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XM financial trouble



 
 
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  #11  
Old March 19th 06, 05:46 PM posted to rec.aviation.ifr
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Default XM financial trouble

In article ,
Andrew Gideon wrote:
I do wonder, however, about how
$12/month is going to sustain the contracts for tens or hundreds of
millions of dollars for on-air talent; at some point, there has to be a
line in the sand for the providers.


Keep in mind that, aside from acquisition costs, new customers cost
nothing. That is, the infrastructure is the same for one customer or one
trillion customers. There *is* a number of customers where $12/month
covers that infrastructure.


This isn't true. New customers do not represent zero cost. While the
broadcast infrastructure may be able to serve "trillions" of customers,
the customer service, billing, maintenance, etc. all have costs that
increase as subscriber count goes up. In addition, the infrastructure
will require periodic capital improvements, both as subscriber count
grows and as technology changes.

That being said, it appears that both XM and Sirius are focused on
market share and not profit at this point. Of those two goals, only
profit is required to sustain a company, so there must be some long-term
objective that would benefit from market share position--such as
advertising sales.




JKG
  #12  
Old March 19th 06, 05:51 PM posted to rec.aviation.ifr
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Default XM financial trouble

XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.
The same goes for any business.

Andrew Gideon wrote:
On Wed, 08 Mar 2006 08:39:48 -0500, Jonathan Goodish wrote:


I do wonder, however, about how
$12/month is going to sustain the contracts for tens or hundreds of
millions of dollars for on-air talent; at some point, there has to be a
line in the sand for the providers.



Keep in mind that, aside from acquisition costs, new customers cost
nothing. That is, the infrastructure is the same for one customer or one
trillion customers. There *is* a number of customers where $12/month
covers that infrastructure.

I've no idea whether or not they can reach that number, mind you. I don't
even know if the number is greater or lessor than the number of people on
the planet grin.

I hope they succeed. I haven't purchased their service (I don't listen to
much music), but (1) I like having the option and (2) I like the aviation
products and I hope at least to purchase that at some point.

- Andrew

  #13  
Old March 19th 06, 06:35 PM posted to rec.aviation.ifr
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Posts: n/a
Default XM financial trouble

XM radio, like magazine publishing depends more on
advertising revenue than subscription customers. But
advertising rates will vary with the number of subscribers
who are feed the ads.


"Jonathan Goodish" wrote in message
...
| In article ,
| Andrew Gideon wrote:
| I do wonder, however, about how
| $12/month is going to sustain the contracts for tens
or hundreds of
| millions of dollars for on-air talent; at some point,
there has to be a
| line in the sand for the providers.
|
| Keep in mind that, aside from acquisition costs, new
customers cost
| nothing. That is, the infrastructure is the same for
one customer or one
| trillion customers. There *is* a number of customers
where $12/month
| covers that infrastructure.
|
| This isn't true. New customers do not represent zero
cost. While the
| broadcast infrastructure may be able to serve "trillions"
of customers,
| the customer service, billing, maintenance, etc. all have
costs that
| increase as subscriber count goes up. In addition, the
infrastructure
| will require periodic capital improvements, both as
subscriber count
| grows and as technology changes.
|
| That being said, it appears that both XM and Sirius are
focused on
| market share and not profit at this point. Of those two
goals, only
| profit is required to sustain a company, so there must be
some long-term
| objective that would benefit from market share
position--such as
| advertising sales.
|
|
|
|
| JKG


  #14  
Old March 19th 06, 10:31 PM posted to rec.aviation.ifr
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Posts: n/a
Default XM financial trouble

In article xDgTf.118102$QW2.27122@dukeread08,
"Jim Macklin" wrote:
XM radio, like magazine publishing depends more on
advertising revenue than subscription customers. But
advertising rates will vary with the number of subscribers
who are feed the ads.



Most of XM's music channels are "ad free." It is my suspicion that this
will not be a sustainable business model for them (nor Sirius) long term.



JKG
  #15  
Old March 19th 06, 11:31 PM posted to rec.aviation.ifr
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Default XM financial trouble


"Newps" wrote in message
. ..
XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.


$144 a year for a two year contract?

The same goes for any business.

(A few thoughts)

I heard consumer pundit Clark Howard state to the effect that the
overwhelming majority of companies spend about 15 times as much acquiring
new customers as they do servicing existing customers.

