COMPANY PROFILE
Sirius XM Radio Inc.
REFERENCE CODE: 787AC6F2-4390-407B-9275-22C140208C81
PUBLICATION DATE: 9 Nov 2012
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Sirius XM Radio Inc.
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
Company Overview
COMPANY OVERVIEW
Sirius XM Radio Inc. (Sirius XM Radio or "the company") is engaged in broadcasting music, sports,
news, talk, entertainment, traffic, and weather channels for a subscription fee through proprietary
satellite radio systems: the SIRIUS system and the XM system. The company operates in the US
and Canada. Sirius XM Radio is headquartered New York City, New York and employed approximately
1,526 people as of December 31, 2011.
The company recorded revenues of $3,014.5 million during the fiscal year ended December 2011
(FY2011), an increase of 7% over FY2010. The operating profit of the company was $676.1 million
during FY2011, an increase of 45.3% over FY2010. The net profit was $427 million in FY2011
compared to a net profit of $43 million in FY2010.
KEY FACTS
Head Office
Sirius XM Radio Inc.
1221 Avenue of the Americas
36th Floor
New York City
New York 10020
USA
Phone
1 212 584 5100
Fax
Web Address
http://www.sirius.com
Revenue / turnover 3,014.5
(USD Mn)
Financial Year End
December
Employees
1,526
NASDAQ Ticker
SIRI
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
SWOT Analysis
SWOT ANALYSIS
Sirius XM Radio Inc. (Sirius XM Radio or "the company") is engaged in broadcasting music, sports,
news, talk, entertainment, traffic, and weather channels for a subscription fee through the proprietary
satellite radio systems: the SIRIUS system and the XM system.The company’s strong market position
provides it a competitive advantage over its peers. However, intense competition could result in
lower subscription, advertising and other revenue, which could impact the company’s business and
financial condition.
Strengths
Weaknesses
Strong market position
Multi-platform offering is a competitive
advantage
Increasing profits and margins
Dependence on automakers
Opportunities
Threats
Positive outlook for online/digital radio
services in the US
Poised to benefit from the growing Hispanic
population
Intense competition
Government regulations
Weak economic outlook for the US
Strengths
Strong market position
Sirius XM Radio has strong market position. The company is the world’s largest radio broadcaster
measured by revenue and one of the world's largest pure-play audio entertainment companies.
Sirius XM Radio is also the second largest media business in the US based on the total basic paid
subscribers. The company had a subscriber base of 22.3 million at the end of the first quarter of
FY2012 compared to DirecTV (20 million subscribers), Dish Network (14.1 million) and Time Warner
Cable (12.5 million). According to industry estimates, Sirius XM Radio holds an estimated market
share of 70% of pre-installed satellite radio in new cars sold in the US. It is also the dominant player
in the pay radio market.
Over the years, the company has successfully gained market share and emerged as a formidable
player in the industry. The company enjoys wide audience and has access to large cross selling
opportunities. Sirius XM Radio dominates the satellite radio market and enjoys significant scale
advantages compared to its peers.
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
SWOT Analysis
Multi-platform offering is a competitive advantage
Sirius XM Radio offers content through multiple platforms. The company offers broadcasting services
through hardware, internet and mobile. Hardware primarily includes the units sold through automotive
original equipment manufacturers (OEMs). The company offers content through its website. It also
provides its content to iPad, iPhone, BlackBerry and Android-powered smartphone users through
mobile applications. Furthermore, Sirius XM Radio is developing applications for televisions and
Blu-Ray players. Radio broadcasters, including the company, have the advantages of creating the
content once which generates revenues at multiple points. Increasing number of platforms that Sirius
XM Radio distributes content on, leads to higher audience numbers and hence, increases revenue
generating opportunities.The company's presence across several platforms is a significant competitive
advantage as other broadcasters like internet radio are usually restricted to a single platform.
Therefore, the multi-platform presence enhances the revenue generating opportunities and provides
competitive advantage as the company enjoys multiple touch points and thus wider audience.
Increasing profits and margins
Sirius XM Radio witnessed a strong growth in its profitability.The company's operating profit increased
from $228.3 million in FY2009 to $676.1 million in FY2011, representing a CAGR of 72%. In addition,
Sirius XM Radio's operating margins increased from 9.2% in FY2009 to 22.4% in FY2011. Similarly,
the company recorded a net profit of $427 million in FY2011 compared to net profit of $43.1 million
in FY2010 and a net loss of $538.2 million in FY2009. Sirius XM Radio's net margins increased from
-21.8% in FY2009 to 14.2% in FY2011. Increasing profits and margins reflects the efficient cost
management and sound decision making of Sirius XM Radio, which could be leveraged to fund
growth plans in the future.
Weaknesses
Dependence on automakers
Sirius XM Radio's subscription growth is largely dependent on the sales through automakers. During
the last few years, most of the company’s new subscription growth was derived from purchasers
and lessees of new and previously owned automobiles. As a result, the sale and lease of vehicles
with satellite radios was an important source of subscribers for Sirius XM Radio's satellite radio
services.
Automotive production and sales are dependent on many factors, including the availability of consumer
credit, general economic conditions, consumer confidence and fuel costs. Any decline in the vehicle
sales could reduce the subscriber growth of the company and impact its sales.
