New York - Sirius XM's planned
2.0 service will increase bandwidth 25 percent, enabling the satellite-radio
broadcaster to offer more programming to next-generation satellite radios
without making existing radios obsolete, the company revealed.
Although the company already
offers more than 130 channels, the 2.0 service will enable more music and audio
channels as well as more data services to new radios, potentially including
expanded programming for Hispanics as part of a separate subscription tier, CEO
Mel Karmazin said in announcing his fourth consecutive quarterly net profit in
the third quarter.
The 2.0 service, due to launch in
the fourth quarter of 2011, will also enable new convenience and
Because the new service will be
available only on new radios, Sirius XM will make it possible to sell
aftermarket satellite radios to vehicles with OEM-installed satellite radios.
The 2.0 service will also potentially spur replacement purchases of
transportable radios, MP3-style headphone portables offering live service, and
satellite home tuners.
The first 2.0 radios will be
available next fall at retail stores, said operations and sales president Jim
The radios and service, said
Karmazin, present "huge upside opportunities for us," noting that the company
offers only three Hispanic channels. With 2.0 service, he said, it "would not
be difficult" to create a group of 10 to 12 channels devoted to the Hispanic
market. The company "has not done a good job at all reaching out to the
Hispanic-speaking market," he noted.
When asked whether the launch
will turn around the company's declining retail subscriber base in 2011, Myer
said, "We certainly hope so." He said he expects the aftermarket products
available next fall "to be well-received in the aftermarket, though he and Karmazin
noted that satellite-radio subscriptions will continue to be dominated by OEM
radios because of the sheer number of OEM satellite radios on the road,
including those in used vehicles.
In addition, the window of aftermarket
opportunity will not be open indefinitely, given that Karmazin previously said new
2.0 radios would roll out to new cars "as soon as they are able to incorporate
this into their production schedules."
For the three months ending September, Sirius
XM lost 188,884 retail (non-OEM-radio) subscribers compared with the year-ago
period and lost 637,188 retail subscribers in the first nine months of its
fiscal year. The losses brought its retail subscriber base as of Sept. 30 to
7.09 million out of a total subscription base of 19.86 million. (See table for
In other comments, Karmazin said
he hasn't reached an agreement to extend Howard Stern's contract, which expires
at the end of the year, and he said smartphone-delivered Internet radio in the
car "does represent competition." Internet radio, however, offers no more
competition to satellite radio than does terrestrial radio, he contended.
Satellite radio and Internet radio will jointly take radio-revenue share from
terrestrial radio, he claimed.
In announcing the company's third-quarter
financials, Karmazin contended the company is "stronger than ever." Adjusted
total revenues grew 15 percent in the third quarter to $722.5 million and for
the nine-month period by 13.4 percent to $2.1 billion. Net income grew for the
fourth consecutive quarter to $67.6 million compared with a year-ago loss of
$151.5 million. Nine-month net income hit $124.5 million compared with a
year-ago loss of $363.8 million.
Sirius XM also reported third-quarter
improvements in average revenue per user (ARPU), the churn rate of self-pay
subscribers, and conversions of promotional OEM radio subscriptions to paid
subscriptions (see table).
The company previously
announced that it expanded its subscriber base for the fifth consecutive
quarter during the three-month period ending September, adding more net new
subscribers than it did during the year-ago period but fewer than it did in the