Maybe that $55 million deal last week with Oprah Winfrey was a bit over the top... One of XM Satellite Radio's directors quit Thursday, saying the company would be in deep trouble if it didn't quit spending like a drunken sailor (we're paraphrasing here, but you get the idea). Meanwhile, XM reported an increased quarterly loss on higher expenses.
XM has almost twice the subscribers of rival Sirius (that has shock jock Howard Stern as its star celeb), but both companies are spending heavily to attract new subscribers, in a race to capture share in an expanding market. Therein lies the rub... in the last quarter it cost XM $89 to sign up each new subscriber, vs. $64 a year ago.
XM says this is all a short term aberration, and it's on track to reach profitability by 2010. Investors were less sanguine - its shares were down 5 percent at the close on Thursday, with some pointing worriedly to XM's failure to turn new car buyers into regular subscribers. Many vehicles now come with a free trial period of the satellite service, and 'uptake' rates after the complementary period expires haven't been as robust as the company has been hoping for.