Looking to boost its revenue and number of subscriptions, Sirius XM Satellite Radio Inc. Thursday announced a range of new programming options that lets subscribers buy programming from both of the recently merged rival services.The moves are the New York company's first steps toward boosting and integrating the services of the former Sirius Satellite Radio and XM Satellite Radio Holdings since their merger was completed earlier this year. A new programming package known as "Best of Both" lets subscribers receive a range of stations from each for $16.99 a month, $4 more than the $12.95 a month most XM and Sirius subscribers now pay for over 100 channels.
XM subscribers who didn't have access to the Sirius show of talk show host Howard Stern will now be able to listen to it. Sirius listeners will now be able to add XM's Oprah & Friends channel to a lineup that already included Martha Stewart's programming.
Other new pricing plans allow consumers to pay less, raising different issues for the company. A plan that allows consumers to choose 50 Sirius channels "a la carte," costs just $6.99. For now, the a la carte option doesn't include XM stations.
Sirius XM desperately needs to boost revenue and subscriber growth in order to shore up its financial picture. Next year, it has over $1 billion in debt coming due, and needs to show its business is growing in order to refinance on favorable terms. Its shares have taken a beating since June, when the Federal Communications Commission approved the merger. Thursday shares closed at 60 cents, down five cents. Before the merger was finalized Sirius shares were trading above $2.50.
Although the two radio companies merged earlier this year, customers so far might not have noticed -- because programming from each was still almost entirely separate from the other. Now, the new options could be a boon so people like Mike Arenella of Pleasanton, Calif. A self-described XM junkie, Mr. Arenella says he'd love to be able to get some programming from Sirius, too.
"To be able to listen to a specific ice hockey game or football game when you're on the road would be nice," says Mr. Arenella, who does the bulk of his satellite radio listening on weekend trips to various motorcycle-racing events. Under the new plan, he will be able to get those extra Sirius channels.
To some extent, the plan is a gamble, since it is unclear how much consumer appetite there will be to pay extra -- especially during the current economic turmoil.
Sirius XM has said publicly that it expects the new programming options to drive subscriber and revenue growth, although it has not offered specifics. But some critics predict a hit to revenue as consumers trade down to cheaper offerings.
However, others say less expensive, more tailored options will discourage people from canceling their service altogether, helping the company in the long run. "If you're getting what you want, there's less of a reason to leave, and more of a reason to sign up," says Tony Wible, an analyst at Citigroup.
The new options also come with plenty of upselling opportunities. For example, customers who choose the $11.95-a-month "family friendly" plan are offered a plan that throws in some more G-rated programming from the other company's service -- in other words, bonus Sirius content for XM subscribers, and bonus XM content for Sirius subscribers. That costs $14.99 a month. And anybody who chooses the 50-channel a la carte option for $6.99 will hear about the 100-channel option for $14.99.
By: Sarah McBride and Ethan Smith
Wall Street Journal; October 3, 2008
