TORONTO – XM Canada said this morning it plans to bump its rates up by $2 a month (matching rival Sirius Canada) while reporting solid growth through its third quarter, ended May 31st.
Canadian Satellite Radio, which operates as XM Canada, reports 80,000 subscribers since service launch, however, 64,000 are paid while 16,000 are OEM trial subscribers (mostly in-car listeners who are not paying monthly fees during various trial periods, thanks to the deals signed by XM where in order to have the receivers installed in Hondas, Toyotas and others, XM has promised the car companies which install their equipment that new car buyers don’t have to pay a fee during their trial period, the length of which is about three months each) as of May 31, 2006.
Sirius Canada and XM launched at basically the same time – November 2005 – but Sirius’ subscription price was $14.99 and XM’s was $12.99. Despite that, Sirius has out-paced XM in Canada, with the private company announcing in May it has topped 100,000 subscribers. Existing XM subscribers will retain the $12.99 price until September 2007.
During this morning’s conference call with financial analysts, some doubt was raised about how Sirius counts its subscribers, given that XM splits up its count. "We don’t know what they call a subscriber, that’s the issue," said CSR CEO John Bitove. But, "we can’t comment because we don’t know the exact details because they’re private."
Yesterday, XM Canada made a few announcements, including XM Radio online, which will bring a selection of XM channels to desktops, and the launch of the Pioneer inno, a portable satellite player/MP3 combination device. After it’s first week on the store shelves, "the retailers love it. They can’t keep them on the shelves," said company COO Stephen Tapp. And at $499, it’s a premium product which will draw premium customers, he added.
However, it remains to be seen if the Canadian recording industry follows its American counterparts who have launched a multi-billion-dollar lawsuit against XM Radio (U.S.) for selling the device. The U.S. industry says the inno’s recording capabilities step around copyright and is an unlicensed digital download service.
XM also has auto deals with Suzuki, General Motors, Honda, Nissan, Toyota, Suzuki and Subaru, representing more than 50% of the 1.6 million new vehicles sold annually in Canada.
The company also announced a wireless deal with Telus last week, which will carry 20 XM channels on one of its devices. During the conference call, Bitove said more wireless deals will be coming, if not right away. The Telus deal is an exclusive one, for a while. "Are we precluded in doing anything with anyone else. The answer is no, in terms of timing," said Bitove.
For the three-month period ending May 31, 2006, CSR reported revenue doubled over the previous quarter, to $2.34 million from subscriptions, activations, advertising sales and sales of radios from the direct fulfillment channel. The net loss for the three-month period was $20.4 million. As CSR had not launched operations a year ago, there are no corresponding prior year figures for CSR’s third-quarter and nine-month 2005 results. For the nine-month period ending May 31, 2006, CSR’s revenues were $3.53 million with a net loss of $79 million.
For the three-month period ended May 31, average revenue per unit (ARPU) was $13. CSR incurred subscriber acquisition costs (SAC) of $69, remaining stable at the level of last quarter, while Cost Per Gross Addition (CPGA) increased from $194 in the second quarter to $241, primarily as a result of increased advertising and marketing expenses around the Father’s Day selling season in the fourth fiscal quarter.
Operational expenses for the three-month period ending May 31, 2006 included general and administrative (G&A), marketing and cost of revenue, which includes programming costs. For the period, G&A was $3.4 million, while marketing expenditures were $6.2 million and cost of revenue was $5.9 million.
"The preparation and launch of the XM Canada satellite radio service for the nine-month period ended May 31, 2006 also includes operational expenses related to the build-out of a national repeater network ahead of schedule and under budget. For the nine-month period, G&A was $13 million, while marketing expenditures of $20.2 million and $14.2 million in cost of revenue were incurred to acquire new subscribers and the launch of XM Canada during the 2005 holiday season. Most of our planned infrastructure rollout occurred in the first and second fiscal quarters of 2006. With these significant expenditures complete, we did not incur significant capital expenditures in the third fiscal quarter," said the press release.
– Greg O’Brien
