SiriusXM to Bow Streaming Video in Q2, Hike Fees on CRB Ruling
A “completely redesigned” SiriusXM app for iOS and Android devices is beta testing and will debut in Q2, “providing the springboard” to launch streaming-video content on the service, said CEO Jim Meyer on a Wednesday earnings call that also saw much discussion of increased royalties and coming price hikes. “There’s no reason we can’t begin to acquire larger numbers of streaming-only subscribers.” The "plan is to launch video, first with Howard Stern in the second quarter, and then follow up later in ‘18 with additional short-form content from around the SiriusXM bundle,” added the executive.
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Video is complex, so the company is proceeding cautiously. Meyer quipped that “we’re not going into the Netflix business. They can rest easy. We’re not coming after them.” The satellite radio provider's video offering for 2018 will be part of its All Access programming package, said Meyer.
The company will be “opportunistic,” acquiring content “if something in our wheelhouse comes up,” said Scott Greenstein, president and chief content officer. Meyer didn't know how successful SiriusXM will be in the streaming-only business. Meyer conceded he’s thinking more bullishly than in the past about building SiriusXM’s streaming-only business, saying the popularity and versatility of Echo Dot and other smart speakers helped change his mind. "You only see a few things every once in a while that you think are truly changing," he said. "These in-home speakers are truly changing when you look at the way people use them."
SiriusXM estimates it will take a $200 million hit this year in higher copyright expenses due to the Copyright Royalty Board's 41 percent hike (see 1712150022), said Chief Financial Officer David Frear. The company will pass along the higher costs in the form of “music recovery fees,” he said. The MRFs amount to a 4 percent average surcharge that will start showing up in February bills and will take about 18 months to work their way through the system, said Frear. SiriusXM expects imposition of the MRFs will “stimulate some churn” but also “increased” subscriber use of the company’s “discount plans,” he said.
"I hate the decision,” said Meyer of the CRB’s rate hike. “I think it’s wrong. Quite candidly, I think the basis for how it was reached was just wrong.” SiriusXM will follow the “paths to try to rectify that,” he said, conceding “there’s not a big thick book of success in appealing these things.” Frear agreed the CRB’s decision “defies any logic or understanding of our industry,” and “mathematical errors” also helped inflate the rate hike by “a couple of percentage points.” The “basis” for the CRB’s determination was “preposterous,” because it lacked understanding of the competitive landscape between satellite radio and terrestrial AM and FM, said Frear. CRB representatives didn’t comment Wednesday.
“There’s no other CEO job I’d rather do,” said Meyer when asked about an SEC filing Jan. 11 that he signed a new contract that expires Dec. 31. He turns 64 this fall, and the “conversations” he had with Chairman Greg Maffei and the board were “that we should just shorten the window a little bit and have more conversations about what I might want to do and frankly what they might want to do with me,” he said. If there comes a transition to a new CEO, it will be done in "an orderly and efficient, well done manner," said Meyer.
Meyer agreed to stay on as a consultant for three years if he leaves as CEO when the contract expires, the filing showed. Meyer was promoted to CEO in December 2012 with the departure of Mel Karmazin. He joined Sirius Satellite Radio in 2004 as president-operations and sales under then-CEO Joe Clayton, for whom he worked at Thomson-RCA.