Mel says "Satellite radio is red hot!"
You can tell he's a veteran radio guy, since Mel Karmazin used his own twist on the old RAB slogan several times in his first quarterly conference call as CEO of Sirius Satellite Radio. Insisting that "Satellite radio is red hot!" Karmazin declared that Sirius is now better known to the public that rival XM - - no doubt because of the publicity surrounding the company's signing of Howard Stern. While he wouldn't discuss the details of any talks he's having with Viacom/Infinity, Karmazin said investors should continue to assume that Stern will launch on Sirius in January 2006 and no sooner.
While Sirius has based much of its marketing to date on being commercial-free on its music channels, Karmazin made it clear that ad sales are going to become an important component of Sirius' revenues - - including Stern's show and many of the non-music channels that the satellite broadcaster offers. He also expressed hopes that many of Stern's current Infinity advertisers will come with him to Sirius. Karmazin said Sirius will be hiring people this year to have its ad sales operation ramped up by the time Stern's show debuts.
Karmazin cast doubt on a report in yesterday's New York Post that executives of Sirius and XM have begun preliminary talks on merging the two satellite radio companies. Without even mentioning XM by name, he said he had not met with the Chairman or CEO of the other company mentioned in the Post story. And he said that a merger of the two competitors would face regulatory hurdles.
Never one to think small, Karmazin noted that cable and satellite TV combined today serve 90 million US households - - and said there was no reason why satellite radio shouldn't reach that level some day, although he didn't offer any target date. For now, Sirius is projecting that it will add 1.4 million subscribers in 2005, taking its total to over 2.5 million. Claiming high consumer satisfaction with the Sirius product, Karmazin insisted that the company's churn rate will be "very low." Churn dropped to 1.5% in December, but Sirius is telling Wall Street to expect a monthly rate of 1.6-1.7% for 2005.
RBR observation:
Want to bet on that low churn rate, Mel? We see no reason why satellite radio's churn rate won't double or triple from current levels over the next few years as people trade in cars, one-year packages built into auto purchases expire and some people just decide they're not using the service enough to justify the monthly payment. You're going to need those ad revenues to keep your business model from falling apart.
Are you reading this from a forwarded email?
