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

To: pcstel who wrote (2186)	2/17/2006 1:25:40 AM
From: i-node	Respond to of 3386

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. But we know what the numbers are because they disclose everything you need to know. There is a good reason for them doing what they do, and it is totally consistent with the way promotional subs have been handled, for example, in the cellphone industry. he 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. This really isn't true. Both XM and SIRI use anti-churn measures in those instances where the equipment isn't purchased at retail. For example, XM will give you a low-end receiver -- but you have to commit to 6 months of service at $13/month -- which gets you pretty close to CPGA, and gets pretty close to the actual cost fo the gross add for low-end receivers. 18% of your subscriber base will discontinue service. Yes, but 72% doesn't, which is sufficient to handle the CPGA of those who do. Besides, CPGA still isn't at scale right now. It just makes zero sense to look at Q4 CPGA as being representative. It isn't -- it hasn't been, and it won't be. The Stern Effect was a one time event that is over. Blended CHURN and total CPGA presented as such. But, they have decided that this is information that no one really needs. It is there for those who want it. But arguing that it is somehow misleading because the OEM promo subs aren't included in churn is specious. The entire cost of obtaining those subs, as well as the ARPU (in the case of GM) is totally different and it makes no sense to just arbitrarily lump them in as "churn". You don't make much on one of those GM subs. But you don't lose much if they churn out, either. You do make some good points. Churn is the enemy. And a few percentage points makes a big difference over time. But XM's churn has been remarkably consistent (and SIRI's for that matter) -- even after the price increase, XM's churn scarcely blipped. The business model continues to be excellent once you get to operating at scale. If demand petered out at 10M or 15M subs, they're in trouble. But it is easy to envision 40M or 50M subs within a few years. Will you still be arguing the business model isn't viable at that time?

To: pcstel who wrote (2186)	2/17/2006 9:31:52 AM
From: DaveMG	Read Replies (1) \| Respond to of 3386

Isn't 1.8% of 10 million 180,000, not 1.8 million? I am going to check on it but I doubt very much that they count the 54% who activate post free trial as subs before they actually sign up and activate because that would ultimately produce huge churn numbers, not even in the ballpark of the numbers being reported.. Your argument depends on 2 factors mainly as I see it. The first you have yet to disclose and that is what is your take on the ultimate number of subs and the rate at which they will continue to accrue. And the second is that costs continue to rise and outflank revenues. I have been assuming since the beginning that sat radio will ultimately garner at least 25% of the automotive mkt, so 50 million subs split in some way between SIRI and XM, and that subs will continue to grow by approx 5 million/year, which I think will prove conservative) well into the next decade. For your argument to work, I think you need a ceiling on subs and no ceiling on spending..

To: pcstel who wrote (2186)	2/17/2006 9:53:06 AM
From: DaveMG	Read Replies (3) \| Respond to of 3386

Is the " blended" ie total churn number actually 18% because that is a VERY large number that would in my estimation reflect those 46% who don't activate post trial, but that would also be a deceptive number to use when it comes to look at the model. It would make more sense, it seems to me to look at churn from those who do sign up and activate, and to then assume that if Xm is posting say 6 million subs at the end of 2005, that some large number ie 500k, will never activate, but all that does is lower the sub numbers by some relatively constant number over time, so that the real sub number is always 500k below what's stated. And presumably nobody who buys at retail forgets to activate.