Sirius XM To Go Bankrupt?

SiriusXM

What\’s this, Sirius/XM, the merged satellite radio providers that are supposed to be the future of all radio broadcasting, the in car device that is pushed and hyped by dealers across the land and the home of Howard Stern is about to go belly-up?

That\’s what the rumors say, and in these turbulent times, especially turbulent for any carmaker or anything auto related, it might not just be too far off from happening.

According to Edmunds, the Auto Observer, AND the New York Times Sirius XM is making preparations for a possible bankruptcy filing. Huh? You\’d think they\’d have to be doing something fundamentally wrong to get them selves in these straights. Every time I look up, there\’s a car advertised that hypes the inclusion of a Sirius/XM set up in its dashboard, but it turns out that hype might just be that: a lot of sizzle, and not much steak.

It turns out that neither Sirius nor XM (when they were separate companies) ever turned a profit, and together they have $3.25 billion in debt, which is a LOT of debt for what amounts to a start up, especially a start up with this much market presence, advertising and hoopla. To make matter worse for them, by the end of February, a bill for $175 million will come due.

Ouch.

But you know, is this really all that surprising?

Radio revenues have been dropping for some time, and although Sirius/XM does have Howard Stern on their roster as a high level, well-known personality, go ahead, name another. At that is the problem.

Sirius/XM is little more than a country-wide, satellite version of ground bound, or as they call it \”terrestrial\” radio. And what has been causing the decline in listenership and therefore ad revenue is, if anything, a lack of personality.

With the corporate consolidation of most media over the past 15 – 20 years, whatever amounted to the slightly different, the regional or, for that matter, the interesting, has slowly (or quickly in a lot of cases) been driven off the airwaves.

The songs you hear on the radio in San Francisco are the same ones you\’ll hear in Chicago, and the same ones you\’ll hear in Omaha etc etc etc … and if you don\’t think there\’s a difference between the music produced in Chicago versus, say New Orleans, you need to get out more. No, seriously: get out more. Go see more live music. It\’s really interesting, and good for you to do.

Anyway, you can\’t get much more blander and homogenized than listening to something that a Sirius/XM programmer thinks people in Miami AND people in Seattle want to listen to at 10 in the morning.

So Sirius/XM teeters? Well, sorry for all the employees, especially in the current economic climate, but by and large the company was trying to fill a need that didn\’t even exist.

Source: Edmunds

About The Author

Tony Borroz grew up in a sportscar oriented family, but sadly, it was British cars. His knuckles still show the marks of slipped Whitworth sockets, strains to reach rear upper shock bushings on Triumphs and slight burn marks from dealing with Lucas Electric "systems". He has written for a variety of car magazines and websites, Automoblog chief among them, as well as working on very popular driving games as a content expert. He has also worked for aerospace companies, software giants and as a movie stuntman. He currently lives in a secure, undisclosed location in the American southwestern desert.

24 Comments on "Sirius XM To Go Bankrupt?"

  1. herb friedman

    After reading your comments regarding Cirrus Radio I find it very curious that your article is so negative. My wife and I enjoy the stations we listen to. It ranges from classical to pop to oldies. It seems to me that your negative attitude indicates something is on your adjenda that has nothing to do with the quality of the programming. Since it is people like me who gladly pay the subscription costs your negativity means nothing.

  2. With It

    This was published on Feb 26th? Are you living under a rock or something? SiriusXM has fully paid its Feb 09 debt with the assistance of a loan from Liberty Media and there is NO imminent threat of bankruptcy whatsoever.

    A solid company with $2b/yr in revenue and 20 million subscribers, laboring to succeed under a large debt load in an impossible credit climate doesn't need utterly clueless bashing like this. Do some (any!) research before you publish crap like this!

    I am a very happy multiple XM/Sirius radio subscriber and a stockholder, as well.

  3. Some people like it, some don't. it's that simple. A lot of our review cars have Sirius or XM installed, and I rarely use it. There are a few good stations on XM, and maybe one on Sirius. Now they've combined, but I still certainly wouldn't pay a monthly fee for it, but I suppose if I did a lot of long-distance driving I would consider it.

    By the way "With It" – don't you see a problem with your statement "SiriusXM has fully paid its Feb 09 debt with the assistance of a loan from Liberty Media"?

    They paid off debt with more debt? There is indeed threat of bankruptcy; they've been talking about it for a while now.

  4. mark

    wow i cant believe this, man you are one pathetic pos, why do u feel like rereporting something that is 2 week's old and already been proven is not going to happen, hey i hope you enjoy your check from the nab you pos. Sattelite radio is not going anywhere, why dont u write a story about clear channel going bk, cause they are the one who WILL go BK, not sirius. Once again worst pos article ever written.

  5. That, of course depends on whether or not you like your local radio. I for one don't listen to it at all, I just hook up my iPhone and stream internet radio if I'm in the mood for radio. It's all about preference. Clearly plenty of people love XM enough to pay monthly for it, but that's just not enough to keep them afloat.

