Sirius XM Looking at Bundles with DirecTV, Karmazin Says
Sirius XM and DirecTV have “a number of opportunities” to work together through Liberty Media, which owns large stakes in both companies, Sirius XM CEO Mel Karmazin said Thursday in an earnings call. His company has “an excellent working relationship” with DirecTV CEO Chase Carey and has “had discussions” with him “over the last few days,” and with Liberty Media CEO Gregory Maffei, about teaming up, Karmazin said.
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Since “we have different shareholder pieces,” there are opportunities “on an arm’s-length basis” to bundle the Sirius XM and DirecTV services, Karmazin said. DirecTV might “have a special package for many of their subscribers to be able to get Sirius at an attractive price… In this environment, it behooves us to consider every possible way that we can grow our profitable subscriber base and our revenue.” If working with DirecTV “or any other Liberty company” will help Sirius XM increase its revenue, “we're open for it,” Karmazin said.
Sirius XM is “thrilled” to have Liberty Media as “a partner,” Karmazin said. Its investment agreement with Sirius XM “is a very good deal for Liberty and a very, very good deal for our company, considering where some of you had us going,” he told analysts who had written off Sirius XM as headed to bankruptcy. “There was so much being written about our company going bankrupt that all the doom and gloom stories had a tremendous impact on the consumer and their interest in buying the product,” Karmazin said of the company’s 2008 decline in retail net subscriber additions. The Circuit City liquidation also “really did hurt us,” said Jim Meyer, president of sales and operations. “Circuit City was a very, very strong supporter of satellite radio.” With that retailer’s demise, its shoppers switched to mass merchants that aren’t as supportive, he said. “That’s something we're going to address this year.”
Sirius XM is testing “a number of initiatives” to make its service available more widely, Meyer said. As the company announced at its annual meeting in December, it’s working on an application to allow subscribers to stream Sirius XM Internet content to their iPhones and iPod Touch devices, he said. It also will allow iPhones and Touch users to subscribe to Sirius XM without buying a radio, he said. “We're currently in rigorous applications testing and plan to launch in the second quarter.”
An analyst asked Karmazin to forecast what proportion of Sirius XM subscribers will choose the company’s $16.99 “Best Of” programming package this year. “I think it’s a very fair question, but the answer is we just really cannot give you any information,” Karmazin replied. He added, “We just think the environment today is so difficult to predict. Wall Street and investors - and I'm not saying wrongly - just kill companies for missing numbers. It’s foolish for us today, with the growth we have coming from our financial performance, to throw a number out there.”
Chief Financial Officer David Frear said Sirius XM had “withdrawn” all its previous forecasts, including a projection the company would add 1.6 million new subscribers this year. The exception: Sirius XM thinks earnings before taxes, depreciation and amortization will exceed $300 million this year, Frear said.