The churn numbers are a major point of confusion in the media. Keeping in mind it is a monthly rate, 2.6% would be really, really bad. But these media people are conflating "churn" with promotional subscribers who decide not to become paying subscribers.
SIRI's churn was excellent for Q1, as was XM's given its fee increase. But there is a bit of a "gotcha" in SIRI's number:
In their deal with Chrysler, all DCX factory installs received a "free" 1 year prepaid subscription; initially, these numbers were small, but the last couple of quarters they are building.
Just as XM counts "promotional" subscribers as subscribers, so does Sirius. But every quarter, XM loses about 40% of those subscribers when they decide not to continue with a real subscription -- so, XM's sub #s are inflated by about 40% of the previous quarter's promotional subscribers -- currently about 100K.
Sirius, OTOH, is not losing these customers until the end of the 1 year promotional period (XM uses a 3 month promo period), which will be mostly beginning in Q3. So, while XM carries 40% of one quarter's subs on the books which we know are going to churn off, Sirius is carrying almost a full year. It is starting to become significant.
I'm not suggesting they should do anything differently, just that the subscriber numbers are inflated by the facts. SIRI's #s are likely overstated by some 120-150K, which is basically 10% for them.
Anyway, there is a great deal of confusion on the churn figures, but both companies did extremely well in this area in my view. |
