XM and Sirius spend like drunken sailors on audience-snagging content
XM has Oprah Winfrey, Snoop Dogg, NHL, and Major League Baseball.
Sirius has Howard Stern, Eminem, National Football League, and Playboy.
Actually, both satellite radio stations have way more to offer, and it all comes at a steep price, according to a Billboard Radio Monitor article:
Many analysts agree that Sirius offers the more compelling content, but some think the advantage comes at too high a cost. Exhibit A is Stern himself: Sirius is paying more than $500 million for his services over five years.
Including all the other deals Sirius has struck with the likes of the NFL ($220 million over seven years) and Playboy, the company will spend $240 million this year alone on content, Bank of America analyst Jonathan Jacoby estimates.
Such costs cause Jacoby to recommend that investors sell their shares of Sirius in favor of buying XM shares.
But XM has been spending with only slightly less abandon, encouraging one director to resign over what might become a financial “crisis.” Big-ticket content deals at XM include Major League Baseball ($650 million over 11 years) and Oprah Winfrey.
Piper Jaffray analyst Anthony Gikas disagreed with the former XM director, telling investors that XM — while spending less than Sirius — has managed to line up “a more favorable mass-market content mix.”
Don’t tell that to Stern. His rampages spare no one, not even Winfrey, whom he derides for promising as little as a half-hour of herself each week to XM compared with the 20 hours he gives Sirius. Stern also delights in reminding listeners that NASCAR races, currently on XM, will make their way to Sirius next year, a coup for which Sirius paid $107.5 million. Further highlighting the escalating cost of the content wars, XM paid just $15 million in 2002 for five years of NASCAR.
Out of control insanely mad spending, you think? Sure it is, but hope springs eternal:
Eric Logan, executive vp programming at XM, said that those critical of spending for content aren’t looking at the big picture, which includes advertising. XM’s ad revenue was $20 million last year, a sevenfold increase compared with 2003, and that sort of rapid growth is expected to continue for several years.
“The criticism of us spending too much is dwarfed by the fact that we’re one of the fastest-growing consumer electronics categories in history,” Logan said
Both companies seem eager to pause the content-buying spree, at least for now. Investors, rejoice!
