Analysts Break from Wall Street on November Sirius XM, DirecTV Predictions
By Jeffrey Hill | October 31, 2011
[Satellite News 10-31-11] The new month will provide two very different scenarios for two leading U.S. satellite broadcasters. Satellite radio provider Sirius XM is set to release its highly anticipated 2011 third quarter results Nov. 1, continuing a year of outpacing expectations. Pay-TV operator DirecTV, however, is working to maintain its Fox Broadcasting content carriage deal with News Corp.
Wall Street forecasts for Sirius XM’s third quarter revenue expect a generation of about $764 million from the broadcaster. Analysis firm Seeking Alpha, however, thinks the consensus may be a bit aggressive. “It will be difficult for the company to match their second-quarter subscriber numbers [of more than 450,000]. Subscriber acquisition costs, as well as costs associated with getting its radios onto retail shelves are expected to increase,” the firm wrote in a report issued Oct. 31.
Seeking Alpha did note that automobile sales have been encouraging despite the poor economy, which provides good news for Sirius XM and could bode well for its September retail sales. “Even if sales remain flattish as predicted, the increased penetration in cars will allow Sirius XM to grow. Therefore we expect continued subscriber gains this quarter and maintain our healthy 15 percent overall subscriber growth expectations for the whole year as of now. Investors should stay tuned for growth in automotive segment and outlook for remaining year, and for 2012, that the company might provide during its earnings release.”
An analyst who asked not to be named for this story told Satellite News that his firm expects Sirius XM to report subscriber numbers between 400,000 and 420,000. “It could come down to the deal that General Motors has with 1,000 dealers to provide promotional Sirius XM subscriptions to any brand car as long as it is satellite radio equipped. While that program launched in the second quarter, it could have some conversions that will help the third quarter numbers.”
Sirius XM executives have hinted that one of their priorities in the fiscal third quarter was to solidify the company’s 2011 guidance, while focusing on the additional revenue streams coming into its earnings column as a result of its service price increase scheduled for 2012. The company also is set to roll out its Satellite Radio 2.0 retail unit, which could generate long-term growth in the second half of next year.
“The company is far from transparent when it comes to their subscriber numbers,” said the analyst. “They don’t separate OEM and retail. I think the true retail numbers will not be as good as expectations and that is why they are being hidden.”
Meanwhile, analysts will closely watch DirecTV as the pay-TV operator continues negotiating a retransmission dispute between itself and News Corp. The failure of these negotiations could result in millions of DirecTV customers losing a number of News Corp. channels Nov. 1.
DirecTV analysts have published reports claiming that News Corp. has demanded a 40 percent rate increase for the networks they provide. News Corp. officials denied the accuracy of that figure in a statement issued earlier in October, but admitted they would be, “interested in a rate increase as a part of a new retransmission contract with the satellite operator.”
DirecTV’s main U.S.-based competitor Dish Network had similar disputes with both Disney and News Corp, and have lost subscriber access to a number of their networks in 2010 and 2011. The unnamed analyst said he believes recent reports that the two sides are still not close to a deal. “Despite some last-minute optimism I’ve seen in the media, the likelihood of DirecTV viewers losing some of their networks, shows and movies Monday night is pretty high. This is one of a number of issues that cable and satellite companies and networks have had with each other over the cost of access for each channel.”