Re: 539,705 Cancellations in 4th Quarter
- From: Rocinante <matrixoutsider@xxxxxxxxxxx>
- Date: Tue, 26 Feb 2008 12:01:37 -0800 (PST)
On Feb 26, 10:47 am, "Robin's Gunt" <loppingo...@xxxxxxxxxxx> wrote:
Deactivated subscribers 4Q 2007
539,705
Deactivated subscribers All of 2007
1,886,671
Sirius wasn't a hot Christmas item this year either, as there were only
211,962 subscribers added on the retail level during the last 3 months of
2007. Compare that to the 559,312 subscribers added on the retail level
during the last 3 months of 2006. Fourth quarter 2006 retail sales
(559,312) were almost as big as retail sales for ALL of 2007 (598,883).
That is only one minor negative aspect. It's all relative within the
industry. The positive news is overwhelming:
Excellent execution lead to a 45% increase in 2007 revenue to $922
million. These results were driven by 4.2 million gross subscriber
additions; an annual record for satellite radio. 2007 subscriber
growth of 2.3 million net new subscribers drove a 38% increase in our
ending subscriber base to more than 8.3 million subscribers. SIRIUS
also produced positive free cash flow for the second half of 2007 a
first in history of our company. In the fourth quarter of 2007, SIRIUS
produced $76 million in positive free cash flow, up 150% from the
$30.4 million in positive free cash flow in the fourth quarter of
2006.
Last year during the 2006 investor conference call we provided
financial and operating guidance. I am pleased to report that SIRIUS
accomplished or exceeded all of the goals that we established. Our
goal for subscribers was in excess of 8 million; we delivered over 8.3
million. We estimated revenues to approach $1 billion; we delivered
$922 million, a 45% increase over the $637 million in 2006. We
estimated churn to be in a range of 2.2% to 2.4%. We delivered 2.2%.
We also forecasted SAC per gross add to approach $100, and we
delivered $101 for the full year and $90 for the fourth quarter.
In the fourth quarter of 2007, SIRIUS garnered 68% of the total
satellite radio after-market sales according to the NPD Group, our
highest segment share ever Beginning in the fourth quarter of 2005 and
continuing for nine consecutive quarters, SIRIUS has attracted the
majority of the satellite radio subscriber growth. SIRIUS' share of
total satellite radio net subscriber additions is extraordinary. Just
yesterday NPD issued their January report marking the 29th consecutive
month where SIRIUS has attracted the majority of satellite radio
subscriber growth.
SIRIUS' focus on customer satisfaction drove continued positive
results in customer retention. The monthly all-in churn rate was 2.2%
for the year, which was at the low end of our guidance. Self-paid
churn was 1.6% for the year, a very positive sign of continued
customer satisfaction.
Turning now to the auto sector, only three years ago in 2005 SIRIUS'
production penetration rate was approximately 10% of our exclusive
OEMs total production. That figure is expected to grow to over 50% in
2008 and is poised to rise even higher in the next few years.
SIRIUS also extended our exclusive relationship with Ford until 2016
and with Chrysler until 2017. Ford will install SIRIUS into 70% of
their '09 model year vehicles and Chrysler will install SIRIUS into
70% of their 2008 model year vehicles. As you can see, SIRIUS is
executing extremely well.
Now I would turn it over to Jim Meyer. We will then hear from Scott
and David and I will return to say a few additional words about our
pending merger and then we will take questions. Jim?
James E Meyer
Thanks, Mel. Both the fourth quarter 2007 and the full year were very
successful for SIRIUS. As you know, one of our goals for 2007 was to
maintain our market leadership position and SIRIUS more than
accomplished that goal. As Mel said, this marks the ninth consecutive
quarter for net add leadership.
During 2007, SIRIUS added 4.2 million gross additions, an annual
record for satellite radio. Total subscribers increased 38% to 8.3
million. During the year, retail subscribers increased 15% while OEM
subs grew 87%. In the fourth quarter, 2007 net additions of 654,000
were comprised of 444,000 net additions from the OEM sector and
211,000 net additions in the aftermarket.
Another highlight of the year was all-in churn rate of 2.2% and our
self-paid rate of 1.6%. We are thrilled with the results from our
customer retention and very pleased with our stable self-paid churn
performance.
