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Setbacks Leave XM With 'Explaining to Do'
NASCAR driver Jimmie Johnson is joining XM Satellite Radio as a host. The service has 5 million subscribers.
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XM officials and several analysts pointed out that XM still dominates the auto market and has deals with 60 to 70 percent of U.S. automakers. Honda, Hyundai and Toyota also plan to increase the number of cars that come with XM as an option, which would make up for any slowdown by GM. XM gets about half its subscribers from the auto market and the other half through retailers such as Best Buy and Circuit City.
The company's biggest challenge in the coming months may be on the retail front, as Sirius begins an ad blitz promoting Stern.
"Stern may be the one risk to watch as the retail market share temporarily shifts to [Sirius]," wrote Tom Watts of SG Cowen & Co. in an Oct. 26 note on XM.
Analysts from companies such as J.P. Morgan expected Stern to add 1 million to 1.4 million subscribers to Sirius' subscriber rolls in the next year -- revenue that would help offset the company's five-year, $500 million deal with the radio host.
During an analyst call yesterday, Sirius chief executive Mel Karmazin predicted that Stern, lower prices on hardware and a new portable device would produce a "blowout" fourth quarter.
"Could [XM] get eclipsed by retail ads from Sirius for two quarters because of Stern? Sure," Horace said. But in the long term, she added, XM still has an advantage because of its lead in auto distribution.
XM officials have their own holiday marketing blitz planned. And it doesn't involve taking Stern on directly.
"We're focused on what we offer. We have our own unique content. We don't want to be Stern satellite radio," said spokesman Chance Patterson. "We have our share of big names . . . but focusing on big names doesn't address the user experience. People want a lot of live content and a mix of sports and news. We've been able to deliver the mix people want."
