What happens when disposable incomes shrink substantially?
The early learning is that premium access models take a hit, while ‘essentials’ like internet and mobile access are maintained. In the case of Sirius XM Radio, that is a serious problem given the large number of lower-cost or free alternatives. A seriously-bruised automobile industry is also dragging the total, especially for such a dashboard-intensive format.
The result? At the end of the recent quarter, Sirius counted 18.4 million subscribers, a 0.9 percent drop from the same period last year. That is the second straight quarterly drop, and the first declines in company history.
The subscriber erosion is creating a problem on the financial side, with revenues and profits taking a dive. Sirius posted losses of $157.4 million over the three-month period, far broader than year-ago declines of $83.9 million. The figure includes some toxicity – a $108 million charge on debt-related facilities, and a $24 million write-off. Now, the question is whether the Sirius model can survive, especially given heavy debt commitments and mounting consumer issues.