Media Economics report for Sirius XM Satellite Radio

Sirius XM Holdings is a radio broadcasting company that offers satellite radio services in Canada and the United States. The company broadcasts and creates commercial-free music, live events, sports talk, news, comedy, entertainment, sports, Latin music, and exclusive talk. The company also offers weather, data, information services, and traffic updates for those who subscribe in trucks, cars, boats, aircraft, and recreational vehicles through SiriusXM Traffic, SiriusXM aviation, Sirius Marine Weather, NavWeather, and XMWX Marine. The company provides connected vehicle services and telematics, providing security, safety, and convenience services to a large number of automotive manufacturers. In November, 2013, the company reorganized its structure, making Sirius become a wholly owned, direct subsidiary of the Sirius XM Holdings Inc. The company operates in the United States and offers two satellite radio services, XM Satellite Radio and Sirius Satellite Radio. By 2013, Sirius XM had subscribers totaling to 25.6 million (Chen, 2013).

Sirius XM Satellite radio giant has been lately on a great path of success. The company’s revenue and subscriber base are growing at a very rapid pace, although its stock price has not followed forth. Liberty share, which is its controlling shareholder, has an intention of gobbling up its growing asset at a discount of its intrinsic value. However, the general market considers the intention of Liberty Media as an offer that is lowballed. Shareholders of Sirius should be expecting a higher bid from Liberty than the one offered. In the year 2013, the company had a fantastic time with its cumulative subscribers going past 25.5 million. This meant that there was an increment of about 1.6 million additional subscribers in that year. The number of self paying subscribers of the company also grew to over 21 million. According to Chen, (2013). There has been strong economic recovery and booms and rebounding capital markets, which have been a great boost for the expansion of the company’s businesses.  High rates of automotive sales have also contributed to the high number of new subscribers.  The company’s competent management team has stated that it is estimating the number of subscribers in 2014 to record an increment of about 1.2 million. In the year 2013, the company increased the price of core offering to $14.99 as a result of an increment t of about $0.50, which was anticipated to yield an increased growth in revenue for every user. However, the modest increase in price may lead to an increase in the monthly churn for the company to increase from 1.8%.

Sirius’s receivers are pre-installed in over 70% of new cars in the United States. This will enable the company to fetch more subscribers through the use of free trials. The company’s chief executive said that satellite receivers of the company are already installed in over 57 million cars in the United States; he hopes that this number will double in the next four years. In addition, the company is planning to  increase the  number of subscribers in the market of used cars and also offer differentiated content s that would enable the company attract new customer segments, such as the Hispanic population ( Chen, 2013).  The company faces serious competition from Pandora. In December 2013, the monthly user base for Pandora surged to 76.3 million, thereby increasing the total listening hours to 1.56 billion hours. Pandora’s availability in the 9 out of 10 best sellers in passenger cars has made the company face serious competition. The competitor has also introduced advertising for its audience and monetizing the growing number of users by partnering with automakers such as Ford. However, Sirius provides commercial-free experience and a large breath of content to its customers, thereby making the two companies coexist due to the fact that they operate in two different value propositions.

Liberty is the major shareholder in the company, claiming approximately 52% ownership. However, the company’s growth potential has been immensely growing and its free cash flow and profitability have been at higher pace of growth. It can be said that following the steady growth potential, and stellar metrics, the company is at an enviable position. The market generally believes that it is necessary for Liberty to increase its bid, given that Sirius’ shares are trading way above $3.68 mark. In order for Sirius to close its share to $4 per share, Liberty needs to raise its stock bid. Sirius is a highly undervalued company but it grows at a fairly healthy rate (Chen, 2013).  It offers it subscribers a commercial free radio services, distinct from other internet services and terrestrial radios like Pandora. According to Chen, (2013), the addressable market of the company is on the rise given that many of its receivers are already installed in the renowned cars and its share have recently been trading at a value above $4.

Recent reports show that things never get dull for the company, which is United State’s only satellite radio provider. The shares of the company recently increased by approximately 1.5%, to close at $3.51. The satellite radio giant introduced some programmes to operate during annual events. The Sirius XM in New York has built the biggest pay-radio service in the world with 26.5 million subscribers. Despite the company’s popularity it has faced a number of challenges over the years; majorly competition from other digital radio service providers like Apple Inc (Chen, 2013). Liberty Media has played a significant role in the operations of the company as it saved it from near bankruptcy n the year 2009 by offering it a loan of $530 million.

Apple also played a significant role in reviving the operations of Sirius. At a time when Sirius XM shares had fallen by 2.4% to $3.29 after Liberty had declared that it would hold its stake of 53% in the satellite radio, Apple surprisingly came in and boosted the stock of the company. Liberty’s decision to pull back made Sirius shares to drop down by 2.3%, but the company quickly revived due to the intervention of Apple Company. Due to the conditions of fragmented audiences and the rapidly changing digital media technology, the company has put in measures to ensure that it coexist with its close competitors. My position is that I would not wish to work for this company because the company is not able to operate on its own. The majority of the shares of the company are owned by Liberty Media and an attempt by Liberty to withdraw its ownership nearly collapses the company, save it for Apple that came in and revived it. The company easily becomes bankrupt and it is only saved by a loan from Liberty. I think it is a company that is not reliable and not good to work for.

 

 

 

 

 

 

 

 

 

 

References

Chen, J. (2013). Essentials of technical analysis for financial markets. Hoboken, N.J: Wiley.


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