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The major players in the pay to listen radio market,Sirius and XM Satellite Radio,are trying,but neither has turned a profit to date. Automobile radio systems have evolved from the old am mono speaker system to intricate am-fm-multi disc cd players with more knobs and features than ever before. We have progressed from 8 track to todays far superior CDs. Is pay to listen radio going to be the next step in this progression or will it go the way of the 8 track and disappear?
To date,Sirius Radio has lost almost $5 billion dollars! For the 4th quarter 2007,Sirius made a substantial step forward with revenue of $250 million and reduced 4th quarter losses to $166 million compared to a loss of over $245 million for same quarter 2006. Sirius and XM both have very high fixed costs and subscriber base must keep expanding or neither will ever be profitable.
XM seems to be on the ropes more than Sirius. XM has already used $188 million of the current $250 million line of credit they have.XM had 4th quarter 2007 revenue of $308 million and a loss of $116 million before EBITDA. While Sirius is increasing subscriber base,XM subscriber base is actually dropping. Is Sirius picking up ex XM subscribers or is the market for pay to listen radio subscribers declining?
And,then you must assume Sirius and XM will eventually merge. You would then have a company with over $2billion in revenue,but a company that won't be profitable for several years,if ever. XM has speculated they will be profitable by 2012,assuming a dollar increase in sudscriber monthly fee in 2009 and they can retain their current subscriber base. Not likely.
If Sirius and XM merge,then I think they form a stronger company. Will the new company ever be profitable or will they go the way the way of the 8 track? I tend to assume the latter. By the time these companys merge and then become profitable,something new will have evolved and they will go the way of the dinosaur,extinct.
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