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#11
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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
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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
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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 $12/month | covers that infrastructure. | | This isn't true. New customers do not represent zero cost. While the | broadcast infrastructure may be able to serve "trillions" of customers, | the customer service, billing, maintenance, etc. all have costs that | increase as subscriber count goes up. In addition, the infrastructure | will require periodic capital improvements, both as subscriber count | grows and as technology changes. | | That being said, it appears that both XM and Sirius are focused on | market share and not profit at this point. Of those two goals, only | profit is required to sustain a company, so there must be some long-term | objective that would benefit from market share position--such as | advertising sales. | | | | | JKG |
#14
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XM financial trouble
In article xDgTf.118102$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
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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. $144 a year for a two year contract? The same goes for any business. (A few thoughts) I heard consumer pundit Clark Howard state to the effect that the overwhelming majority of companies spend about 15 times as much acquiring new customers as they do servicing existing customers. Call some company and see how fast their phone menu system kicks in for SALES as it does for Customer or Tech Support. Likewise, name a CEO that came from Tech Support instead of Sales and Marketing. :~( |
#16
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XM financial trouble
Having been a Sirius subscriber, and having had to put up with
short-cycle replays, very old programs, and incompetent customer service, I found it no surprise when I cancelled my subscription upon expiration (they automatically re-bill and you have to actively cancel) it was tremendously difficult. After spending 3 months trying to get the unauthorized payment back from Sirius, and spending 47 minutes (measured) on the phone on hold the last contact, I filed a complaint with the credit card company. Imagine my lack of surprise when the CC company rep immediately refunded the money and commented that "this happens a lot with this company". I then started asking other folks I knew with Sirius only to find that most are converting to XM even though we have to buy new equipment. Looking at it from a purely economic point of view, the direct costs of adding subscribers will decrease as the subscriber count rises. Since all accounting and most customer service functions are automated, until the process scales beyond system capacity each new subscriber represents almost no new cost. -----Original Message----- From: Jonathan Goodish ] Posted At: Sunday, March 19, 2006 3:31 PM Posted To: rec.aviation.ifr Conversation: XM financial trouble Subject: XM financial trouble In article xDgTf.118102$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
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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
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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
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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
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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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