in the methodology XM will be using counting some subscribers.

With a change in methodology come an unbalance, and until the current methodology can absorb that change, the balance is disturbed. That is exactly what will be happening for XM in the first half of 2007.

The "weaker" first half numbers are not at all indicative of "nothing happening", or a "weakness in the sector". Quite to the contrary, XM will be building a "backlog" of subscribers during that time with Hyundai, Nissan and Toyota. This happens because, going forward, subscribers from Hyundai, Nissan, and Toyota are not counted in subscriber rolls when the consumers promotional period starts. Instead the installations will be counted after the promotional period ends and when a consumer decides to keep the service. The method is derived from the structure of the deal. Absent any revenue from Hyundai, Nissan, and Toyota, these installs are a pure "promotional period", and because there is no revenue, they are not counted as subscribers at the inception of the promotional period.

Thus, during the first half of the year, this new method will be taking shape for XM. After a three month trial, those that keep the service will become a part of the subscriber count. This is where a "backlog" of subscribers is created.

For example, if we were to assume 50,000 installs from these automakers in January of 2007, and a 50% take rate were also assumed, XM would have a sudden swell of 25,000 subscribers in April. The February crop would hit in May, the March crop in June and so on. As the year progresses, and installation rates increase, the crop will get bigger. With a deeper penetration rate anticipated for model year 2008 cars, we should expect bigger monthly numbers beginning in July or August of 2007.

It stands to reason that this type of change in the counting methodology will take 6 months or so to become absorbed into the overall system. Given these changes, and the investment XM is making into these installations, we hope to see some sort of breakdown or statement from XM on how things are progressing.

These changes require that investors shift from what they have been conditioned to accept. With all of the other OEM deals, the subscriber crop has been counted as soon as the "seeds" were planted. With Hyundai, Nissan and Toyota, it is the "harvest" that determines the subscriber count.

Investors should think of OEM installations as "seeds" and "harvest" of a crop. The "seeds" are planted and take three months to come to fruition. With GM and Honda, the "seeds" are added to the subscriber number. With Hyundai, Nissan and Toyota the "harvest" determines what is added to the subscriber number.

Labels: gm, honda, hyundai, nissan, subscriber count, toyota, xm

2/04/2007 10:46:00 AM

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Tuesday, January 30, 2007

XM and Honda Extend Relationship Through 2016

January 30, 2007

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.

Labels: acura, honda, OEM, xm

1/30/2007 08:56:00 AM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

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Monday, January 15, 2007

Honda To Open New Plant To Meet Growing Demand

January 15, 2007

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 link to the AP story is HERE

Labels: honda, xm