Satellite TV battles for remains of satellite radio, DirecTV owner wins stake in Sirius XM
Due to the recent merger of former satellite radio competitors Sirius and XM, and despite a recent rate hike, the newly formed Sirius XM conglomerate has a huge pile of debt and no cash on hand to pay it off. Fear not, lovers of radio from the sky, Liberty Media, owner of DirecTV satellite television, has just stepped up to the plate with a major infusion of moolah, which it will provide in exchange for 12.5 million shares of preferred stock that's convertible to a 40% equity stake in the company. A total of $530 million will be paid out by Liberty, $280 million of which will be paid immediately with a second installment of $250 million a little later down the road. A whopping $171 million of that first payment will go straight to Siruis XM's debtors. DirecTV rival EchoStar, which owns Dish Network, was in the midst of gobbling up huge chunks of the satellite radio company's debt, prompting many to assume a takeover bid was imminent. Regardless, most analysts believe that the move by Liberty was mostly a financial decision, as Liberty will receive a 15% return on its initial $280 million investment.
[Source: Automotive News - sub. req'd]
Reader Comments (Page 1 of 2)
ConeDodger 11:40AM (2/18/2009)
I'm glad, I can never go back to FM radio after having xm. I'll pay the extra money to have no used car commercials damaging my hearing every 5 minutes.
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Aaron 11:44AM (2/18/2009)
Thank god! I hate DISH with a passion, so overpriced, crappy customer service, charges for "free" local channels, discontinued Voom HD, etc etc etc.
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Dave in MI 11:47AM (2/18/2009)
Personally, I wouldn't send money to a group that irresponsibly hired celebrities like Howard Stern and Oprah without the revenue to actually pay. Didn't Stern get like $500 million and Oprah like $55 million? Wonder why they have a bunch of debt? Probably all on credit cards.
It's like sending money to my brother-in-law. I'd like to help him out, but he'll just blow the money.
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Eddie 12:02PM (2/18/2009)
You have to spend money to make money. Exclusive content is the way to get more subscribers. Without Howard Stern, Sirius would have far less subscribers.
Rocketboy 12:29PM (2/18/2009)
In defense of how much they are paying HS (Yes, it pains me to defend anything HS), but that's the cost for the entirety of Howie's show. It's not a direct check to Howie.
AZZO45b 1:58PM (2/18/2009)
5 year deal 500 million... but the L.A, Galaxy said they paid 250 million for David Beckham & most media dismiss that figure. Here is the basics of Stern's deal:
http://www.washingtonpost.com/wp-dyn/articles/A10953-2004Oct6.html
100 million a year? Some actors pull in 20-30 mil a movie, so it seems pretty high. I also thought chunks of the "100 million" came through Sirius stock, which would also drop Howard's take home pay.
Jim 12:06PM (2/18/2009)
"A whopping $171 million of that first payment will go straight to Siruis XM's debtors."
*Creditors,* not debtors. Sirius/XM is the debtor.
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Toy Yoda 12:14PM (2/18/2009)
Is this a dead end business, anyways? Why would I want to buy satellite when HD radio is here? Okay, so maybe HD radio isn't as good, but as the technology improves? Why would I want to go satellite?
What about internet radio? I can listen to my favorite broadcast anywhere with internet radio. Heck, in the future, if not now, you probably could hook up your large mega harddrive on your desktop to the internet and have your own private internet radio channel wherever you go. And, you probably can feed in your own audio from your favorite tv listing through the same technology too.
So, from my point of view, as an investor, I don't see Satellite as a great business when it's being assailed from many sides.
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Toy Yoda 12:16PM (2/18/2009)
And, with internet radio, you can use Pandora, or Pandora like technologies to feed you music that is similar to what you like.
the vegas style guy 12:27PM (2/18/2009)
Yeah, I think this is a business model that has a planned death date almost built in.
I love Howard Stern, but, his contract was just too much for a new company. No one can drive enough business to justify that amount of money. Of course, I doubt he really gets that much, we don't know the true terms of his contract.
Jim 12:48PM (2/18/2009)
"Why would I want to buy satellite when HD radio is here? Okay, so maybe HD radio isn't as good, but as the technology improves?"
'cos HD radio doesn't do much to solve the problems of terrestrial radio; namely crap content and 25 minutes of ads per hour.
Toy Yoda 1:10PM (2/18/2009)
Right Jim, but what about the 2nd point? Internet radio? With Pandora, you get your radio stations, you get an infinite number of them, and you can fine tune them, and have no commercials, and you get the added benefit that if you like the song, you can buy it "on the spot"?
