SIRIUS XM Radio Inc. (NASDAQ: is supposed to be one of the hotter media companies with its satellite radio dominance. It has a cult following, millions of subscribers, and it charges for much of which could be free elsewhere depending upon the content. After shares ran above $2.00, something strange happened… SIRIUS XM may be tied almost entirely to new car sales now. The satellite radio company greatly outperformed Ford and GM over the last year, but that three-month chart pretty much shows a trend that SIRIUS is just tracking Ford and GM shares now. That could be the scariest thing out there for the fans of Mel Karmazin, Howard Stern, and the real of Team SIRIUS.
The line performance compares Sirius XM to General Motors Co. (NYSE: GM) and to Ford Motor Co. (NYSE: F) over the last 3-month period. Sirius XM may be performing better overall for the past 90 days, but the shape of the lines don’t leave much doubt about the company’s attachment to auto sales.
Sirius XM reported 21 million customers earlier this month as part of its quarterly earnings report, about 800,000 more than the company reported at the end of 2010. Sirius XM notes in its 2010 Form 10-K that it has “agreements with every major automaker to include satellite radios in new vehicles, although these agreements do not require automakers to install specific or minimum quantities of radios in any given period.”
New subscribers, the company’s largest revenue source by far, depends on new car sales. And even that is not a guarantee that carmakers will continue to install the Sirius XM hardware. Without the equipment, the number of subscribers will either dry up or cost the company too much in acquisition costs. Recall, too, that less than 20% of new US cars are sold with the Sirius XM hardware installed at the factory.
Sirius XM is betting the company that auto sales will keep it afloat. That’s a big gamble.