A Rough May for XM Radio
May was a pretty rough month for XM Satellite Radio, given the reasons it was put under the spotlight.
Of course, there's the proposed merger with Sirius and the scrutiny that Congress is putting on it. This week, Sen. Herb Kohl (D-Wis), who heads the Senate Judiciary antitrust subcommittee, urged regulators to block the merger. That follows a letter sent earlier this month to Federal Communications Commission Chairman Kevin Martin by Congressmen James T. Walsh (R-NY) and John McHugh (R-NY), who also oppose the merger and think it will harm consumers and competition. Sirius chief executive Mel Karmazin, who has been the voice of both companies during the Congressional hearings, has acknowledged that the companies face "an uphill battle" in getting a merger approval.
Separately, XM shock jocks Opie and Anthony created a bit of a scandal of their own with a controversial segment involving Queen Elizabeth II, First Lady Laura Bush and Secretary of State Condoleezza Rice. Even though XM's airwaves are not regulated by the FCC and are pretty much uncensored, the jocks apologized and XM kept them on the air - until they came back and started talking about the "dumb rules" set by their employer. XM pulled the plug on them for 30 days and the users revolted, calling for subscription cancellations and a posting YouTube videos of XM receivers being smashed. XM said about 5,000 subscriptions - a fraction of the 8 million or so subscriptions - were cancelled in protest.
In the middle of all of that, the service went out. The company took another hit for being slow to tell subscribers that there was a service problem. It turns out a software installation impacted one of the satellites and disrupted service. Within 24 hours or so, things were back to normal. And, much like customer response to the Blackberry outage earlier this year, subscribers seemed to forgive and forget, some of them cheering as they spread the news that service had been restored. (Yes, satellite radio customers love the service that much.)
To cap off a rough week, both XM and Sirius held shareholder's meetings this week. The thing to remember is that Sirius and XM have been walking hand-in-hand as they try to sell the benefits of the merger to Congress, the FCC and consumers. But unlike XM, which kept the doors of its shareholder's meeting tightly closed at a Washington hotel this morning, Sirius broadcast its meeting over the Web. (I tried my best to get into the XM meeting this morning but they wouldn't budge.)
A comment by Karmazin at his shareholder's meeting yesterday that "We suck less" than XM also left XM executives in Washington wondering how he came to that conclusion. Since the merger was announced on Feb. 19, XM's stock has fallen, as of the market close today, from $16.10 to $11.80, a decline of 26.7 percent. For the same period, Sirius' stock has dropped from on May 1 to $2.89, or 27.9 percent.
For the month of May, XM shares are down from $11.85 on May 1 to $11.80 today, or less than one percent. Sirius shares are down from $3.01 to $2.89, a decline of 4 percent.
May 25, 2007; 5:30 PM ET
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