Turning to the aftermarket channel, while the net additions for the
fourth quarter and the full year are clearly down from 2006. SIRIUS
retail MPD share of the satellite radio segment in the fourth quarter
was at a record 68%. Overall, I am satisfied with our after-market
share trends, particularly when you realize our average selling price
is greater than any other sat radio products. We are very focused on
this key channel of distribution and continue to work with our
retailers to achieve our share objectives.
I would also like to note that inventory is in excellent shape this
year, about half the level at this time last year, and new product
introductions are progressing well. Both the new Stiletto 2 and the
new Sportster 5 were widely available at retail and were strong
sellers this past holiday season.
We continue to believe that the aftermarket channel will remain an
important long-term contributor. However, our assumptions for the
future are grounded in the reality of the recent after-market trends.
It is abundantly clear that satellite radio competes with an
increasingly broad spectrum of entertainment and consumer electronics
options. Our long-term challenge is to continue to innovate our
products so that we can leverage our outstanding content in today's
increasingly competitive audio entertainment environment.
Now let's turn to the OEM world. We continue to be pleased with our
progress with our OEM relationships. Earlier this month, we announced
that Chrysler extended our relationship until 2017 and confirmed that
Chrysler will continue to target SIRIUS to be included in at least 70%
of their production.
In the fourth quarter, we also announced that the Ford Motor Company
extended our relationship to 2016. In this agreement the Ford and
Mercury brands agreed to target a 70% production penetration level
beginning with the '09 model a year. Also remember that Lincoln will
continue to offer SIRIUS as standard equipment.
In addition, we are very excited that beginning with the '09 model
year Ford will be the first of our auto partners to introduce SIRIUS'
new suite of data services, Travel Link. The Travel Link service
incorporates up-to-the-minute information to get you where you are
going faster, safer and smarter. This new service includes real-time
traffic both tabular and graphical weather, gas prices, movie listings
and sports scores.
Ford is so enthusiastic about the Travel Link service that they have
decided to incorporate it as standard equipment in every next
generation NAV system that they sell. Travel Link will be offered on
multiple Ford and Lincoln Mercury vehicles beginning in the '08
calendar year.
Things are also going well with Mercedes-Benz which continues to
target 90% penetration this year production and 90% plus for the '09
model year. VW and Audi continue to target 80% penetration for SIRIUS
in this year's production. By the way, Audi recently announced a
special one-year prepaid subscription promotion as part of their
overall promotions for their successful A4 model.
Another exciting development later this year is the introduction by
Kia of SIRIUS as standard equipment. SIRIUS will be offered by Kia in
100% of Kia's auto production beginning with the '10 model year.
As the OEM numbers attest, during the fourth quarter SIRIUS in
conjunction with our automakers continue to execute well on all
fronts. Much of this success can be attributed to greater penetration
rates, which exceeded our projections. I'm particularly pleased that
the vast majority of our exclusive OEM relationships are targeting 70%
plus production penetration.
Our efforts to achieve significant penetrations rates with each of our
OEM partners for the most part has now been solidified. In 2008, we
will focus our resources on improving the dealer sell-through
experience which we know will lead to a good conversion experience at
the end of the factory trial period.
We are also very focused on the used car channel which accounts for
over 40 million vehicles sales per year. In 2008 we will target to
launch a certified pre-owned program with each of our OEM partners. In
fact, we launched Ford this month. Over the next three to five years
this segment represents a very significant opportunity to offer
factory installed SIRIUS Radio to second and third owners at very
attractive economics.
In conclusion, SIRIUS continues to execute well in both the OEM and
after market channels and we will continue to focus on reducing our
per unit cost and economically growing our business.
Now I'd like to turn it over to Scott.
Scott Greenstein
Thanks Jim. In 2007 SIRIUS was the premier choice in audio
entertainment. Our dynamic array of content from music to talk to
sports keeps getting even better, culminating in a reinvented audio
experience that is unavailable anywhere else. As we communicated in
our innovative fourth quarter marketing campaign, everything else
falls short.
