Now that Sirius has a little financial breathing room, can they make a profitable business model. The acquisition of XM Satellite may have given them more subscribers, but is it enough to survive. The answer to both questions, per Mel Karmazin seems to be yes.
He says that they currently have 19 million customers and that their churn remains low and manageable. Even more surprising, Sirius is moving into the black. "In the fourth quarter of 2008, a devastating one for most companies, Sirius XM recorded its first operating profit ever (measured by Ebitda, or earnings before interest, taxes, depreciation, and amortization), as well as its first significant slug of free cash flow."
The Liberty deal certainly comes at a high price, but it staved off bankruptcy and may bring with it long term synergies. "Plus, one of the benefits of the Sirius/XM merger - aside from the cost savings - is that several years from now, once all Sirius and XM customers are on the same system, half of Sirius XM's spectrum will be freed for other uses. ... Premium content wouldn't necessarily be limited to audio. Sirius XM currently offers a three-channel Backseat TV service for select Chrysler and Jeep SUVs. (For an extra $7 a month, Sirius subscribers can get mobile feeds of the Disney Channel, Nickelodeon, and the Cartoon Network.) If Sirius XM wanted to launch more video channels, it would probably have a willing partner in Liberty Media, which owns half of DirecTV as well as several cable networks, including QVC and Starz."
Will this distribution spectrum be more preferable than content received wirelessly through the web. Sirius currently competes with internet radio; the same will hold true in the video space as well. Why pay for subscription if it is available elsewhere for free. Sirius, like cable, may be facing similar challenges.
