I have been following the ongoing drama of the possible Sirius XM bankruptcy/take over/whatever is going on with great interest. I have also been reading the comment threads following these articles and I am so annoyed by most of these people I’m about to scream. So, instead of going crazy there, I’m going to spread some common sense here.
1.) To all the people who point to the Howard Stern contract as the reason the company is in trouble. You are morons. Most of these comments come from people who don’t like Stern, and that’s fine. He’s certainly not for everyone, but he has been worth every penny the invested in him. When they signed him, Sirius had roughly 700,000 subscribers and XM had somewhere in the neighborhood of 6 million. That was in January of 2006. By the middle of 2007 Sirius had around 7 million subscribers to XM’s 9 or so million. That type of growth is insane and there’s no way they get there without Stern. Like him or not, he has a following. Because of him, Sirius went from no name recognition and very few listeners to forcing a merger with XM.
2.) I bought Sirius for both my dad and brother last Christmas, 2007. They both love it. Their musical tastes could not be more divergent. When one product can completely satisfy two sets of tastes so far apart, it is a product with a HUGE upside. This company will be worth a lot in the long run.
3.) This is a brand new industry with insane start up costs. Not only the R&D to develop all the technology from the radios to the antennas to the satellites, but they had to launch satellites into space. Ive never done that, but I feel pretty confident in saying, “That ain’t cheap.” Plus, they have to provide content and talent. They have probably overpaid for some of their talent, but to lure people away from their current gigs and get some high profile people they needed to pay for it.
4.) Anyone who says people aren’t willing to pay for radio is also a moron. I don’t know anyone who has tried satellite radio and said, “no thanks, terrestrial is better. I prefer 30 minutes of commercials per hour.” They have 20 Million subscribers and their problem is not that they are losing subscribers. They’re still adding subscribers, just not as fast as they had been/would be if the economy wasn’t in the tank.
5.) The government dragged their feet on the merger for 18 months. It was a ridiculous waist of time and it hurt both companies. They needed to merge for cost purposes and because of the long merger process they spent 18 months spending money at a much higher rate than they would have if they had been allowed to merge earlier. The debt situation right now would not be this bad if they hadn’t been obstructed by this.
6.) If the economy wasn’t in such bad shape they wouldn’t have any trouble restructuring this debt.
Finally, the problem isn’t the product, or the willingness of people to pay for it. It’s basically timing. Whether they end up restructuring through Chapter 11, or whether there is some sort of deal worked out with Directv or Echostar, Sirius XM isn’t going anywhere.