As the ultimate destination for music lovers and the only radio home
of 100% commercial-free music, SIRIUS proudly offers music channels
dedicated to the most celebrated entities in music history with a
powerful line-up that now includes Elvis radio, Eminem's cutting edge
music and lifestyle channel shade 45; Metropolitan Opera radio, and
Jimmy Buffet's radio Margaritaville, just to name a few of our unique
exclusive music channels.
In addition, SIRIUS recently launched the Grateful Dead channel,
SIRIUSly Sinatra and the return of E Street radio. In the fourth
quarter alone we premiered limited run pop up channels in partnership
with JD, Garth Brooks, kid sensation Miley Cyrus and Duran Duran.
SIRIUS continues to build its strength in comedy and entertainment by
complementing our popular comedy channels Raw Dog and Blue Collar
Comedy with the Foxxhole. The Jamie Foxx executive produced channel
featuring both new and legendary comedic and music talent as well as a
weekly show hosted by Foxx from wherever he is in the world is now
part of the SIRIUS comedy line up.
Howard Stern, the cornerstone of our unique content offerings,
continues the radio revolution on SIRIUS as he recently began his
third year of groundbreaking, uncensored content on January 9th of
this year, marking still only 730 days since he first went on our air.
SIRIUS offers Stern fans additional exclusive programming with the
debut of Act 1 to be followed later this year by Act 2 of the history
of Howard Stern, a five-part critically acclaimed radio documentary
featuring never before heard audio and interviews celebrating the
legendary rising career of the king of all media.
On the entertainment business side we added Variety Radio News, which
was launched featuring up to the minute box office reports and
breaking news and reviews on movies and TV and more from veteran
Variety reporters and editors. We are gearing up for surely what will
be another important breakthrough in talk radio, the launch of Doctor
Radio. The first of its kind and completely exclusive to SIRIUS,
Doctor Radio is the 24/7 health and wellness channel in partnership
with NYU Medical Center, giving the listeners easy direct and
unprecedented personal access to first-class doctors who will speak
candidly to address real life medical matters and scenarios.
In sports, SIRIUS continues to have the most sports properties on
radio as the sports leader and official satellite radio of the NFL,
NASCAR, NBA and many other properties. SIRIUS delivers every important
game, race and event with live play-by-play coverage, exclusive shows
hosted by the biggest names in sports. We complement that with
innovations in audio entertainment experience like NASCAR radio in-car
audio Driver2Crew Chatter channels. Our extensive presence at this
year's Super Bowl featured a blend of sports, entertainment and music
that shows the breadth of SIRIUS' programming on any give day. Leading
up to the Super Bowl, our NFL radio channel presented up-to-the-minute
news and analysis with the biggest names in the NFL while Martha
Stewart Living Radio broadcasted Inside the Taste of the NFL event
benefiting hunger charities; Radio Margaritaville featured live
broadcasts from Phoenix and Maxim Radio and Playboy radio were live on
the red carpet at the hottest Super Bowl parties the night before.
On the actual game day, SIRIUS offered 12 individual broadcasts of the
game in eight different languages. Nowhere else are football fans able
to enjoy such a diverse and comprehensive Super Bowl experience.
As always, our program continues to generate strong press on a daily
basis as well as serving as a substitute for marketing dollars. More
than 16,000 printed stories appeared throughout 2007 with audience
impressions of more than 7 billion. SIRIUS again was featured in
broadcast segments on numerous network and cable programs including
The Today Show and The Late Show with David Letterman.
In 2008 and beyond, SIRIUS remains the premier destination for audio
entertainment, with the best in class music, talk, comedy and sports
programming. Whether device or content, everything else falls short.
Now I would like to turn it over to David Frear.
David J. Frear
Thanks, Scott. SIRIUS delivered a solid fourth quarter and a great
year leading or beating guidance and achieving the company's biggest
ever quarter of positive free cash flow. The SIRIUS business model
continues to scale in a highly cost effective manner with revenue
growth in the fourth quarter of 29% compared to a 1% decrease in cash
operating expenses for the quarter and revenue growth for the year of
45% compared to cash operating expense growth of only 9%. In fact,
other than revenue shared royalty expense, every operating expense
line item declined as a percent of revenue from the prior year.
