RBR has always insisted that churn is a major issue for both satellite radio companies, despite their insistence that subscriber turnover is under control. Bridge Ratings is out with new analysis showing that the customer turnover rate for XM and Sirius is far higher than for cable TV, satellite TV or wireless phones.
Getting a handle on the real churn rate isn't easy, since the companies count subscribers differently. For example, if someone buys a car with a satellite radio installed and doesn't continue the subscription after the trial period, Sirius counts it as churn and XM does not.
Taking a very broad view of turnover, Bridge Ratings calculates that both companies lost about half as many subscribers as they added in Q1 of this year. "During the first quarter of 2007 both satellite radio companies experienced a great deal of churn. XM's net subscriber growth for the quarter was 285,000 off an impressive gross gain of 868,000. That means that the company experienced cancellations or non-renewal trials of 583,000 – a 67% attrition rate. Sirius added 556,000 net subscribers in the first quarter off a gross of 988,000 – a 43% attrition rate," Bridge Ratings said in its latest update on satellite radio.
SmartMedia observation: That "attrition rate" (good name) is not the same as calculating a churn rate as done on Wall Street for cable TV, satellite TV and satellite radio, but it is an astounding figure. It also adds weight to our contention that the "pre-marketing cash flow" numbers that XM and Sirius have been bandying about are ridiculous. Without marketing, their already high churn rates would go into the stratosphere.