Satellite Radio: Lots of In-Car Listeners, No Profits Yet

(MoneyWatch)  If satellite radio's wealth were measured in paying customers, it would be a rich company. Sirius XM Radio has almost 20 million subscribers in 2009, compared to less than a million that Sirius alone had in 2004 when it signed on Howard Stern (for an incredible $500 million over five years). In a very difficult media economy, the newly merged company is projecting 13 percent revenue growth, to $2.7 billion, in 2009.

But new listeners aren't enough, and satellite radio has never been profitable. Sirius XM is staggering under a Tribune Co. level of debt, and nearly $1 billion of it comes due this year. (Ironically, Tribune's chief innovation officer, radio program legend Lee Abrams, is the former creative chief at XM.)

Satellite radio's problems are compounded by its dependence on the ailing auto industry. Most satellite subscribers listen primarily in their cars, though various home options are also available. The industry is losing sales and cutting back in many ways, but it seems loyal to Sirius XM. A spokesman for the combined services says it has relationships with every major automaker, most of whom are increasing satellite's reach into their product lines.

In a conference call last November, Sirius XM CFO David Frear told analysts the company had seen "a pretty good uptick in penetration rates" during the third quarter. Ford, for instance, has targeted 70 percent Sirius XM penetration beginning with its 2009 models. General Motors puts the service in 80 percent of its cars and trucks. Even if you just bought a used GM vehicle, you can get a free three-month XM trial.

"Our current agreement is scheduled to continue through 2013, and we have no plans to alter that agreement," said Jocelyn K. Allen, a spokesperson for GM's OnStar service. One reason that carmakers like satellite radio, besides the prestige factor, is the built-in revenue-sharing arrangement that adds to seriously straitened bottom lines.

There is definitely a lot of great commercial-free programming on XM Sirius. But today's satellite subscribers, who may be looking for ways to cut the family budget, do have other options. They can go back to broadcast radio, or they can plug their music-laden iPods into the handy "aux in" port that many carmakers have made standard equipment. That way they can be their own DJs, and it won't cost them a dime.