So what happens to all that expensive and unique programming Sirius (NSDQ: SIRI) and XM (NSDQ: XMSR) amassed during the highly competitive pre-merger days? The companies promised the merged Sirius XM would offer subscribers choice of content, ways to combine the two and access via existing satellite radios. Today, they started to deliver—but at a cost and with some big gaps, including online access for a la carte subs: -- “Best of Both”: For $16.99 monthly, roughly $4 more than current fees for each separately, XM subs can add a “Best of Sirius” pack with Howard Stern, Martha Stewart Living Radio, NFL, NASCAR and *Playboy* Radio. Sirius subs can add the “Best of XM” with Oprah Winfrey, Opie and Anthony, XM Public Radio, “select” games from NBA, NHL and NCAA, and the PGA Tour. Most should be able to add the packages with their existing radios. A “family friendly” version is $14.95. Internet radio is included; upgrades to CD-quality sound are $2.99 a month. Want Grateful Dead Radio or the Boss on XM? Out of luck. -- A la carte: But a la carte options require a new radio. The first of those (Sirius Starmate 5) went on sale today for a suggested $129. And a la carte is limited: no live games or games—and no internet radio. Plans start at $6.99 for 50 channels from Sirius with an extra $0.25 per premium channel per month. A la carte plus Howard Stern runs $12.95. Adding sports starts at $11.99 or, in an odd bit of pricing, you can get Howard and sports for $12.95. Prices for Sirius-only a la carte are capped at $12.95 for a la carte no matter how many channels are selected. Premium channels include the Grateful Dead Channel, E Street Radio, Elvis, Siriusly Sinatra, Martha Stewart and the Fox News Channel. A Gold version with 100 channels, no premium charges and some XM options runs $14.99. At first glance, a la carte seems more for new users who don’t have investments in equipment. As for “best of”—all depends on your definition of best. 

So what happens to all that expensive and unique programming Sirius (NSDQ: SIRI) and XM (NSDQ: XMSR) amassed during the highly competitive pre-merger days? The companies promised the merged Sirius XM would offer subscribers choice of content, ways to combine the two and access via existing satellite radios. Today, they started to deliver—but at a cost and with some big gaps, including online access for a la carte subs: -- “Best of Both”: For $16.99 monthly, roughly $4 more than current fees for each separately, XM subs can add a “Best of Sirius” pack with Howard Stern, Martha Stewart Living Radio, NFL, NASCAR and *Playboy* Radio. Sirius subs can add the “Best of XM” with Oprah Winfrey, Opie and Anthony, XM Public Radio, “select” games from NBA, NHL and NCAA, and the PGA Tour. Most should be able to add the packages with their existing radios. A “family friendly” version is $14.95. Internet radio is included; upgrades to CD-quality sound are $2.99 a month. Want Grateful Dead Radio or the Boss on XM? Out of luck. -- A la carte: But a la carte options require a new radio. The first of those (Sirius Starmate 5) went on sale today for a suggested $129. And a la carte is limited: no live games or games—and no internet radio. Plans start at $6.99 for 50 channels from Sirius with an extra $0.25 per premium channel per month. A la carte plus Howard Stern runs $12.95. Adding sports starts at $11.99 or, in an odd bit of pricing, you can get Howard and sports for $12.95. Prices for Sirius-only a la carte are capped at $12.95 for a la carte no matter how many channels are selected. Premium channels include the Grateful Dead Channel, E Street Radio, Elvis, Siriusly Sinatra, Martha Stewart and the Fox News Channel. A Gold version with 100 channels, no premium charges and some XM options runs $14.99. At first glance, a la carte seems more for new users who don’t have investments in equipment. As for “best of”—all depends on your definition of best. 