Customer service and billing expenses per average sub per month
declined 20% to a $1.10 for the year and 23% to $1.23 for the fourth
quarter. Contribution margins remained high at 69% for the full year.
As Mel mentioned, SAC per gross add for the year improved 11% to $101;
in the fourth quarter SAC per gross add declined 13% to $90 from $103
in the same period last year.
These metrics, combined with our relentless focus on responsibly
managing fixed costs led to across the board improvements in 2007 in
our free cash flow adjusted EBITDA pre-SAC EBITDA and pre-marketing
EBITDA. The improvement in our operating performance is measurable and
substantial. In 2006 pre-marketing EBITDA became positive for the
first time at $99 million; in 2007 pre-marketing EBITDA improved to
$251 million and pre-SAC EBITDA became positive for the first time at
$94 million.
Also in 2007, adjusted EBITDA improved $186 million or $0.65 for each
dollar of additional revenue. All of this was achieved despite
absorbing the cost of the Copyright Royalty Board ruling. We are
clearly demonstrating a path to profitability.
On a cash basis, we built upon our first ever positive free cash flow
quarter in the fourth quarter of 2006 of $30 million and expanded this
to $76 million in the fourth quarter of 2007. For the first time ever
we achieved positive free cash flow for the second half of the year
recording positive $8 million compared to a cash flow loss of $201
million in the second half of 2006. Further evidence of the company's
consistent improvement in operating performance.
We also experienced improvements on the non-cash side of the business
with stock comp expense falling 82% in 2007 to $79 million. When
combined with the operational improvements highlighted earlier, this
drove a 49% reduction in our net loss for the full year.
With that, let me turn it back to Mel
Mel Karmazin
Thanks David. Now I would like to take a few minutes to update you on
our pending merger with XM. During the fourth quarter, the
shareholders of both XM and SIRIUS approved the merger. As you know,
approval from the DOJ and the FCC are pending. We believe that we have
made the case that the merger will strengthen satellite radio's
position within the audio marketplace while maintaining robust
competition for consumers.
Following approval of the merger, we will offer consumers more choice
and lower prices and that is why the merger serves the public
interest. We will offer a la carte pricing, programming packages and
family friendly options including credit for those who don't wish to
receive adult content.
The bottom line is this: the merger of SIRIUS and XM is great for both
consumers and shareholders. The efficiencies created by this merger
will be extraordinary; they will allow us to offer more choices and
lower prices which we believe will attract more subscribers. The
merger has also received broad support from leading organizations and
prominent individuals, consumers, Members of Congress, former FCC
Chairman, public interest groups, diversity organizations, retail and
auto companies, religious leaders and more have all voiced support for
this merger. We look forward to a fast, positive ruling from the
government.
Let me end by saying that SIRIUS is executing very, very well. We
continue to scale our business, attract new subscribers and meet our
financial objectives. SIRIUS is well positioned whether we combine
with XM or continue as a standalone company. You saw our significant
increase in free cash flow in the fourth quarter that enabled us to be
free cash flow positive for the second half of '07. You see the
leverage of our way of running the company. Revenue up 45% while total
operating expenses rose only 9%.
We are very focused on continuing to produce strong revenue and
subscriber growth while we control all of our costs. The high fixed
cost nature of our business is a disadvantage in the early years but
really pays off for us once we are beyond breakeven and continuing to
grow.
The goal for SIRIUS is positive free cash flow, EBITDA and earnings
whether we merge or not. We have come a long way and are looking
forward to delivering the financial performance that our shareholders
deserve.
Thank you for listening and now we are ready to take your questions.
Question-and-Answer Session
Operator
We will take our first question from Ben Swinburne - Morgan Stanley.
Ben Swinburne - Morgan Stanley
Thanks and good morning, guys. Mel, would you be willing to give us a
two to three yea outlook on the retail channel? Obviously you are
doing very well relative to XM, but certainly overall the category has
slowed more than probably even yourself expected this year. How much
of that do you think has to do with both companies maybe not marketing
or putting out as many new products as they would given the pending
merger and how much of that has to do with the ramp on the OEM side
where customers are really getting their new radios in new cars pre-
installed?
Should investors think about retail as potentially declining over
time, the sub base, or do you expect a reemergence or reinvigoration
of that channel down the road?
