XM Extends Brand, Partners With Apple

By | March 3, 2008 at 3:10 PM

XM Satellite Radio is partnering with Apple to make XM’s programming available on iPods, according to CEO Nate Davis, who revealed their cooperation while discussing the company’s fourth-quarter results last week.

Although Davis said he “wouldn’t call it a strategic relationship,” XM began podcasting content in December, and two XM podcasts are already listed in iTunes’ top 10 podcasts. XM is now working with Apple to make XM content accessible via iTunes.

This new distribution plan is part of a broader push to promote XM and recruit subscribers via online channels, at the expense of broadcast and physical retail, which Davis said have been too costly.

One of the main expenses of XM and its rival-turned-merger-partner, Sirius, are costs related to acquiring new subscribers. During 2007 XM’s cost per gross addition rose to $121 from $108 in 2006, as the basic subscriber acquisition cost rose from $65 to $75. The gross addition figure takes into account churn from subscribers leaving, recording the cost of actually growing the subscription base.

On the financial front, XM said its revenues rose 20% in the fourth quarter to $308 million, and 22% to $1.1 billion for 2007, compared to 2006. Overall, it added 1.4 million new subscribers in 2007–ending the year with over 9 million, up 18% from 2006.

XM is still posting losses, albeit narrower than last year. During the fourth quarter of 2007, it recorded a loss of $239 million, versus $257 million in the fourth quarter of 2006. For the full year, it posted a loss of $682 million versus $719 million in 2006.

XM and Sirius are counting on their proposed merger to help reduce the costs of subscriber acquisition and put the companies on a stable financial footing. However, last week, James Goss, an analyst who follows radio for Barrington Research, remarked in a note to clients that the DOJ review of the merger is taking an “unusual” amount of time, suggesting the deal faces an uphill battle for regulatory approval.

Goss predicted both companies could suffer financially if the merger is not allowed to proceed.

XM and Sirius recently extended their merger agreement to May 1.

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