Monday, March 05, 2007

CBS's Moonves Comments On Satellite

March 5, 2007

One has to wonder whether these comments help or hinder the sirius and XM merger process.

CHICAGO (MarketWatch) -- CBS Corp.
2:24pm 03/05/2007

CBS's radio stations have not been affected by satellite radio, Chief Executive Les Moonves told a gathering at the annual Bear Stearns Media Conference in New York on Monday. Moonves said he would leave it to the National Association of Broadcasters to comment on whether or not XM Satellite Radio should be allowed to complete their proposed $13.6 billion merger, but said CBS Radio has benefited from the traditional medium's locality. "We're local, and [satellite is] not." Not only can terrestrial radio stations offer local news, weather and sports, Moonves said, but playlists can be altered to suit different markets. "We've had a lot of success with these Jack stations," he commented, referring to a format that seeks to replicate the random playlists possible on MP3 players and other devices. "And the playlist in L.A. is different from the one in New York."

Seems that according to Moonves, that terrestrial radio is doing fine in the broadcasting space, and that their localized content gives them a perceived buffer between themselves and satellite radio. Localized sports radio stations is one particular form of content where terrestrial radio carries a distinct advantage. In Boston for example, Sports Radio WEEI carries a whole line-up of sports shows dedicated to the Red Sox, Patriots, Bruins and Celtics. This type of localized content goes deep into specific players and team happenings better than that which is available on a nationally based radio show. Additionally, satellite radio is virtually commercial free on the music side of things. again, a distinct advantage for terrestrial radio. Advertisers seeking an audience that listens to a specific genre of music need to advertise with terrestrial, as there are no ads on satellite.

Moonves points out distinctly some of the competitive advantages available to terrestrial radio. So far the NAB has avoided these points, and instead focused on what they perceive as advantages that satellite has over terrestrial. As the marketplace gets defined in the merger process, these advantages need to also be explored.

Labels: merger, moonves, satellite choice, sirius, xm

3/05/2007 02:42:00 PM

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

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SSG is not a Financial Advisor. Read Disclosure: HERE

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Tuesday, February 06, 2007

Deutsche Bank Comments On Possible satellite Transaction For XM

February 6, 2007

In a note issued today, James Dix of Deutsche Bank spoke of a possible sale and leaseback option for XM's most recently launched satellite XM-4. Dix sees it as a transaction to help liquidity.

Report Excerpt:

Sale-leaseback would affect liquidity, not merger

Looking at possibility of sale-leaseback transaction. Per channel checks, we believe that XM may be pursuing a potential saleleaseback transaction involving the XM-4 satellite it launched late last year. Of course, it may not conclude a deal. Assuming satisfactory terms, we would likely view such a transaction as a modest positive, given its impact on liquidity.

Impact of 2006 sub shortfall on cash is already known

Given that XM finished 2006 with 7.6m subs, vs the 9.0m sub guidance it gave at the beginning of 2006, its sub revenue base for 2007 is roughly $170m less than contemplated at the beginning of 2006. Even after SAC, we estimate the incremental negative impact on year-end 2007 cash could be roughly $100m. Thus, it is not a surprise that the company would be pursuing additional liquidity. The company in fact carved XM-4 out of the security for its financing in the spring of 2006, which would facilitate a saleleaseback transaction now. We estimate the carrying-value of the satellite at $240m, which includes value for the launch vehicle and in-orbit insurance (for 18-24 months, we believe). The launch was good, and thus we estimate XM-4's useful life at this point is at least 15 years.

Do not believe a financing transaction would affect merger odds

We believe the primary implications of such a transaction would be for XM's liquidity, not the prospects for a merger with Sirius. For example, XM-3, launched two years ago, is currently security for line of credit financing. XM's service is now operating using XM-3 and XM-4, with XM-1 and XM-2 powered down and available as spares. That said, we still believe that a completed merger would be a challenge for both companies (see our report "After further review ... still not counting on a merger" dated 1/31/07).

Labels: merger, sale-leaseback, satellite choice, xm, xm-4

2/06/2007 11:27:00 PM

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

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SSG is not a Financial Advisor. Read Disclosure: HERE

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Wednesday, January 31, 2007

Something That Gives Pause To SDARS

January 31, 2007

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

Labels: ils, launch, satellite choice, sea launch

1/31/2007 02:32:00 PM

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

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SSG is not a Financial Advisor. Read Disclosure: HERE

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Wednesday, January 24, 2007

Content, Freedom and Choice - A Winning Combination

January 24, 2007

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.

Labels: OEM, satellite choice, sirius, xm