Sirius and XM merged in July 2008 to form Sirius XM Radio (
SIRI
). Since then the economic downturn took its toll since the company
depends heavily on distribution through automobile sales from
companies like Ford (
F
),
GM
(
GM
) and Toyota. Below we take a look at the the 3 biggest drivers to
Sirius' satellite radio subscriptions which makes up almost 84% of
its stock value. Its competitors include Cumulus Media Inc. (
CMLS
) and Westwood One Inc. (
WWON
). We currently have a
price estimate of $2.00 for Sirius XM Radio's
stock
, which is about 20% above market price.
The most important division for Sirius XM Radio
Sirius XM earns revenues from
Satellite radio subscriptions
, which makes up 84% of its stock value. These services include a
variety of channels across various categories including music,
sports, talk and entertainment as well as news and information. The
firm's primary source of revenue is the subscription fees it
charges customers for annual, semi-annual, quarterly or monthly
subscriptions. In addition, the company derives revenue from
activation and other fees, the sale of advertising on select
non-music channels, the direct sale of satellite radios and
accessories as well as other ancillary services such as weather,
traffic, data and "Backseat TV" channels.
3 drivers for the satellite radio subscriptions
division
1) Number of Sirius XM automotive subscribers
This represents the total number car-owners who have subscribed
to Sirius XM radio services. The number of Sirius XM automotive
subscribers increased steadily from 3.7 million in 2007 to 13.1
million in 2010. Favorable factors for the increase have been the
Sirius and XM merger, an increase in U.S. light vehicle sales, and
new vehicle penetration. Going forward we expect the number of
Sirius XM automotive subscribers to continue increasing during the
Trefis forecast period.
2) Number of Sirius XM retail subscribers
This refers to the number of Sirius XM radios sold through the
retail channel. The number of retail subscribers increased from
2007 to 2008 due to the merger with XM. It has been declining since
then and stood at 6.9 million in 2010. Going forward we expect it
to continue declining during the Trefis forecast period.
3) Sirius XM's Average Revenue Per Subscriber
This represents average yearly revenue per user and is derived
from total earned subscriber revenue and net advertising revenue,
divided by the daily weighted average number of subscribers for the
period. It decreased from $103 in 2007 to $82 in 2008,
before increasing to $122 in 2009 as the company increased
rates on multi-subscription packages and offered new packages
bundling the best of Sirius and XM. In 2010 average revenue
decreased slightly to $119. Going forward, we expect the
average revenue per user to increase steadily during the Trefis
forecast period.
See our full analysis and $2.00 price estimate for
Sirius XM Radio