You also get the possibility of sending more than just audio content down. You can have interactive radio much more so than just talk. There's so much potential in internet radio that I don't see satellite providing at all.
Again, it seems like this business is a dead end. When car vendors start providing internet radios and/or when everyone has smart phones, I think bankruptcy will be the normal state of affairs for this technology.
I don't know, I could be wrong, but it just appears that way to me.
Sean 1:28PM (2/18/2009)
I keep hearing the "b-b-but INTERNET RADIO!!!" argument, but I'm telling you, it's just not there yet, at least as far as radio in the car is concerned.
Satellite radio's primary advantage is its nationwide coverage: you can listen to the same station on a trip from California to New York with no signal dropout (well, perhaps in heavily forested or mountainous areas, but those signal drops generally only last at most a few minutes).
Compare that to internet radio, which would generally rely on a 3G cell or WiMax connection. These only exist *in major urban areas*. There is no seamless nationwide cell coverage. Driving through the Nevada desert? No signal. Driving through much of Montana? No signal. And so on.
Internet radio faces the same limitation as terrestrial HD radio: you can only pick it up in populated areas. Of course, HD radio also has the same problem as AM/FM, which is the fact that its programming consists of constant blaring commercials and lowest-common-denominator programming.
Until there is some sort of seamless, coast-to-coast data coverage, internet radio is just a non-starter.
AZZO45b 2:13PM (2/18/2009)
How is your internet connection in the car? Others have mentioned issues with 3G & laptops with wireless Wi-Fi cards (besides I'm securing my laptop while driving)
Internet radio is NOT commercial free unless you PAY for it. Plus, I listen to some local stations on internet radio (through i-Tunes) & I will lose them from time to time. I'm not in a car & the local terrestrial radio signal is still broadcasting.
BIG_D 2:36PM (2/18/2009)
Do you really think that car makers will offer free internet radio? Everything has a price. You will have to pay for mobile internet access to listen to Pandora wherever you are. Until internet radio is a cheaper option, satelite is here to stay. Sirius will however have to address their pricing when mobile internet radio is available at a reasonable price. Sirius isn't going anywhere when they have agreements with the NFL, NBA, MLB....etc. Sirius generates 2 Bil a year in revenue from 20 mil subscribers and it is worth every penny. The reason they are in debt is due to the exclusive contracts for content (Stern, Oprah, NFL, MLB) and their large start-up and operating cost. They will be profitable in the near future so buy that 15 cent stock while you can.
Jim 3:05PM (2/18/2009)
"Do you really think that car makers will offer free internet radio? "
it's possible, but if it's "free" then it will most likely have the same flaws as broadcast radio, i.e. the ads and lackluster content. If it's to avoid those flaws, it'll be a for-pay service. At which point satellite radio doesn't seem so out of line.
Toy Yoda 6:01PM (2/18/2009)
Okay. Great points all of you. But when it comes to coverage and reception, I just see 3G coverage as an immature technology. When the coverages does come on board (IF ofcourse...) then what would the compelling reason be to stay with satellite, or even subscribe? The fact that someone had to rebutt my cliche "bbbbut internet radio" already tells you that satellite has a serious campaign ad to mount. Again, from a consumer's point of view that doesn't matter, but from a business / investor's point of view? I would think this is a very bad sign.
So lack of commercials, okay, that's a compelling reason for a consumer to subscribe, but as a business model? I'm not feeling it... it was the same sales pitch with cable, and there's plenty of ads on cable. As the popularity of the internet radio increases, you will get plenty of radio's that will be commercial free. And, although I don't know for sure, my hunch is, there's more a chance that it will be commercial free, since it probably costs alot less; you certainly don't have to worry about satellites and selling ground reception units, nor developing them. Besides, you can get internet radio of any music style you like with maybe a 5 second worth every hour.
So internet radio isn't for free. yeah that's a good point. But, then again, I'm not buying internet radio. I'm buying a data connection. I believe all smart phones you buy with a data plan and it's no extra charge for subscribing to an internet radio. But, look what I get... I get not only internet radio, I get a whole host of other goodies.
Anyways, thanks for conversation...
wayne 12:23PM (2/18/2009)
I love my Sirius but I gotta admit, I've thought of ending my subscription once Maxim was taken off. So far the Merger has done nothing for me.
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Jim in Tampa 2:24PM (2/18/2009)
I couldn't agree more, wayne. Except I had XM. I do not like the new Sirius classical music programming with talking! It's like listening to NPR.
Just shut up and play the music!
maxg27 12:49PM (2/18/2009)
Howard Stern contract extended for 2 more years!!
Did anyone else hear about this?!
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