Mel Karmazin
First of all, we think that the merger has certainly contributed
toward confusion in the marketplace. We know our own secret shoppers
that have gone in have gotten misinformation from an awful lot of the
salespeople at retail; not malicious, just that they are just not
aware of exactly what's going on.
We also believe that as OEM continues to increase and as we get more
subscribers who are experiencing SIRIUS for the first time in their
car, that it seems natural that they are going to want to have a radio
available to them either in a portable mode or in their other car or
in their home. So fundamentally we see no reason why the aftermarket
should not continue to play a very, very important part in our
business model.
The one other thing that you ought to start thinking about in regard
to the aftermarket are all of the used cars that are out there today.
So we will be rolling out and making more announcements shortly about
all of the initiatives that we have both in the area of certified pre-
owned as well as in the area of just used car sales. In addition to
OEM ramping up and somewhere between 15.5 million and 16.5 million new
cars sold, a good chunk of them having satellite radio in them, that
there is going to be this after-market where people are going to
continue to want to acquire it and will continue particularly with the
merger to be able to innovate and come up with more and more exciting
products to demonstrate our competitiveness with these other devices
that are out there today.
Operator
Your next question comes from Robert Peck - Bear Stearns.
Robert Peck - Bear Stearns
Mel, are you going to comment at all on any recent news with the DOJ
and what the hold up is? Can you comment to whether you've met with
them recently, have you met with Barnett?
Along those lines, the analysts have put out synergies somewhere
around $5 billion or so. Can you quantify what you think the synergies
could be from SIRIUS' point of view?
Mel Karmazin
No, we have nothing else to comment on the DOJ other than what they
have said is that they will let us know when they have concluded and
made their decision. We wait by our telephone, but we really have not
heard anything from them. It has been more radio silence then anything
else.
Regarding the synergies, as you know, in addition to you guys looking
at what you estimated synergies, a third party looked at the
synergies, an independent company that had access to both SIRIUS and
XM and they made also a determination of how substantial they are.
Because of the anti-trust laws, we have not been able to still look at
XM's contracts to be able to ascertain what we think the synergies are
going to be. As the market cap of the companies have dropped, based on
I assume uncertainty about the merger, the synergies become a bigger
and bigger percentage of the market caps of the combined company and I
have some experience in integrating companies and believe that once we
get the approval that we'll be able to capture very, very substantial
synergies for our shareholders and do it in a rather quick manner.
Robert Peck - Bear Stearns
Mel, on that point, there is a termination date coming up on the
merger. Should we just assume that gets extended indefinitely or how
should we think about that?
Mel Karmazin
I think the way you ought to think about it is that you should assume
that both companies would be having a board meeting prior to the March
1st drop dead date and after the boards have met that you will hear
the result of that.
Robert Peck - Bear Stearns
Can you give us your thoughts on how 3Q and 4Q maybe have been
impacted by a potential global consumer recession? The impact you are
seeing, particularly in the fourth quarter.
Should the merger not go through, could you walk us through the
liquidity scenario of a standalone SIRIUS if the recession continues?
David Frear
When we go out and we file our 10-Ks which we will do in the course of
the next couple of days that it will make statements about liquidity
and capital resources that are based upon our standalone business.
Since we don't have merger news we obviously won't be contemplating
the merger impact in those statements.
I can tell you that we will reaffirm a fully funded plan and that
incorporates the current view for the economy. As it relates to
consumer recession and impact on sales, there must have been an impact
on sales but the aftermarket business has been impacted by quite a
number of things; the general economy certainly has impacted it,
competition from other products out in retail has impacted it;
certainly there is plenty of competition in audio entertainment and
there is substantial competition at retail from devices of different
types; navigation devices were incredibly hot throughout 2007. So we
compete with them for share of wallet as well.
Operator
Your next question comes from David Bank - RBC Capital Markets.
David Bank - RBC Capital Markets
I think Mel said at the beginning of the call when you talked about
penetration for Chrysler and Ford, I think both had 70% in model year
2008 cars. Did the 70% pertain to the option being available in 70% of
manufactured labels or brands of cars? Or was that actually 70% of
each automobile manufactured having a radio installed and activated?