  6. With It

    My problem stems from this statement:

    "To make matter worse for them, by the end of February, a bill for $175 million will come due."

    The payment referenced CAME DUE and was paid by Feb 17th. The article says the debt will come due by the end of Feb. WRONG. Before you write something with a title of 'SiriusXm to go bankrupt?' do some research and get your facts straight. If this article came out on Feb 16th, it would have been timely. Writing about something that happened a week and a half ago as though it hasn't happened yet just displays a complete lack of grasp of the situation. You can try and weasel out of that missatement any way you want but your ignorance of the situation is clear.

    Yes, the debt 'paid with more debt' still exists but it's pushed off to a more realistic time frame that's not quite as pinched by the ridiculous 18 month merger approval period the FCC strangled the companies with on behalf of the NAB. Given those 18 months to operate freely as merged companies with an ever-increasing subscriber base instead of idling along, prevented from reaping any benefit of merger synergies, SiriusXm would likely have had no trouble paying the February debt without any assistance. The company will release its Q4 2008 financial statements in the next week. You may be suprised how "clearly" they can be kept afloat when they aren't artificially shoved up against a deadline.

    And by the way, when you pay debt with debt it's not 'more debt' because the old debt is paid off.

    I doubt you know anything about the terms of the loan and how it affects future debt, so I won't bother you with that. SiriusXM still faces a great deal of residual debt in the future, but now is in a better position with more time and more options to repay that debt than they were before Feb 17th. As previously noted, the subscriber base is steadily growing and the merged company doesn't have new debt stemming from being in competition with one another, the source of much of the legacy debt. Simply: the debt the company currently faces is not merely related to operating costs so a supposition that the subscriber base and other income cannot support the company is anything but clear.

    As for not liking the service, that's fine. That's your choice. But writing an embarrassingly misinformed piece pushing the notion of imminent bankruptcy for SiriusXM is just sensationalist BS and needs to be called out. You're entitled to your opinion, but you aren't entitled to misstate facts.

  7. I made the statement about paying off debt with more debt because you were acting like that's what will save Sirius XM now. It's like putting a band-aid on a gunshot wound. It might slow the bleeding slightly, but the wound is still there, and the band-aid won't fix the original problem.

    To relate it more relevantly, it's the equivalent of paying off the balance of one credit card with another card with a lower minimum payment. It only delays the consequence of poor money management.

    Some of the facts in this article may be a bit dated, but the fact remains that Sirius XM, no matter how many loans they paid off with other loans, are in serious trouble.

    My opinion is irrelevant in this argument, and to make it clear, I don't dislike the service. In fact I like the idea quite a bit. It's just not for me, and I think they have issues to be worked out before I would consider it. For example, when I'm listening to XM in one of our review cars, we can go under a McDonalds drive-thru and the signal will cut out completely. That's piss-poor service, and shows how little testing they do when installing these systems.

  8. With It

    Are you aware that SiriusXM has terrestrial repeaters in more populous areas which eliminate the fade when the satellites are blocked?

    http://www.dogstarradio.com/sirius_map.php

    You don't have to 'test' line-of-sight satellite signals to know they get blocked. It's not an 'issue to be worked out', it's a physical limitation unless you happen to be in the vicinity of a terrestrial repeater. The number of those repeaters is likely to increase as the number of subscribers continues to increase. Last time I checked AM radio disappears when you drive under something too….

    You still aren't grasping the nature of SiriusXM's debt. They were originally two separate, competing companies, each with their own start up costs which included launching multiple satellites per service. Being in competition with one another led to spending in pursuit of gaining the upper hand. Contracts for content and talent were driven higher because there were two competing services vying for the contracts. Holding SiriusXM present management singularly responsible for the actions of two separate, competing companies is nonsense. They are just one company now having to deal with the debt of two companies and in fact they are doing so successfully.

    When the two services decided in January 2007 to merge rather than continue trying to outspend each other instead of working on meeting upcoming debt obligations, the FCC blocked it. It wasn't until July 2008 that the FCC grudgingly allowed the merger to happen, conveniently giving the newly merged company a whopping 6 months to streamline operations in preparation for the upcoming debt instead of the 2 years they aimed for. How is that poor money management? I call it sabotage via FCC on behalf of the NAB, who would like nothing more than to see satellite radio fail.

    As for your credit card analogy: a longer time to repay a non-recurring debt makes the debt manageable. Every company carries debt, they just have to have it structured in such a way to make paying it back possible. Sirius and XM have never missed a single debt payment in either of their histories or their short history as a merged entity. You call that poor money management? How would you have run a satellite radio company? Not launch satellites? Not advertise? settle for substandard content? Is that what you consider good money management? Sounds like an excellent way to kill a good idea. Ever hear the phrase 'You have to spend money to make money?'

