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Technology Stocks : XM Satellite Radio Holdings Inc. (XMSR) -- Ignore unavailable to you. Want to Upgrade?

To: DaveMG who wrote (2169)	2/16/2006 12:50:18 PM
From: i-node	Read Replies (2) \| Respond to of 3386

I thought programming costs for the quarter were quite low. Does anyone have a handle on what ongoing programing costs are likely to be given all the content deals already announced? Exactly. XM's content deals have not materially changed these costs -- Oprah will add $17 million/year, but will be offset by half the ad revenue from the channel. Losing NASCAR saves $5M/year, but they're likely to spend that getting beefed up content for a NASCAR presence going forward. The effects of MLB and most of the other content items is already reflected in the financials. They had to spend $100M more than expected in Q4 to compete against Stern, and I hate it, but it should be a one-quarter affair.

To: DaveMG who wrote (2169)	2/17/2006 12:36:30 AM
From: pcstel	Read Replies (3) \| Respond to of 3386

Just to be sure I understand,is it your contention then that a crossover where revenue exceeds costs will never occur, that costs will continue to rise as fast or faster than revenues from additional subs? Real problem here is CHURN. CHURN kills subscriber business models. Now, many a XM long have always commented that XM's CHURN rate is "VERY LOW". This is true if you accept what XM Management tells you is CHURN, as the actual CHURN rate. XM states that they do not count those in a new car trial period in their CHURN figures. Yet, they count those same people in the trial period as Subscribers. So they count them as subscribers when they agree to the free trial period. "Built into the price of the car". Yet don't include them in the CHURN Metrics if they do not become an actual subscriber. So, the CHURN rate appears "manageable". Yet, if we actually counted everyone management counts as a subscriber on the front end that either refuses to continue past the trial period, or simply discontinues service into the blended CHURN Metrics. That CHURN figure would be quite a bit higher. As I alluded to earlier. The Sat Radio Business Model is as bad as it gets. Because unlike other traditional subscriber models. There is not even a contract, or early termination fee, that guarantees that at least the CPGA, and related cost of capital can be recouped if the subscriber opts out early. So a CHURN rate of 1.5% means that in a given year. 18% of your subscriber base will discontinue service. Which again,isn't really a great big deal if you had a contract that guaranteed the return of your CPGA. But, to confuse everyone even more. XM management has two terms. SAC and CPGA. So they won't really even tell you straight away exactly how much each new subscriber add costs. But, as far as I have been able to see it. It is somewhere in the middle of SAC + CPGA. XM has made this quite difficult by creating these Subscriber Metrics defined by their own definitions. So it would be easier to really predict why their losses are so large if they simply gave you the figures you need to see. Blended CHURN and total CPGA presented as such. But, they have decided that this is information that no one really needs. Which has lead to the continued confusion as to why they keep throwing everyone for a loop when they post their results. In other words. You can't plot some dots on a graph and get any real predictions, because you don't really know the final value of the data points the you need to know, to do it. So if you only had a True Blended CHURN rate of 1.5% and 10 million subs. Then in a year. You would need to add appox. 1.8 million new subscribers. Just to maintain your current subscriber levels. (ZERO Subscriber Growth).(Wall Street wouldn't like that). So 1.8 million subscribers would cost you 270 Million in CPGA costs. If $150 was your TOTAL CPGA. So all of those 1.8 million would have to remain a subscriber for 1 year, in order for XM to just recover their CPGA (minus Cost of Capital). Now, in that time they have had to pay Royalties, Cost of Content, Help Desk, Retention Serives, etc. on top of the cost of capital. So with the above figures. It takes about a year and a half until you can start to make a profit off of a new subscriber. And if they discontinue service before that time.. The company eats the CPGA and associated Cost of Captiol. Pretty Ugly really. These are the same problems every subscriber based business model faces. Only problem is.. Sat Radio can't even guarantee the return of their upfront CPGA investments. So management faces some pretty hard decisions. Increase initial upfront costs to the consumer that will lower CPGA figures. Demand a contract length that will at least guarantee the return of upfront CPGA costs. Increase subscriber fees ARPU to offset lost CPGA costs. Any and all of the above will have a dramatic result on Growth. And when Growth stops, or is greatly reduced. So goes your high flying stock price, and your access to capital through the Capital Markets. Management usually choses to "manage their short term access to the capital markets, and the value of their options, by managing the stock price, rather than managing the company for long term success."