Yes, I believe I calculated the CPGA as in excess of $400 about 4 months ago...
I don't really want to argue it, but I seem to recall you came up with a much higher figure. Which, of course, is to be expected during the opening months of establishing a business which is ultimately to have tens of millions of subscribers.
If the CPGA costs were over $400 last year as calculated by ML and myself. Then I have a hard time in understanding the credibility of your claims that the subscribers that activated a year ago have already repaid their CPGA costs?
No, you're correct here -- I misspoke. The correct statement would have been that subscriptions being acquired TODAY will be paid for one year from today. A year ago, this was not, in fact, the case. However, I would be quick to point out that substantial portions of those costs from the ad campaign a year ago went into NOT acquiring subs, but in establishing a brand -- which worked, in that today satellite radio is often referred to simply as "XM Radio" and almost nobody has heard of Sirius.
You can "classify it" anyway you want. It's still marketing costs whose ultimate goal is to acquire subscribers
As pointed out above, this is not totally correct -- but it isn't a point worth getting balled up about. However, ask Coca-Cola whether they feel their marketing expenses for this quarter benefit mostly "this quarter" or "future periods". XM has established itself as THE brand (not merely "A" brand). That didn't happen for free.
You should also keep in mind that the average subscriber is paying 1 year in advance; thus, beginning '04, the total cost of subscriber acqusition will be covered in advance.
If so, this would be a "first" in the subscriber businss!
Precisely. That's what makes it attractive. But it gets much better. As we get into '05, '06, and beyond, the cash this business generates is, frankly, unbelievable. At 10M subs, this business will generate roughly $1.50/share in profit. We could easily see 10M subs in '06. By '09, subs could easily be twice that, particularly if SIRI fails at it appears it will. |