    I guess Moody's recent upgrade of SiriusXM's credit rating is an indicator that they "are in serious trouble" due to poor money management? Standard and Poor's are poised to upgrade them as well. Seems to contradict your assessment of the company's financial health. I mean..who should listen to financial industry analysts opinions in these matters, anyway? I guess we should all just look to bloggers who write about fast cars instead.

  9. David Garrett Jr.

    I agree with most everyone else that has commented. Your news is old. And it is a couple weeks behind. How Google listed this on the news page I do not know. And satellite radio is not the same as regular radio. I don't have Sirius XM, but when I heard they were going bankrupt and then someone gave them a loan to help pay their debt I became an investor. Because I am a used car dealer and a lot of people like the satellite radio in the cars. Considering Sirius XM is a monopoly I feel it could turn out to be a great investment.

  10. With It

    It's not hard to figure out why so many media outlets (including this one) love to hammer the word 'bankruptcy' when it comes to SiriusXM. There's 20 million subscribers whose ears perk up when they say it. It's tabloid sensationalism at its finest.

    Investors (And I am one) who understand the situation and the players involved have had faith that bankruptcy was not imminent and we have been been proven correct.

    We don't appreciate agenda-driven or just plain ignorant writers continuing to bang the bankruptcy drum without regard for the facts. It was valid speculation before the Feb debt was paid. After the fact it's just buffoonery.

  11. Bobleft

    Man, what a looser of a reporter are you? Granted you might not like the service but you are as bad as the paid to bash CNBC people and all the media combine that wants to see Sirius fail, GET YOUR FACTS STRAIGHT..is reporting like yours that has sunk the Market with mis information and lies

  12. James

    Well whatever you do – DO NOT sign up for their Lifetime Subscription without reading their fairly well hidden (and never mentioned during the sales process) terms and agreements. This is an out and out fraud on the Sirius consumers.

    It appears that Lifetime does not mean YOUR Lifetime it means the lifetime of your existing receiver. That's right – get a new car with the radio built in, upgrade to a newer device and you will quickly find out how they have resorted to misleading customers with their Lifetime promotion. So what happens if your device fails after the one year warranty is up? That's right – you have lost your lifetime subscription.

    PS – the terms and agreements also go on to say "no refunds" on the hefty $500 fee.

    So beware: The promise of Lifetime Service isn't Sirius!

  13. Rob S

    You gotta watch it when you write sensationalist titles Chris. These Sirius trolls really came out of the woodwork on this one. But I feel it's my obligation, nah, my duty to point out the grammar/spelling mistakes.

    1) adjenda should be agenda. if this sites negativity means so little to you, why did you write out a huge response?

    2) satellite, not sattelite. perhaps chris was incorrect in his assumption that sirius is going to go bankrupt but it's pretty ridiculous to write pos a hundred times. calm down buddy.

    3) 'With It's second response is by far the most intelligent thing written on this whole page. It is unfortunate he didn't start with this.

    4) The rest of it is blah blah blah, except for the person who wrote looser instead of loser. my personal favourite stupid mistake. almost ironic.

    anyway, it seems that the people who are arguing for sirius are stakeholders in the company so they are speaking with an agenda just as much as automoblog.net is. i personally don't think it was intentional, just a way of getting some new readers. it certainly managed to do that.

  14. Mase

    You have to be more thorough. If your SiriusXM radio fails after a year, you can transfer your lifetime account. It's like $50 bucks. It's not like you've wasted $500.

    Full disclosure, dude.

  15. James

    I offered MORE full disclosure in my post than Sirius did when I signed up, dude.

    The charge is $75 for each change and once you have had three changes your lifetime is over. So yes, then it is like you wasted your $500. Bottom line: If it has an ending other than your lifetime – then it isn't really a "lifetime" subscription is it? BTW this change feature was added only after they had so many complaints – the original agreement text was "one" device. Still if your radio dies after warranty you – you have to purchase a new radio and pay for a switch. Then three strikes your out – so why didn't they call it the Baseball Subscription Plan?

    But even with ALL that said – they are still NOT telling anyone about the terms and agreement when they are offered the deal over the telephone.

  16. mark

    james any1 buying the lifetime clearly knows what they are getting, if not they are stupid for not looking into what they are purchasing.

  17. Rob S – I didn't write this article, Tony did. And there was no agenda – just an opinion. I don't want Sirius XM to go bankrupt, I just think they have a lot of work to do.

    James – thanks for the warning. That's important to know for potential customers.

  18. James

    Yes Mark – I can see where I was confused… If someone tells me over the phone that I can upgrade to a "lifetime subscription" – I should know that it is the lifetime of the receiver NOT my lifetime. So whenever I get a lifetime warranty on a any product and the product stops working – THEN of course the warranty is no good anymore – after all the lifetime of that product is up. That makes perfect sense – I don't know why I was thinking that they meant something different. Wow, am I stupid.

    Thanks Mark for showing me the light.

  19. Shalonda Geho

    Ok, that is a good start however i’ll have to consider that a great deal more. Will show you exactly what more there is.

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