Call some company and see how fast their phone menu system kicks in for
SALES as it does for Customer or Tech Support. Likewise, name a CEO that
came from Tech Support instead of Sales and Marketing. :~(





  #16  
Old March 20th 06, 11:48 PM posted to rec.aviation.ifr
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Posts: n/a
Default XM financial trouble

Having been a Sirius subscriber, and having had to put up with
short-cycle replays, very old programs, and incompetent customer
service, I found it no surprise when I cancelled my subscription upon
expiration (they automatically re-bill and you have to actively cancel)
it was tremendously difficult. After spending 3 months trying to get the
unauthorized payment back from Sirius, and spending 47 minutes
(measured) on the phone on hold the last contact, I filed a complaint
with the credit card company. Imagine my lack of surprise when the CC
company rep immediately refunded the money and commented that "this
happens a lot with this company".

I then started asking other folks I knew with Sirius only to find that
most are converting to XM even though we have to buy new equipment.

Looking at it from a purely economic point of view, the direct costs of
adding subscribers will decrease as the subscriber count rises. Since
all accounting and most customer service functions are automated, until
the process scales beyond system capacity each new subscriber represents
almost no new cost.


-----Original Message-----
From: Jonathan Goodish ]
Posted At: Sunday, March 19, 2006 3:31 PM
Posted To: rec.aviation.ifr
Conversation: XM financial trouble
Subject: XM financial trouble

In article xDgTf.118102$QW2.27122@dukeread08,
"Jim Macklin" wrote:
XM radio, like magazine publishing depends more on
advertising revenue than subscription customers. But
advertising rates will vary with the number of subscribers
who are feed the ads.



Most of XM's music channels are "ad free." It is my suspicion that

this
will not be a sustainable business model for them (nor Sirius) long

term.



JKG


  #17  
Old March 21st 06, 03:58 PM posted to rec.aviation.ifr
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Posts: n/a
Default XM financial trouble


"Newps" wrote in message
. ..
XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.
The same goes for any business.


Vast majority of those costs are fixed (advertising, CS staff, data
processing).


  #18  
Old March 21st 06, 04:59 PM posted to rec.aviation.ifr
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Default XM financial trouble



Matt Barrow wrote:
"Newps" wrote in message
. ..

XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.
The same goes for any business.



Vast majority of those costs are fixed (advertising, CS staff, data
processing).


Whatever. Any competent business can tell you what it costs to add a
new customer. It is always much more than retaining an existing
customer. Things like advertising and staff are expensive. It's a cost
well worth taking as it pays off in the long run.
  #19  
Old March 22nd 06, 03:20 AM posted to rec.aviation.ifr
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Default XM financial trouble


"Newps" wrote in message
...


Matt Barrow wrote:
"Newps" wrote in message
. ..

XM knows exactly what it costs to attain each new subscriber and it is
much more than the $12 a month they are getting from existing customers.
The same goes for any business.



Vast majority of those costs are fixed (advertising, CS staff, data
processing).


Whatever. Any competent business can tell you what it costs to add a new
customer. It is always much more than retaining an existing customer.


It's where more resources are directed, but actually holding a customer is
harder (according to studies I've heard) which is a point missed by so many
executives and why there is such derision for (purported) Customer
Dis-Service.

In sum, in some industries, yes; not so in others. In industries with costly
FIXED infrastructure, for example.

Things like advertising and staff are expensive. It's a cost well worth
taking as it pays off in the long run.


So is customer service, but we all know horror stories about abysmal CS.


--
Matt
---------------------
Matthew W. Barrow
Site-Fill Homes, LLC.
Montrose, CO



  #20  
Old March 22nd 06, 03:59 PM posted to rec.aviation.ifr
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Posts: n/a
Default XM financial trouble

In article ,
"Matt Barrow" wrote:
In sum, in some industries, yes; not so in others. In industries with costly
FIXED infrastructure, for example.


The bottom line is that new customer acquisition does not cost "next to
nothing" for any business. Neither does customer retention.

A few years ago, I read an article that analyzed the costs involved in
producing an Apple iMac. While the iMac sold for around $1000 at the
time, the analysis concluded that Apple was making a windfall profit
because parts costs were only around $250. The analysis completely
ignored the costs of doing business: marketing, R&D, manufacturing,
distribution, etc. In reality, Apple's profit was much smaller on a
per-unit basis than the article suggested.



JKG
 




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