MoneyWatch Tech

Sirius XM Tries to Turn Dirge Into Jingle

By Erik Sherman

Updated on: May 27, 2009 / 3:39 PM EDT / MoneyWatch

Sometimes I'm torn on a headline. In this case, I considered writing that Sirius XM was trying to rewrite its past and future, because that is essentially what it's trying to do. Via Silicon Alley Insider, I heard about CEO Mel Karmazin's presentation at the annual shareholder's meeting. It smacks of management trying to pretty up what has happened and what might.

Here's the timeline that the presentation slides offer:

1990-1997, obtain license
2000--2001, develop radio chipsets and launch satellites
2000--2004, develop content and auto arrangements
2003--2007, rapidly build subscriber base
Feb. 2007--July 2008, complete merger
2008--2009, cut costs
2009+, focus on cash flow

The slide presentation then went into detail of all the places that the company was cutting costs. And clearly that was going to be necessary. But the misdirection here starts with the history, making it sound as though the merger was something planned all along. In reality, the merger was one of many attempts -- including the reverse stock split and sale of additional shares and lifetime subscriptions -- for Sirius and XM, either separately or together, to turn what appeared to be in practice a money-losing proposition into a profitable one.

Now onto the subscriber base expansion. As I noted earlier this month, the company has a major customer retention problem. Here's the graph based on the company's own numbers.

Whether you blame the auto industry or the economy in general, new subscriptions have peaked and seem to be headed downwards. At the same time, look at how the company has been losing subscribers over the last few years:

Percentage of Subscriptions Lost Per Year
Year	% Lost
2006	34.9
2007	32.1
2008	34.9

In other words, should things continue as they have, each year the company will lose roughly a third of the subscribers with which it started. So the amount of new subscriber acquisition must continue to be high to keep revenues from falling back year over year. In other words, "cash flow" is the new term for trying to bring in more customers while cutting costs, otherwise known as what the company has been doing for a while.

As the saying goes, history is written by the winners. But when the future looks like the past, you have to wonder if the company's fortunes will suddenly turn around for the better.