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Copy of Sirius XM Radio

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Todd Palmer

on 29 April 2013

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Transcript of Copy of Sirius XM Radio

Industry Analysis Radio Broadcasting Industry
via Satellite orbit
Telematics technology Radio Broadcasting Industry Highly competitive
Consumer demographics & business advertising drive demand Sirius XM Total Subscribers - 23,900,336
Average monthly Revenue per User (ARPU) 2012 - $12, 2011 -$11.58, 2010 - $11.73
New Vehicle Conversion Rate 2012 - 45%, 2011 - 45%, 2010 - 46%
Subscriber Acquisition Cost (COST) 2012 vs. 2011 Change - 9%, 2011 vs. 2010 Change - 5% Porter 5 Forces; Competition Among Rivals Cumulus Media
Dial Global
Clear Channel Media
Pandora
Spotify Economic Indicators Market Size: $63.2 billion
Growth: Stagnant for traditional radio (am/fm)
Big upside for satellite radio
Number of Rivals: 0
Geographic Scope: Upper 1/3 of Mexico, Contiguous United States, and Canada
Capital Requirements: 1 Boeing 702 Satellite costs $250 million and up
Economies of Scale: High Threat of Substitutes Medium
Freemium Radio (Pandora and Spotify)
Classic AM/FM Radio
iTunes and MP3 collections
Sirius XM's exclusive content levers firm's bargaining position Threat of New Entrants Low
High Barrier Costs:
Satellites $250m each
Terrestrial Repeaters
Proprietary Software
Media agreements Threat of Suppliers High
Royalty agreements rising
Top Talent is very costly ie. Howard Stern & Martha Stewart
Top talent has more leverage Summary of Porter 5 Forces Ticker: SIRI
Stock Price $3.12 as of April 26, 2013
52 Week Range $1.78 - $3.25
Market Cap: $20.46 billion
Beta: 2.06
P/E: 6.11
EPS: 0.51 Strengths:
Profitability
Activity Weaknesses:
Liquidity
Leverage Background Satellite CD Radio was incorporated in 1990
Sirius XM Radio was founded in July 2008
Merger in 2007 between Sirius Satellite Radio and XM satellite radio
Personal radio channels
Stock prices at all time low, in March 2009
Liberty Media provided the funds needed
Record revenue and Earnings in February 2013 Mission Orientation Who - Satellite radio provider
What - Music, sports, entertainment, traffic and weather
68 music channels
20 talk and entertainment shows
38 channels of sports
12 traffic and weather channels
How - through car radio's, internet, and cellphone technologies
Sound clearance dependent of subscription
Why - to provide clear entertainment to its millions of subscribers High
Subscription based
New Vehicle Conversion Rate is key
Buyers also need to have radio platform Concerns:
Buyers - can unsubscribe at any time
Suppliers - upper hand dictating costs Positives:
Exclusive content is economic moat Mission and Vision Statements It's like nothing you've ever heard before
Imagine channels and channels of whatever you want to listen to. Commercial free music, all your favorite sports, exclusive talk and entertainment. Not to mention comedy, news, traffic, weather and more. It's all here, all in one place
Welcome to the world of satellite radio Ordinate Goal To expand operations outside of North America Strategy Current Objectives Forecasting adding 1.4 million subscribers in 2013
Activated all radios without subscriptions to 60 channels
Investment policy objectives are the preservation of capital, maintaining sufficient liquidity to meet operating requirements and maximizing yield Before venturing into new regions, Sirius XM needs to:
Understand consumer demographics
Find competitive advantage
Survey potential customer base
Find break-even point
Structure system logistics Systems Reliable and trusted method of data gathering
Supervising Director reports to senior management
Devise hierarchical control
Use proven media advisers
Survey feedback Structure Find talent to initiate study
Set up shop in new region Internal Audit Content and the value of the content is a core competence and a distinctive competence
Delphi XM MyFi
Delphi XM MyFi2 Shared Values Commitment
Trust
Quality
Impartial Skills Qualitative Data
Quantitative Data
Logic Models
Evaluation Design
Capital Budgeting SO and ST Professional data samplers
Ability to speak native language
