Announcement Could Come This Week
It wasn't too long ago a number of
pilots expressed concern at the buyout of XM Satellite Radio,
provider of the invaluable XM WX satellite weather service, by
Fliers were concerned their inflight weather displays would go
blank if Sirius opted to discontinue providing that service to a
relatively small subscriber base... fears that proved to be
unfounded, as the
sale was completed in November 2007 without
Alas, there's now a new problem... one that could be much, much
worse. The New York Times reports the company now known as Sirius
XM Radio is talking with advisers about a possible bankruptcy
filing, due to a faltering subscriber base and absence of new
credit sources. The company has $175 million in debt payments due
at the end of February, that few expect it will be able to pay.
The bread-and-butter market for Sirius -- which has yet to make
a profit, either independently or with XM -- is the automobile
industry. Sirius XM radio systems installed in new vehicles make up
the largest customer base among the roughly 20 million subscribers,
who each pay a monthly fee to listen to hundreds of channels of
entertainment and news programming.
Sizable as that revenue pool may seem, those monthly fees have
come nowhere close to matching the millions of dollars spent by
Sirius to send new transmission satellites into orbit... or, what
Sirius has paid to retain popular talent for its programming, such
as the $100 million paid to shock jock Howard Stern. Once touted as
the next big thing in radio programming, Sirius has been outflanked
by other, cheaper alternatives, such as Internet-based radio
stations and MP3 players.
The Times says Sirius has survived so far by refinancing its
roughly $3.25 billion in debt at low rates, payable when the
company finally turns a profit. The viability of that business plan
has evaporated in the global credit crisis.
In addition to talks with bankruptcy experts, Sirius CEO Mel
Karmazin is also reportedly in negotiations with business rival
Charles Ergen, chief executive of EchoStar, about a possible
takeover. It could be a hostile one; Echostar holds a significant
chunk of Sirius' debt, and could seek court approval to take over
Sirius if a bankruptcy filing does indeed occur.
An announcement could come within days, according to the Times.
What that may mean for XM WX remains to be seen. Stay tuned.