@ Media & Money: Sirius XM's Karmazin: Managing Debt, Stronger Balance SheetAll In The Future

(PaidContent.org)  This story was written by David Kaplan.

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With over $2 billion in debt, the unified satellite radio company Sirius (NSDQ: SIRI) XM (NSDQ: XMSR) already had plenty of challenges before the credit markets tightened up these past few weeks. But CEO Mel Karmazin tried to steer things into the bright future instead of the darkening present. In a Q&A with Mediaweek's Katy Bachman at the Dow Jones/Nielsen Media and Money Conference in New York, Karmazin pleaded for some time to get the company's finances in order, as he boasted of Sirius XM's strengths even in an economic downturn.

-- The future is bright: Karmazin: The fact is that it will take satellite time to get to free cash flow; look how long it took cable. The equity in the company is worth $1 billion. On one hand, you have a company that has grown over a period of time. We've gone from $67 million to $2.4 billion in revenue by the end of the year. The companies that get rewarded today have a great balance sheet. That's not us today, but that's us in the future. As for the debt, Karmazin said: "We're engaged in discussions [our lenders]. I believe we'll be able to refinance it, even in this market."

-- Even if Detroit loses, we still win: We're a subscription business. About 96 percent of our business comes from that. the largest driver is when you go out an buy a new car, every car company has committed to putting it. Next year, we'll have 50 percent penetration. There are about 17 million new cars produced a year. That number will be 13 million next year. If there are only 12 million cars sold, no one as forecast that, but even if the worst happens, 6 million will leave the assembly line with satellite radio. And our surveys show that 50 percent of the people who are offered satellite with their new car, take it. That will get us to $300 million revenue growth even if Detroit has a very bad year. Even in a market where cars are not doing well, we can still feel successful.

-- Content syndication: Sirius XM had talks about syndicating its content to terrestrial radio stations and networks. But Karmazin takes a dim view of these deals, noting that they tend to undercut Sirius XM's existence as a subscription service. "Why would they pay $12.95? It's because they can't get it anywhere else. We have 65 commercial free music channels. If you want to listen to something on terrestrial radio, you have to pay by listening to commercials. Our model is different. It would also hurt the brand to produce content that would have to conform to FCC standards. I will honor some agreements we have made. But I wouldn't go out of my way to do more syndication deals."


By David Kaplan