James E Meyer
The 70%, to clarify what Mel said for Ford, was beginning in'09 model
year, which as we know begins in the second half of this year.
Remember that Chrysler is already at a 70% penetration level beginning
with the '08 model year which we're seeing; we saw that growth in the
later half of last year and we'll continue to be level this year,
obviously depending on overall production.
Ford is going to ramp up towards the 70% now and will achieve - is
targeting the 70% in the second half in '09. Also remember, VW, Audi
and some of our other OEMs are just in the ramp up as well and that's
why Mel indicated an overall penetration level of approximately 50% in
'08.
Mel Karmazin
And those percentages are of their production -- not an option -- they
are physically put into the vehicle, when they leave the assembly
line.
Operator
Your next question comes from Eileen Furukawa - Citigroup.
Eileen Furukawa - Citigroup
In the unlikely event that the merger doesn't take place, would you
expect that as a standalone company you are going to take new fresh
look at your programming costs and you might choose to trim content
offerings given your outlook as a standalone company?
Also we saw a little in the fourth quarter it looked like ARPU
declined a bit. Can you give us a little bit more color on this? Where
did it come from? Was it mostly retail or the OEM side? It also looked
like a bump up in your mail-in rebate. What was your thought process
in increasing that in the fourth quarter?
Mel Karmazin
In the unlikely scenario of the merger not being approved, we believe
as David said that we are fully funded that we believe that we are
going to become a profitable company on a standalone basis. We think
that what is driving our success has been our content. Scott and his
team have done a terrific job of putting together a great line-up to
make people want to subscribe to satellite radio.
I think that you should look at our costs as being something that will
probably go up; think in terms of single-digits from a point of view
of cost and programming is not something that we feel -- though if
Howard is on the call and listening, if he would like to extend his
deal at less money we would be interested in that -- but from my
history with him I don't think that is apt to happen.
I think that the idea is that we want to have the best content; great
content costs money. We are going to continue to invest in content but
we believe that our portfolio is complete. There is no missing piece.
There is nothing out there that we need to spend a lot of money for
and we will get the profitability by controlling our costs and growing
our revenue and taking advantage of that fixed cost nature of our
business.
David, do you want to handle the ARPU?
David Frear
In the fourth quarter, our promotional activity at retail was pretty
consistent with what we've been doing for years now in terms of
magnitude of rebate. The differences that we're seeing in the
marketplace now is the consumer backlash to mail-in rebates just from
all of the retailers and so in the course of last year there has been
a shift to the implementation of instant rebate at retail.
So what you wouldn't seen in prior years where we've had breakage on
the mail-in rebates, a substantial number of people simply don't claim
them, that on the instant rebates you are considered to have paid it
at point of sale that you have got 100% fulfillment.
So not really a difference in the promotional strategy; just a
difference in terms of what the retailers are now willing to support
in their stores.
Eileen Furukawa - Citigroup
Was that the biggest impact to the ARPU?
David Frear
There is a table in the press release and as you run your way through
it what you will find is that the rebates had an adverse affect in the
fourth quarter over the prior year of an additional $0.45. That was
you most of the change if you are just looking at the quarter. It is
the other change in ARPU before rebate is related to growth in the
cars that have yet to sell through; somebody will probably ask the
question somewhere or another along the line so I will give you the
answer now that the cars that have yet to sell through are about 11%
of the base at the year end. It is up slightly from the third quarter
and up from the prior year end where I think it was about 9%.
Mel Karmazin
The other thing is that our subscribers are growing faster than in
2007; our advertising grew. If you think about what's going on in the
traditional radio industry, most of the companies that you are
following are reporting down 2%, down 4%, down 6% revenue. In the
fourth quarter our advertising revenue grew 15% but our subscriber
growth was greater and that caused a slight impact in ARPU as well. I
would dare to there are none, no radio companies that you are
following that managed in the fourth quarter of 2007 to show a 15%
growth in advertising revenue.
Eileen Furukawa - Citigroup
That's true. Well thank you very much.
Operator
Your next question comes from Kip Spring - Stifel Nicolaus.
Kip Spring - Stifel Nicolaus
Could you talk about where you stand with your satellite launches as a
standalone company?
