Automakers Embrace iPod; Satellite Radio Dead?

Apple's iPod integration deal with GM, Ford, and Mazda is just the tip of the bad news for struggling satellite radio providers. By 2007, more than 70% of U.S. auto manufacturers are expected to offer similar iPod services.
In addition, early next year, Ford and Lincoln Mercury dealers throughout the U.S. will begin offering Ford's TripTunes Advanced audio system — an iPod integration feature that provides drivers with top sound quality and recharging at the same time. TripTunes Advanced allows the driver to store the iPod in the vehicle's glove box and select music using the steering wheel or radio controls.

The U.S. auto makers claim they are not dropping satellite radio. Responding to another consumer trend, Ford said it is increasing the number of its vehicles with DVD-based navigation systems and Sirius satellite radio. By the 2008-model year, Ford expects to offer available Sirus satellite radio in 90 percent of Ford, Lincoln and Mercury vehicles.

Still, Apple's partnerships with Ford, GM and Mazda is a blow for satellite radio providers, which are struggling to make money. For the second quarter of 2006, XM (Washington, D.C.) last week recorded gross subscriber additions of 926,281 and net subscriber additions of 398,012. XM finished the second quarter 2006 with a total of 6,899,871 subscribers, representing a 56 percent increase over the 4,417,490 subscribers at the end of the second quarter 2005.

For the second quarter, XM reported revenue of approximately $228 million, an increase of 82 percent from the $125 million reported in the second quarter 2005. XM's net loss for the second quarter of 2006 was $229 million, compared to a net loss of $147 million during the second quarter of 2005.

The net loss for the second quarter of 2006 includes $105 million in de-leveraging and other non-operating charges that were not incurred during the second quarter of 2005.

XM still expects to achieve positive cash flow from operations for the fourth quarter 2006 and the full year 2007, although its ability to do so becomes challenging toward the lower end of the subscriber range.

Recently, rival Sirius Satellite Radio (New York) said it ended the second quarter with 4,678,207 subscribers, 158 percent higher than second quarter 2005 ending subscribers of 1,814,626. During the second quarter of 2006, Sirius added 600,460 net subscribers, a 64 percent increase over second quarter 2005 net subscriber additions of 365,931.

Total revenue for the second quarter of 2006 increased to a record $150.1 million, nearly triple last year's second quarter total revenue of $52.2 million. Sirius reported a net loss of $237.8 million, or minus $0.17 per share, for the second quarter of 2006.

For the year, total revenue is expected to hit $615 million, up from previous guidance of over $600 million. Adjusted loss from operations is expected to be $565 million, in line with previous guidance

Editor's Choice
Brian T. Horowitz, Contributing Reporter
Samuel Greengard, Contributing Reporter
Nathan Eddy, Freelance Writer
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing