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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.

By Sam Diaz  |  May 25, 2007; 5:30 PM ET  | Category:  Sam Diaz
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Comments

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5,000 subscribers lost? No I think it was a lot more than that, but can you really trust a company that lies and says their meeting was cancelled so protesters didn't show up, maybe. But what about a company that lies to its consumers and says they have an uncensored channel. When they suspend Opie and Anthony for things they said. Expressing their opinions and feelings about what happened. Or how about telling their susbscribers their subscriptions were cancelled only to find out they gave 1-6 month credits, and didn't cancel them because they were about to go into a stock holders meeting. Then they don't tell people about coverage going down until people complain. When XM decides to stand behind their talent, and stop lying to their customers I may think about coming back. But if other major corporations did something like this they wouldn't be around very long. If XM keeps going against their policies, they too will not be around long.

Posted by: Stinger76 | May 26, 2007 9:26 AM

In my opinion XM has brought many of these problems on itself. The opposition of the merger and service outage have gained some headlines, however, the "shock jock" media hot button was pushed by XM. In a move similar to the "Deer Hunter", XM put a bullet in the pistol, spun, put it to their head and pulled the trigger. Sometimes you get lucky... "click", this time they put a round in their head.... "BOOM!".

Until XM suspended O&A no one new about the "homeless Charlie" comments. They could have calmed the egos of certain politicians privately. The suspension exposed XM as hypocrites and put a "bee in the bonnet" of the most loyal listeners XM has.

After the suspension I canceled my XM and was credited $146.57 in prepaid service. Previous to the suspension I had been a very happy customer of XM for 3 years. Now I wait for O&A's return. No O&A, no XM!

Posted by: hot_karl | May 26, 2007 8:37 PM

Yes, XM did suspend Opie & Anthony. In light of that decision I chose a more subtle form of protest. I flushed my XM down the toilet, bought and Sirius and ****ed my mother.

Posted by: Frunkuss | May 26, 2007 10:59 PM

XM radio can lick my nuts

I bounce my new Sirrus unit on my knee and kiss it on the back of the neck.

Posted by: Uncle Paul | May 27, 2007 9:19 AM

Excellent summary, Mr. Diaz. It seems that both satellite radio companies are facing hard times right now.

As to the topic in the comments about the suspension of Opie and Anthony - I realize that their fans would be upset. However, their behavior after the incident (complaining about the rules set forth by their employer) was what brought them where they are at the moment. I was at the shareholder meeting and the "protest" was about 40 people complaining about a loss of free speech. I talked to one of the protestors and that's what he kept repeating - that XM was denying one of their employees free speech. It is apparent that they do not understand what freedom of speech is and why it doesn't apply here. This was a business decision and, in my opinion, a correct one. You cannot combine an apology with a denunciation of said apology a day later. XM has the right to set limits on the content of their show. If Opie and Anthony find that to be disagreeable, then they can seek a platform for their show elsewhere.
As for their fans, XM has every intention to bring them back on June 15th. If you are not with them, it will be of little consequence to XM. But that decision is yours.

Posted by: PostFan175 | May 27, 2007 3:36 PM

Free Press and Freedom of Speech constitutionally means that you will not go to jail for saying anything, with the exception of threatening to kill someone. However, Free Enterprise means that the rules of the company have to be followed, inclusive of insulting a group or individuals. Racist comments or disrespecting a Queen, Secretary of State, and/or the First Lady are subject to being out of moral character according to that company. You will not go to jail, but you can be fired or suspended. Unfortunately, fans of those celebrities that cross the line, do not understand what Free Speech and Freedom of the Press really means. Your paycheck is based on you following the rules of the company that you work for. I am sure that if you blabber of disrespectful rants to your co-workers, that your time will be limited...no difference here. Unfortunately, over the past few decades, there are people that think making fun of groups or individuals is a joke, and those groups or individuals are supposed to take it and say absolutely nothing to the offender, the offender's employer, and the offender's advertisers. Those days are gone.

Posted by: FreePress FreeSpeech | May 28, 2007 6:50 PM

Yes, your employer has the right to approve or disapprove your speech.

However, when they profit over your speech (both good willed and ill willed) when it benefits them, then censor (i.e. suspend) when it hits to close to home, that makes you a hypocrite. Additionally when they advertise the program as "uncensored" then censor it to the paying customer, that also makes them a hypocrite.

Yes they have the right to do it. But I will not support them.

Maybe if they catered to the end customer instead of the politicians in effort to buy a monopoly, their business would be more profitable and perhaps they would not have a need to merge.

Posted by: hot_karl | May 28, 2007 10:01 PM

If XM only had 5,000 cancel why did it take almost an hour to get my 3 radios canceled, and them beg me to stay offering me free months of service? Why will they not terminate my account until June 5 even though I canceled a week ago? I will ask the SEC to look into XMs claim of only 5,000 cancells. I will also make a complaint to the FCC that XM radio refused to turn off my 3 radios on the day I requested and let my state senators know they should oppose the XM Sirius merger. Thanks for the article Mr. Diaz.

Posted by: Sparky Sparks | May 29, 2007 12:46 AM

XM says only 5k quit in protest, how many just canceled without letting the idiot customer service rep know why?

I wonder what their average daily signups/dropouts is?

Still, I don't have a need for satellite radio. It's never interested me, but there is a segment that can benefit from it.

Posted by: Kim | May 29, 2007 1:20 PM

XM Radio - plays commercials? Now mind you , I am not one to read the fine print on an agreement so I just assumed that if I pay to subscribe to satellite radio, that there would be no f#$%^$g commercials. But I heard a Lexus advertisment on XM. WTF?

Posted by: KC | May 31, 2007 12:33 AM

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