That dismal tally is in the annual report that Sirius XM filed late Tuesday with the SEC. CEO Mel Karmazin isn’t holding his conference call with Wall Street analysts until next week. To no one’s surprise, Sirius XM burned through a lot of cash again last year, but improved over 2007 on a pro forma basis from the previously separate Sirius and XM.
Pro forma revenues increased 18% to $2.44 billion, while operating costs declined 3% to $2.95 billion (not including merger-related costs). That’s still a loss from operations of $517 million, but down sharply from the operating loss of $1.02 billion for 2007. Karmazin has said repeatedly that Sirius XM will cross the break-even line for operations in 2008 and turn an operating profit in the hundreds of millions.
On the bottom line, the company’s net loss for 2008 was $902 million, compared to a loss of $1.25 billion in 2007.
Stung by the downturn in auto sales, Sirius XM ended 2008 with 19,003,856 subscribers, up only 10% from the 17,348,622 that XM and Sirius combined had at the end of 2007. 7,710,306 subscribers were added during the year, but 6,055,072 subscribers deactivated, for a net gain of only 1,655,234. By the way, that deactivation number was up sharply from 4,382,159 in 2007.
The net additions nearly flat-lined in Q4. Gross additions fell to 1,713,210 and 1,630,265 accounts deactivated, for a net gain of a mere 82,945.
Meanwhile, though, the Q4 loss from operations dropped to less than $46 million from $352 million a year earlier. Revenues grew 16% to $644 million.
RBR/TVBR observation: Having saved Sirius XM from the brink of bankruptcy, Liberty Media now has over a half billion bucks on the line at Sirius XM. As Liberty President Greg Maffei was interviewed Tuesday on CNBC, we were shocked to hear him correctly identify the fatal flaw in the satellite radio business plan – and he has the money and patience to fix it. That’s not good news for AM and FM radio.
Going forward, Maffei hopes to see Sirius XM not be so totally dependent on listening in automobiles, but to be ubiquitous – on all types of radios. But here’s where Maffei identified the fatal flaw – although he didn’t describe it that way. He spoke of having Sirius XM not be totally a subscription service, but to have some channels available to the public at large (presumably supported solely by advertising). There are roughly as many inactive satellite radio receivers in the marketplace as those with active subscriptions, so Sirius XM would immediately be able to double its potential audience by unblocking some of its channels. We would expect those to be in the most popular genres of music, so the company would be looking to take audience away from the biggest mainstream FM stations. If the satellite radio people had been smart enough to do that right from the start (instead of lying to investors about how quickly they would turn profitable from subscription revenues) XM and Sirius would have built listenership and ad revenues in better days and pose a real threat to traditional broadcasters right now.