Trusted advisers Supports Shared Goals Ready to grow consumer base
Huge upside
Source of large revenues
Feasible in high discretionary spending areas
Shareholders want higher return Table of Contents Background/mission/vision
Macro-environment
Industry Analysis
External Factor Evaluation (EFE)
Competitive Profile Matrix (CPM)
Internal Audit
Value Chain Analysis
Ratio Analysis
Internal Factor Evaluation (IFE)
SWOT Analysis
Strategy Selection
Implementation Macro Environmental Socio-cultural: Continually make changes to content offered in order to attract new customer, User growth has continued to expand
Legal/Political: Since 2004 pressure to censor satellite radio has increased.
Technological: Sirius believes that the ability to offer content via satellite is a differentiator. Content offered through Sirius XM back seat TV and portable radio
Economic: After avoiding bankruptcy Sirius has become a consistently profitable company. Threat of Buyers Success Factors Comprehensive MLB Coverage - .05 2 .1
Comedy Central - .05 2 .1
Airing Glenn Beck - .05 1 .05
Airing NCAA Championship - .05 1 .05
Airing The Masters - .05 1 .05
Contracts with Car Companies - .2 4 .8
Revenues Tied to Howard Stern - .2 4 .8
Different Platforms (Mobile, Tablets, Smart TVs) - .1 3 .3
Increase in Car Sales - .1 4 .4
Introduced Personalized Radio - .15 3 .45
Total Weighted Score: 3.1 Enter global market (O7,S2,S8)
Expand Internet Offerings and Mobile Devices (S1,S4,T7) Strengths
1. Exclusive Content 0.20 4 0.80
2. Partnerships with car manufacturers 0.15 3 0.45
3. Market Position 0.10 2 0.20
4. Multi-platform 0.10 2 0.20
5. Commercial free radio 0.10 2 0.20
6. Variety 140-160 channels 0.05 1 0.05
7. Free trials and discounts 0.10 2 0.20
8. Growing consumer base 0.05 1 0.05
9. High barriers to entry 0.05 1 0.05
10. Customer service 0.10 2 0.20
Total Weighted Score 2.40 Financial Analysis Activity Ratios Profitability Ratios Ratio Strengths and Weaknesses Weaknesses
1. Royalty fees 0.05 1 0.05
2. Dependence on autos 0.20 4 0.80
3. Debt level 0.15 3 0.45
4. High paid Hosts 0.15 3 0.45
5. Satellite costs 0.10 2 0.20
6. Vulnerability to economic conditions 0.10 2 0.20
7. Lack of internet streaming 0.10 2 0.20
8. Lack of marketing a sole brand 0.05 1 0.05
9. Satellite Signal 0.05 1 0.05
10. Reliance on US market 0.05 1 0.05
Total Weighted Score 2.50 Opportunities 1. Google TV/Smart TVs - .1 2 .2
2. Rise in auto sales - .15 4 .6
3. Online radio - .2 4 .8
4. Increase in Hispanic population - .05 1 .05
5. Increased mobile capabilities - .15 3 .45
6. Possible partnership with Direct TV - .05 1 .05
7. Expanding Global Market - .05 2 .10
8. Offerings in Rental Cars - .1 2 .2
9. Karoake on the backseat tv - .05 1 .05
10.More partnerships with car dealers - .1 3 .3
Total Weighted Score 2.80 Staff Style Qualified leadership
Devoted commitment Threats 1. Potential decrease in auto sales .20 4 .80
2. Too much revenue tied to Howard Stern .20 4 .80
3. Peak in number of subscribers .10 2 .45
4. Liberty Media taking control .15 3 .45
5. The economic status .10 2 .20
6. Freemium (Spotify, Pandora) .05 1 .05
7. Increased in Royalty Fees for subscriptions .05 1 .05
8. Satellite Risk .05 1 .05
9. Increased regulations .05 1 .05
10. Rapid Technological Changes .05 1 .05
Total Weighted Score 2.95 Leverage Ratios Liquidity Ratios Proposal Sirius XM is inclined to grow outside of the contiguous United States, Canada, and the upper 1/3 of Mexico

1. Research and gather data on new markets
2. Content is king
3. Understand demographics to find economic moat Strengths/Weaknesses Strengths
1. Exclusive Content
2. Partnership with Car Manufacturers
3. Multi-Platform

Weaknesses
1. Dependence on Autos
2. High Paid Hosts
3. Reliance on US markets Opportunities/Threats Opportunities: The most important opportunities would be to expand globally, improve the mobile device applications, and improve online radio services
Threats: The most important threats are the reliance on the auto industry, vulnerability to economic downturns, and the ability to attract and retain customers WO and WT TV offering with Direct TV (W2,O6)
Search for New Thriving Hosts (W4,T2)
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