Sirius XM Prepares To Raise Its Rates

Satellite radio company Sirius XM is preparing to raise rates come this March. I have a few comments on this development – some comments as a shareholder in the company and some comments as a consumer of their product. I’d be interested to hear what your take is on this topic, too.

As a shareholder, I’m completely in favor of Sirius XM raising their rates because I know that the company has a series of “financing events” coming up this year where billions in existing debt need to be refinanced. The company is working hard to strategically position itself for the coming years so that it is a streamlined company that continues to grow and generate revenue, but this has been a tricky process.

Towards the end of last year, many of the niche music channels that Sirius XM listeners grew accustomed to hearing were removed in favor of condensing the company’s offerings. This attempt to streamline its services by removing duplicate channels has generated mixed results. Some of the condensing made sense. For example, adding the 40’s on 4, 50’s on 5, 60’s on 6, 70’s on 7, 80’s on 8, and 90’s on 9 channels was the only logical move to make with the standard music channels. The same is true of the Sirius XM Love channel which plays love music all day. Having separate Sirius and XM channels for these standardized playlists is a waste of money.

On the other hand, when Sirius’ Back Spin Radio channel was replaced by XM’s Pop2K channel, the Back Spin fans went bonkers. Through a coordinated campaign, they successfully lobbied to get the Back Spin channel brought back to the Sirius XM line-up (fans of the Strobe channel did the same thing). Creating cost synergies makes sense, but so does listening to your fans.

Now, from my standpoint as a consumer of Sirius XM radio some of the pending price increases really piss me off. First, they are removing the free internet feed and adding a $3.00 monthly fee without increasing services. The company’s argument will be that they are upgrading the internet fee to the better, clearer 128k connection. Guess what? I don’t want the better connection! I’m perfectly okay with the lesser connection that I have now because it works fine!

My way around this fee, though, will be to NOT order the internet service and instead purchase a boombox for when I want to listen to Sirius XM in the house. Plus, with the boombox I can pause and rewind the radio because I’ll be using the unit that I have in my car. So take that!

Second, Sirius XM is increasing the additional account fee by $2.00 to $8.99 per additional account. In other words, if I have my master account paying $12.95 per month (that’s $13.86 per month with tax) and I want to add an additional radio to my account, instead of paying the $6.99 rate, I’ll now have to pay the $8.99 rate. For one extra radio, that brings my total monthly payment with tax to $23.48. If I was to throw in the internet radio on top of that, then my monthly payment with tax to $26.68. That’s too much for anyone to pay for a monthly convenience like satellite radio.

Third, I’m greatly concerned that Sirius XM is now finding ways to skirt around the government’s decree that it could not raise rates for the first three years it existed as a merged company. When approving the merger, the government said that basic rates could not be increased for three years. Well, if the basic internet rate was free, then isn’t charging $3.00 per month essentially raising the rate? And isn’t raising the additional radio rate by $2.00 per month essentially raising the rate? I don’t like it and I would imagine that other consumers won’t like this either.

And yet because of my daily commute and the amount of driving that I do, I still find the company well worth the $13.86 that I pay each month. But paying anything more than that? Well, frankly I don’t know if I could justify an additional expense for not getting an additional service.

However, as a committed shareholder I hope that you clicked on one of the links in this entry and purchased a product from Sirius XM! I truly think the company has great long-term potential – I just question whether squeezing more money out of its already committed subscriber base is the right way to realize additional income.