Sirius Lowers Forecasts

By Amy Gilroy On Nov 10 2003 - 8:00am

Sirius Satellite Radio adjusted its forecast for total subscribers by the end of 2003 to 200,000, down from 300,000 predicted previously.

The company announced it reached 149,612 subscribers as of Sept. 30, after more than a year of national service, with president and CEO Joe Clayton claiming the company is now "on a 200,000 run rate for the year." Sirius said, however, it expects to have 100,000 Sirius-ready products in stores for the fourth quarter, representing the first Christmas it will offer a full assortment of product to a broad base of retailers.

Sirius also announced that it is ramping up its new car sales program with about 25 car models expected to offer Sirius as factory equipment by the end of the year, reaching 47 models at some point in 2004. This will represent about 2.8 million vehicles, said the company.

At an analysts' conference here, Clayton announced that Sirius will offer a portable boombox solution through Audiovox in November. Audiovox will ship a second-generation Sirius plug-and-play receiver, called the SIRPNP2, that will snap into home and car kits with a boombox kit available in limited quantities by Christmas, he said.

These will join the first dedicated satellite radio home receiver expected to ship from Kenwood in November offering Sirius service at a suggested retail price of $299.

According to Audiovox, the new Sirius SIRPNP2 plug-and-play system is a cosmetic improvement over the company's first unit, introduced a few months ago and retains the same price of $99.99. The new Audiovox Sirius-ready boombox will also carry a suggested price of $99.99.

Sirius also said it plans to add 1,000 retailers by the end of the year, for a total of 5,500 outlets. It is instituting a new in-store program that will display Sirius products in the front of about 500 stores, including Tweeter locations, and in special displays at more than 600 Best Buy locations.

Sirius also recently began offering a $50 mail-in rebate program on plug-and-play systems so that home and car kits, or two car kits, may be purchased with a plug-and-play receiver for $149 total after rebate through the end of the year.

At least one analyst said Sirius' third quarter subscriber numbers were mildly disappointing. "I had expected a net add of 59,000 [subscribers] for the quarter and they came in with 44,000. If you look in the long term, that shortfall is not that significant. I still believe in satellite radio and I think there's plenty of room for two players," said research analyst April Horace of Janco Partners, Denver.

She explained that Sirius' quarterly revenue losses are mitigated by the business model for satellite radio in general. "There's a huge infrastructure of $1 billion and change in getting the three satellites up in the air and repeaters and uplink facilities. Depreciation on these is $23 million per quarter. So yes, their income statement loss is large, but the depreciation costs help mitigate their cash flow requirements," she said.

In other announcements, the company said it is changing its radio programming to offer more live music broadcasts. New talk format shows will include "Rolling Stone on Sirius," a program hosted live by top Rolling Stone editors as well as a new talk show with Pamela Anderson broadcast live from her Malibu home.

Sirius is also running TV ads featuring Pamela Anderson and says its brand awareness has risen from eight to 24 percent according to Arbitron-Edison.