Not that this will shock anyone, but with Wall St. falling off the high wire, this is unlikely to be a a period of big time dealmaking. Speaking at a breakfast sponsored by Portfolio, media bigs Mel Karmazin, Jeff Zucker and Steve Rattner (Quadrangle), agreed that a slow period for deals will only get slower. Said Rattner: “It’s been an incredibly slow year for the media M&A landscape and I think what’s happened in the last few days is simply going to exacerbate that. Big deals today are not going to happen. They’re simply not going to happen.” Karmazin—who has watched shares of Sirius (NSDQ: SIRI) slip below $1 since his merger with XM (NSDQ: XMSR)—didn’t predict a total deal freeze, but said any financing would come at a steep price (that’s been the story for awhile, even before all the latest). The panel moderator, Portfolio’s Joanne Lipman, tried prodding the trio into predicting when deals would come back, but despite several attempts, they never took the bait. Karmazin said it would happen when sellers fully ratcheted down their price expectations. -- NBCU sale?: Naturally, since Jeff Zucker was in the house, this had to come up. Zucker had little new to offer ("it’s unlikely"), and Rattner added that there isn’t a likely buyer, even if GE wanted to sell: “The market’s not really happy with these companies [i.e., the big media conglomerates], and the idea that one of them would wake up one day and say ‘Let’s go do a $30 billion acquisition’—it’s simply not happening.” Of course, GE is getting caught up in the downdraft on account of it being heavily involved in finance, so it may yet decide to shore up its capital. -- *IAC* split: Rattner, an IAC (NSDQ: IACI) boardmember was apparently asked about IAC’s split, and though he said he couldn’t comment, he then offered the following: “I will say financial engineering is really not a way to create value for your shareholders or yourself or whoever your owners happen to be. Companies that buy or sell or spin off because they think the market doesn’t understand their multiple and so forth I think are really missing the point. I think at the end of the day, what really matters is running your company, building revenue, building cash flow, and ultimately that will create value and that value will be recognized. And spending your time getting lost in financial engineering is a real mistake.” Portfolio’s Jeff Bercovici notes that this this as a sharp critique of Diller’s split plan, though it could just as easily be referring to the process of building up Old IAC with its Liberty Media-infused dealmaking and financial engineering ethos. 

Not that this will shock anyone, but with Wall St. falling off the high wire, this is unlikely to be a a period of big time dealmaking. Speaking at a breakfast sponsored by Portfolio, media bigs Mel Karmazin, Jeff Zucker and Steve Rattner (Quadrangle), agreed that a slow period for deals will only get slower. Said Rattner: “It’s been an incredibly slow year for the media M&A landscape and I think what’s happened in the last few days is simply going to exacerbate that. Big deals today are not going to happen. They’re simply not going to happen.” Karmazin—who has watched shares of Sirius (NSDQ: SIRI) slip below $1 since his merger with XM (NSDQ: XMSR)—didn’t predict a total deal freeze, but said any financing would come at a steep price (that’s been the story for awhile, even before all the latest). The panel moderator, Portfolio’s Joanne Lipman, tried prodding the trio into predicting when deals would come back, but despite several attempts, they never took the bait. Karmazin said it would happen when sellers fully ratcheted down their price expectations. -- NBCU Sale?: Naturally, since Jeff Zucker was in the house, this had to come up. Zucker had little new to offer ("it’s unlikely"), and Rattner added that there isn’t a likely buyer, even if GE wanted to sell: “The market’s not really happy with these companies [i.e., the big media conglomerates], and the idea that one of them would wake up one day and say ‘Let’s go do a $30 billion acquisition’—it’s simply not happening.” Of course, GE is getting caught up in the downdraft on account of it being heavily involved in finance, so it may yet decide to shore up its capital. -- IAC (NSDQ: IACI) Split: Rattner, an IAC boardmember was apparently asked about IAC’s split, and though he said he couldn’t comment, he then offered the following: “I will say financial engineering is really not a way to create value for your shareholders or yourself or whoever your owners happen to be. Companies that buy or sell or spin off because they think the market doesn’t understand their multiple and so forth I think are really missing the point. I think at the end of the day, what really matters is running your company, building revenue, building cash flow, and ultimately that will create value and that value will be recognized. And spending your time getting lost in financial engineering is a real mistake.” Portfolio’s Jeff Bercovici notes that this this as a sharp critique of Diller’s split plan, though it could just as easily be referring to the process of building up Old IAC with its Liberty Media-infused dealmaking and financial engineering ethos. 