Opportunities
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
SWOT Analysis
Positive outlook for online/digital radio services in the US
The demand for online/digital radio services are expected to increase in the coming years. According
to industry estimates, the US radio broadcasting industry generated approximately $480 million in
online/digital revenues in 2011. The market is projected to grow at a CAGR of over 13% to reach
approximately $760 million by the end of 2015. Sirius XM Radio has a significant presence in the
online radio broadcasting market and will benefit from the trends in the channel. The company offers
SiriusXM 2.0, a satellite and internet services. The company also offers music and other channels
through applications for Apple, Blackberry and Android powered mobile devices. Sirius XM Radio's
presence in the mobile market will find support from the growth of content consumption through
smartphones and other mobile personal communication devices. Although the company has low
exposure to the internet radio, the presence in the online/digital radio market will enhance the avenues
for revenue growth, further catalyzed by the growth trends in the channel.
Poised to benefit from the growing Hispanic population
The company has increased its focus on offering exclusive programs targeting the Hispanic population
in the US. According to the US Census Bureau, the Hispanic population reached approximately 52
million by the end of second half of 2011, representing about 17% of the total US population. The
US Hispanic population is estimated to reach 133 million by mid 2050, constituting approximately
30% of the US population by that date.
The company has made several focused efforts to attract the Hispanic customers. Sirius XM Radio
leased four channels from National Latino Broadcasting on a long term basis. In October 2011, the
company launched an expanded channel lineup, including new music, sports and comedy channels
as well as SiriusXM Latino, a suite of Latin channels featuring a variety of commercial-free music,
plus programming from leading providers of Spanish-language sports, news, talk and entertainment.
The company’s increased focus on offering Spanish radio channels and the growing population of
Hispanics will provide it an opportunity to attract more customers and increase its market share in
coming years.
Threats
Intense competition
The company faces significant competition for both listeners and advertisers. In addition to
pre-recorded entertainment purchased or playing in cars, homes and using portable players, Sirius
XM Radio compete with several other providers of radio or other audio services. Some of the
company’s new, digital competitors are making in-roads into automobiles, where the company is
currently the prominent alternative to traditional AM/FM radio. Sirius XM Radio’s services compete
with traditional AM/FM radio. Traditional free AM/FM radio reduces the likelihood that customers
would be willing to pay for the company’s subscription services.
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
SWOT Analysis
Sirius XM Radio also faces competition from high definition (HD) radio broadcasters. HD radio
stations do not charge a subscription fee for their digital signals but do generally carry advertising.
A group of major broadcast radio networks have created a coalition to jointly market digital radio
services. According to this coalition, over 2,100 radio stations are currently broadcasting primary
signals with HD radio technology and broadcasting more than 1,300 additional FM multicast channels
(HD2/HD3), and manufacturers are marketing and distributing digital receivers.
In addition, internet radio and internet enabled smartphones have been consistently competing for
the audio entertainment consumption. Several large media companies like Clear Channel, CBS and
Pandora, make high fidelity digital streams available through the internet for free or, in some cases,
for a fraction of the cost of a satellite radio subscription. These services compete directly with Sirius
XM Radio’s services, at home, in the automobile, and wherever audio entertainment is consumed.
Moreover, the company also faces competition from advanced in-dash information systems, direct
broadcast satellite and cable audio service providers, traffic news service providers, and other digital
media service providers. The company’s other competitors include Spotify, Rhapsody International,
Citadel Broadcasting, Cumulus Media, Emmis Communications, Entravision Communications, and
Westwood One.
Intense competition could result in lower subscription, advertising and other revenue and could
increase Sirius XM Radio’s marketing, promotion or other expenses, consequently impacting the
operational performance and market share in coming years.
Government regulations
The company's business is subjected to extensive government regulations. Sirius XM Radio is
regulated by the Federal Communications Commission (FCC) under the Communications Act of
1934, principally with respect to: the licensing of satellite systems; preventing interference with or
to other users of radio frequencies; and compliance with FCC rules established specifically for the
US satellites and satellite radio services. Any assignment or transfer of control of the company’s
FCC licenses must be approved by the FCC. The FCC’s order approving the merger requires Sirius
XM Radio to comply with certain voluntary commitments.
The company is required to obtain export licenses from the US government to export certain ground
control equipment, satellite communications/control services and technical data related to its satellites
and their operations. The delivery of such equipment, services and technical data to destinations
outside the US and to foreign persons is subject to strict export control and prior approval requirements
from the US government, including prohibitions on the sharing of certain satellite-related goods and
services with China. In addition, Sirius XM Radio is subjected to several other government regulations.
Changes in law or regulations relating to communications policy or to matters impacting the company’s
services could adversely impact Sirius XM Radio business and financial condition.
Weak economic outlook for the US
Sirius XM Radio Inc.
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Sirius XM Radio Inc.
SWOT Analysis
The US economy has experienced a protracted slowdown, and the future economic environment is
expected to be challenging. The recent macroeconomic data, state-level regional data, and the
increased volatility in the financial markets in the US shows significant downside risks to the economic
growth in the near term. In addition, factors such as weak household balance sheets and confidence,
relatively tight financial conditions, and continued fiscal consolidation are expected to halt the growth.
Moreover, the US economy is expected to face serious risk from the beginning of 2013 due to the
proposed spending cuts and tax increases (fiscal cliff) that are slated to be implemented by the end
of 2012. The combined effect of these measures could result in a huge fiscal contraction, which
would impact the economic recovery. According to industry sources, fiscal cliff would reduce the
growth rate to nil on an annual basis in 2013, and the economy is likely fall into a recession.
Such challenging economic conditions are expected to have an impact on Sirius XM Radio operations.
A continuation or further weakening of these economic conditions could lead to further reductions
in consumer demand for the company’s services. Weak economic conditions in the US could further
impact Sirius XM Radio’s business and financial condition.
Sirius XM Radio Inc.
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