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High costs drive Sirius Q4 loss
One day after rival XM reported a widening deficit, the satellite radio home of shock jock Howard Stern does the same.
Sirius Satellite Radio surprised almost no one on Wall Street today by reporting a widening fourth-quarter loss, as the high costs of celebrity-driven programming and customer acquisition took its toll on the chief rival of XM Satellite Radio.
Sirius did boast a surge in subscribers, hitting 3.3 million by the end of 2005--including 1.14 million subscribers in the fourth quarter alone--compared to more than 6 million total subscribers for XM. Sirius' subscriber gains were largely driven by popular shock jock Howard Stern's move to Sirius in January.
But the enormous cost of luring Stern--approximately $600 million over five years--along with the company's pricey $650 million pact with Major League Baseball, among others, prevented the company from matching Wall Street expectations or beating its earnings from a year ago.
For the quarter ended December 31, Sirius posted a loss of $311.4 million, or 23 cents per share, up from a loss of $261.9 million, or 21 cents per share, for the same period a year ago. Wall Street analysts had projected a loss of 22 cents per share, according to a survey from Thomson Financial.
The company's revenues more than tripled, however, to $80 million from $25.2 million for the fourth quarter of 2004.
But in addition to the high cost of programming, Sirius said that its costs for acquiring new subscribers more than doubled to $145.2 million from $64.9 million in the same period a year ago. Its average cost for adding each subscriber, however, fell to $113 from $124 in the same period a year ago.
The rising costs of programming and adding subscribers hit XM hard yesterday in its own earnings report, with a prominent director quitting and warning over a looming crisis for the company if it did not slow its rapid growth rate.
Both companies are targeting 20 million customers by 2010 as a crucial goal.
For the full year, Sirius lost $863 million, or 65 cents per share, versus a loss of $712.2 million, or 57 cents per share, in 2004. Full-year revenues jumped to $242.2 million from $66.9 million.
Sirius said today that it expects to turn a profit for the full year of 2007.
Sirius also said today that it has inked a new deal to carry the Fox News and Fox News Talk channels beginning March 15. The previous agreement had expired at the end of 2005.
In midday trading, shares in Sirius fell more than 6 percent to $5.30.
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