After waiting a long 18 months for former rivals Sirius (NSDQ: SIRI) and XM (NSDQ: XMSR) to come together, it’s natural for CEO Mel Karmazin to be feeling excited about the possibilities. Speaking at the 2008 Merrill Lynch Media Fall Preview Conference in Marina Del Rey, CA., Karmazin shared his excitement, boasting that the merger will produce savings of $425 million, up from the $400 million he predicted earlier in the year, Radio and Records reported. So far, Sirius XM is on track to bring in $2.4 billion in revenue this year, with $2.7 billion expected in 2009, Karmazin said. So far, the company has pro forma revenue growth of 17 percent 2008, he added. Some of the other attributes of the deal that Karmazin gushed about included: -- Adding up the savings: Karmazin specifically pointed to $145 million in cost savings, including $20 million related to telco expenses and $50 million for subscriber acquisition costs, reducing senior management and outside advisers for another $50 million, and $25 million by eliminating the “innovation center” in Boca Raton, Fl. More after the jump… -- Subscriber forecast: By the end of the year, Sirius XM should have 19.5 million subscribers, with 2 million more the next, ending 2009 with 21.5 million. -- Not all roses and smiles: While things sound rosy for Sirius XM, the two divisions are also bringing together some expensive debt payments in early 2009. Karmazin hopes to refinance the debt and assuage investors’ fears. But given the credit markets these days, that will require a good deal more than Karmazin’s soaring optimism to make it happen. Also, speaking of hopes, Karmazin also shot down any chances of a partnership with Apple (NSDQ: AAPL). Shortly after taking the reins at Sirius, Karmazin spoke with Steve Jobs four years ago about putting Sirius on the iPod. But the talks never went anywhere. Now, an Apple deal is hardly worth thinking about, as it wouldn’t produce enough revenue, Karmazin said.

Filed under: Competitive strategy, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI)

When Sirius Radio (NASDAQ: SIRI) bought and closed in on rival XM Radio last month, the first thing Sirius CEO Mel Karmazin did was to look at cost cutting via taking out redundancies from the merged company. Although all kinds of ideas are floating in the air to increase Sirius subscriptions and push its stock price back above the $1 mark, some are questioning how the combined satellite radio company can grow in 2009.

Indeed, Sirius estimated its subscriber base this morning to be at 19.5 million paying subscribers by the end of this year, with growth hitting 21.5 million subscribers by the end of 2009. So, that leaves Sirius with a goal of growing its base two million subscribers next year. Analysts noted that those numbers are a slowdown from 2007's addition of 3.7 million subscribers and 2006's addition of 4.4 million subscribers. Of course, there were two companies offering service those two years -- now there is one.

Unless Sirius can be really aggressive in marketing its aftermarket radios in new vehicles (the subcompact, four-cylinder kind consumers are actually buying) and ensure Sirius radios are offered as standard equipment in the vehicle product mix outside the defunct truck and SUV markets, it will have a tough time hitting 2009 prospects for growth. There are simply too many other alternatives for consumers listening in their cars (iPods and podcasts/downloaded music, anyone?). Karmazin's constant explanation during the XM merger process was that consumers have so much choice about what to listen to and where, that a combined Sirius/XM would not be a monopoly threat. He's right, and it's starting to show as subscriber numbers slow down.

 

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Filed under: Competitive strategy, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI)

When Sirius Radio (NASDAQ: SIRI) bought and closed in on rival XM Radio last month, the first thing Sirius CEO Mel Karmazin did was to look at cost cutting via taking out redundancies from the merged company. Although all kinds of ideas are floating in the air to increase Sirius subscriptions and push its stock price back above the $1 mark, some are questioning how the combined satellite radio company can grow in 2009.

Indeed, Sirius estimated its subscriber base this morning to be at 19.5 million paying subscribers by the end of this year, with growth hitting 21.5 million subscribers by the end of 2009. So, that leaves Sirius with a goal of growing its base two million subscribers next year. Analysts noted that those numbers are a slowdown from 2007's addition of 3.7 million subscribers and 2006's addition of 4.4 million subscribers. Of course, there were two companies offering service those two years -- now there is one.

Unless Sirius can be really aggressive in marketing its aftermarket radios in new vehicles (the subcompact, four-cylinder kind consumers are actually buying) and ensure Sirius radios are offered as standard equipment in the vehicle product mix outside the defunct truck and SUV markets, it will have a tough time hitting 2009 prospects for growth. There are simply too many other alternatives for consumers listening in their cars (iPods and podcasts/downloaded music, anyone?). Karmazin's constant explanation during the XM merger process was that consumers have so much choice about what to listen to and where, that a combined Sirius/XM would not be a monopoly threat. He's right, and it's starting to show as subscriber numbers slow down.

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Schaeffer's Laura Houser takes a look at activity on the Street after the market close

Schaeffer's Laura Houser takes a look at activity on the Street ahead of the market open

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Schaeffer's Laura Houser takes a look at activity on the Street after the market close

Schaeffer's Laura Houser takes a look at activity on the Street ahead of the market open