XM’s loss widens despite revenue growth
Over the past year, XM has doubled their subscriber base, forged deals with major auto manufacturers to include XM radios as standard equipment in new vehicles, signed a variety of high-profile personalities as DJs, and has taken a huge bite out of the sports arena. So why are they bleeding cash?
Answer: Because only the first item on that list was a good thing for the company’s cash flow.
From BusinessWeek online:
The company had a net loss of $134 million, or 60 cents per share, compared with $120.1 million, or 59 cents per share, the year before. Analysts surveyed by Thomson Financial expected a loss of 66 cents per share.
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XM… added 617,152 net subscribers… Subscriber acquisition costs fell to $53 per users from $57 last year. XM said it still expects to have more than 6 million subscribers by the end of the year.
The bottom line, however, was weighed down by increased operating costs, which more than doubled to $105 million, including programming costs that more than tripled to @28.4 million. Marketing costs also jumped 49 percent to $99.2 million.
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Both companies [XM and Sirius] have incurred heavy losses as they build up their business and sign on-ar talent and programming deals. Sirius signed a $500 million, five -year contact with shock jock Howard Stern… XM has an 11 year, $650 million deal with Major League Baseball.
I expect satellite radio to become profitable within the next few years and remain so for some time, once subscriptions break into the mid-main stream phase. Until then, XM will just have to look like a bunch of jack asses at the end of every revenue period.
