Sirius XM Achieves Subscriber Record While Awaiting Decisions On SoundExchange Lawsuit, Liberty Media Control
Sirius XM added about 622,000 subscribers in Q2, a 38 percent increase from the year-ago period and making last quarter its strongest yet for subscriber growth since the deal creating the company in 2008, said CEO Mel Karmazin. Despite the subscription price increase this year, the company has benefited from stable conversion of people with new autos -- who got the satellite radio service for free and then decided to subscribe after the free period ended -- and stable churn of existing customers leaving, he said Tuesday during on an earnings teleconference.
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Revenue grew 13 percent to $838 million and adjusted EBITDA rose 28 percent to $237 million, Karmazin said. The price increase “was the right step for the company,” Karmazin said. Sirius had asked for and received FCC approval to increase prices for subscribers to what was XM before the deal combining them. Sirius agreed to pay $240,000 in July to settle an Enforcement Bureau investigation over raising some prices (CD July 6 p16).
The audio entertainment business “is more competitive than ever and we're delivering across all metrics,” Karmazin said. The company is benefiting from increased auto sales, he added. Revenue, adjusted EBITDA and free cash flow are expected to increase throughout the year due to the price increase and additional subscriptions, he said. Sirius’ lineup of non-music programming, like sports, The Howard Stern Show, news and business shows “positions us very well against our terrestrial and IP [Internet protocol] competitors,” he said.
A decision on Sirius’ lawsuit against SoundExchange over royalty rates is expected in December, said David Frear, chief financial officer. Sirius is confident it has a strong case, he said: “We like our case better than their case and we'll work through litigation and see where it comes out.” In the de facto control dispute with Liberty, where that company has asked for FCC permission to take control over the satellite radio service, Sirius is engaged in discussions with Liberty, Karmazin said. “Liberty has to decide what they want to do. … They haven’t communicated that to us,” he said: “When we hear what Liberty wants to do, we will clearly respond."
Karmazin said Sirius doesn’t have an interest in acquiring Hughes Telematics, which was recently bought by Verizon (CD July 27 p21). “We have no urgent need to acquire anything,” he said in response to a question about spectrum acquisition. He acknowledged that telcos have an interest in providing their content to consumers wherever they want it, including in vehicles: “Telcos are positioned to do that. … We have had conversations with people who are potential partners for us."
The company began its Sirius XM On Demand service Tuesday. The service allows subscribers using Apple, iPad and other online media players “to choose from their favorite episodes from a catalog of more than 200 shows and over 2,000 hours of content,” Karmazin said. The service will also be extended to Android users, he said. The new offering is part of the company’s IP roadmap, said Jim Meyer, operations and sales president. The service Start Now, which delivers increased functionality to subscribers, also is part of that effort, he said. Through its IP initiative, Sirius is making an effort to do for satellite radio what set-top boxes did for pay-TV subscribers, Karmazin added.
Sirius plans to launch the Sirius 6 satellite in late December. It also will roll out a personalized radio project allowing Internet subscribers to tailor music channels to their tastes, Karmazin said.