David Frear
Sure. When we file our K again later this week, we will show a
deferral of the Sirius 5 launch from the fourth quarter of 2008 to the
second quarter of 2009. There is nothing particularly notable about
the delay; we don't really need the satellite from an operational
perspective until mid-2010 so just based on the pacing of the program
we have elected to defer the launch by a few months.
Operator
Your next question comes from April Horace - Janco Partners.
April Horace - Janco Partners
Good morning. Congratulations on a good quarter despite the economy. A
question for you with respect to advertising. How should we view
advertising on a long-term basis as a standalone company, as a percent
of revenue?
Mel Karmazin
April, it's been a source of frustration for me because I believe that
we are to be generating significantly more advertising revenue than we
have done so far. We're doing about $35 million and it's up
dramatically and I can give you the spin story that says how well
we've done but when you take a look at having Howard Stern for the
first time in his career having a pure national platform and being as
strong as he is, we ought to be doing a better job in selling Howard.
We ought to be doing a better job than we are doing now.
We've been growing our subscriber base so when you start the year, the
advertisers are looking at having 6 million subscribers last year
going into the year on a national basis; and when you compare it to
other national media, that's not a very strong audience base.
Now we are growing our subscriber base. One of the exciting aspects of
the merger is that together I have no idea what XM's subscriber number
for 2007 is, but if you take their guidance and take our reported
numbers you are dealing with over 17 million. That should really jump-
start advertising because we will have this significant critical
mass.
I had said on a call two years ago that I would like to see
advertising represent 10% of our revenue. That is something that we've
not achieved. There is no reason that I can think of as to why we
shouldn't one day be able to achieve it and that's doing it without
ever putting a commercial on our commercial free music stations. We
ought to be doing a far better job of convincing advertisers that
satellite radio, this new industry, deserves to get more of their
advertising dollars.
April Horace - Janco Partners
My second question really relates more to the OEM. There has been wild
fluctuations in OEM production for 2008 anywhere from as low as 15.1
million units to 15.7 million. I was wondering if you could give us,
with those kind of wild fluctuations, what kind of effect would it
have to you guys as well as if you could give us any color as it
relates to the Chrysler restructuring of their retail stores?
Mel Karmazin
Let me have Jim do it, but you know one of the things that we have as
a benefit going into this year is that we are ramping up penetration.
So at a time when some of the OEMs may be cutting back on production
we are getting a benefit because we are picking up penetration so it's
not hitting us as much. I think Jim can give you more color.
James E Meyer
I think that obviously the single biggest variable April is what are
the overall sales going to be and frankly your guess is as good as
ours right now. We are staying very closely, I can tell you that there
has been a fundamental change in Detroit in the last 12 months and
that is these guys adjust their production schedules now much quicker
than they used to in the past which creates a lot more volatility for
us in the short-term. Clearly, I think all of us are watching February
closely and February today is a little scarier based on what some of
these guys have reported for sales.
The number though, if you look back over a long period of time has
settled in still historically in the range we expected to be,
somewhere between the ranges you gave and we'll see where it goes.
April Horace - Janco Partners
And on the Chrysler restructuring?
James E Meyer
So the Chrysler restructuring obviously we're watching as closely as
anyone else. We are very pleased with our penetration of their
production. We will follow closely where Chrysler's settles out with
their market share and I don't have an opinion on where that will be
right now.
April Horace - Janco Partners
I hope to hear from you guys soon as in, like, an approval.
Mel Karmazin
Leave me your home number April.
Operator
This does conclude today's question-and-answer session. At this time,
I would like to turn the call back over to management for any
additional or closing remarks.
Paul Blalock
Thank you very much for listening. That concludes our call.
.
- Follow-Ups:
- Re: 539,705 Cancellations in 4th Quarter
- From: Drumrboy
- Re: 539,705 Cancellations in 4th Quarter
- Prev by Date: Re: 539,705 Cancellations in 4th Quarter
- Next by Date: Re: 539,705 Cancellations in 4th Quarter
- Previous by thread: Re: 539,705 Cancellations in 4th Quarter
- Next by thread: Re: 539,705 Cancellations in 4th Quarter
- Index(es):
Relevant Pages
|
