Well, it's like this. Say ATHM charges $50 per month. Now, suppose they decide to increase their subs by giving away a thin version of their service. So for every sub they recruit, they have to absorb the $50 per month they would not receive. Oh, except they have to pay the cable company $25 that they would otherwise have received. So now they are down $75 per month per sub. This offer is so tempting, they might get another million subs, so they would have to absorb $75M per month, or close to $1B a year in additional losses. With 124M shares outstanding, that is about -$8 per share yearly loss, or another $2 loss per quarter on top of their $1.28 loss. Of course, ATHM could always go out and hire ORBI's accountants, and I'm sure they would show a profit on the books rather quickly :-)
Memo to ATHM management: Try getting subs through better service -- don't try to out-AOL AOL. They learned from their mistakes. |
