Can Advertising Revenue Save XM?
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CONTRIBUTOR Douglas A. McIntyre http://247wallst.blogspot.com : Satellite radio has had a rough road. But, advertising revenue could change that. There is a broad perception that satellite radio is commercial-free. But, that is only true on some channels. The new Oprah show carries commercials and some of them are large marketers including like Target, Dove and Snapple.
According to XM (Nasdaq: XMSR), the company did $20 million in revenue in 2005. The previous year the figure was $8.5 million.
XM�s revenue run rate is about $1 billion a year. Advertising is clearly an extremely small part of this. But, XM has not had Oprah before. As here syndicated TV show and magazine have proven, she is a tremendous draw for marketers.
With an operating loss of $100 million a quarter, and a slowing subscriber base that may only reach 8 million by the end of the year, XM needs a hand. The market for advertising revenue on radio is still huge. Citadel Broadcasting (NYSE: CDL), a modest-sized public radio company did $420 million in revenue last year. The company owns 153 FM and 58 AM stations. The company had an operating profit of $143 million last year.
Over the air radio has lost a great deal of it momentum to satellite radio. But, with its stock down from over $36 a little less than a year ago to $13 now, XM hardly looks like it has taken the momentum torch from the old line broadcast companies. Rival Sirius (Nasdaq: SIRI) is doing no better. In December, its stock traded near $8. It is now below $4.
A hybrid model of paid subscribers and advertising is what may save XM�s bacon. The Oprah channel is not just an experiment. It may be XM�s future.
http://247wallst.blogspot.com
According to XM (Nasdaq: XMSR), the company did $20 million in revenue in 2005. The previous year the figure was $8.5 million.
XM�s revenue run rate is about $1 billion a year. Advertising is clearly an extremely small part of this. But, XM has not had Oprah before. As here syndicated TV show and magazine have proven, she is a tremendous draw for marketers.
With an operating loss of $100 million a quarter, and a slowing subscriber base that may only reach 8 million by the end of the year, XM needs a hand. The market for advertising revenue on radio is still huge. Citadel Broadcasting (NYSE: CDL), a modest-sized public radio company did $420 million in revenue last year. The company owns 153 FM and 58 AM stations. The company had an operating profit of $143 million last year.
Over the air radio has lost a great deal of it momentum to satellite radio. But, with its stock down from over $36 a little less than a year ago to $13 now, XM hardly looks like it has taken the momentum torch from the old line broadcast companies. Rival Sirius (Nasdaq: SIRI) is doing no better. In December, its stock traded near $8. It is now below $4.
A hybrid model of paid subscribers and advertising is what may save XM�s bacon. The Oprah channel is not just an experiment. It may be XM�s future.
http://247wallst.blogspot.com
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