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Technology Stocks : XM Satellite Radio Holdings Inc. (XMSR)
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To: i-node who wrote (2234)2/18/2006 7:52:42 PM
From: pcstel  Read Replies (1) of 3386
 
But a certain amount of the churn is people trading cars, etc., who don't re-up immediately or whatever.

Here is the real weakspot in the SDARS model.. You have cusomter A. Customer A leases a new car on a 36 month lease. Customer A completes the lease and disconnects his service when returning the car. Now 3 years ago.. CPGA was running, lets say. $180 plus cost of capital, and the fixed expenses involved over the life of the subscriber. Let's say that his average ARPU was $11 a month. So over the 33 months. Subscriber A paid $363 dollars, plus his "promotional period". His costs were $180 plus cost of capital. Will call it $220. Plus the fixed costs associated with his subscription. Well, say just $3.50 a month, or $126 over the 3 year period.

So we add it up you get $346 dollars. So over the three year peiod.. An SDARS compnay made a whopping $17, or .47 cents a month. Now, just when the CPGA is repaid, and the company is actually ready to make money off of the radio that was installed 3 years ago. The Subscriber returns the lease. Now Subscriber A leases another new car for 3 years, and gets another subscription to SDARS. You say. Fantastic. But, you get to start all over again.. A new CPGA and subsidy along with corresponding cost of capital to recover again.

Just when you were getting ready to make money. You get to start all over again.
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