Analysts forecast that the Global Broadcasting and Cable TV market, to grow at a CAGR of 5.28% over the period 2012-2016. One of the key factors contributing to this market growth is the increasing amount of TV advertising. The Global Broadcasting and Cable TV market has also been witnessing the increasing use of interactive TV. According to MarketLine, the worldwide broadcasting and cable TV industry is expected to reach around $475 billion in 2015, showing growth of 27% annually. Out of this total market, TV advertisement contributes around 44%.
The broadcasting and TV companies are now focusing on its growth through pay programs and enhancing their portfolio of growing businesses.
Sirius XM Radio(SIRI, Financial) is the world's largest radio broadcaster measured by revenue with a subscriber base of 25.8 million.
The company recently announced its first quarter 2014 financial and operating results. It reported revenue of $998 million, up 11% from the first quarter 2013 revenue of $897 million. It reported net income of $121 million, up 46% over $83 million in last year's first quarter. The total paid subscriber base reached a record 25.8 million, up 6% from the prior-year period. The company anticipates a total subscriber base of 30 million within the next few years.
Automobile market to leverage growth
Sirius has partnered with 12,000 dealerships across the U.S. through the “Pre-owned Vehicle Program” to fuel future revenue growth in future. The basic subscription for Sirius is around $15 a month with 3-months free trail with pre owned vehicles. Historically the conversion from trial to paid user for Sirius is around 45%, providing growth opportunity.
Sirius anticipates auto sales of around $16.2 million, and it projects around 11 million trials in the new car market in the current fiscal year. Total enabled vehicles on the road with a factory installed satellite radio were approximately $62 million at the end of the first quarter and it expects this to double in the next five years to approximately $120 million, providing an opportunity to growth in new car base and drive second owner business as well.
The second owner market is also providing significant growth for Sirius. The company as mentioned has around 12,000 dealers who report sales information. Over 3000 of these dealers are also enrolled in the service line initiative, which gives the company an opportunity to offer trials to dealers’ customers who are getting their vehicle serviced at various locations. From this growing dealer account and larger turnover of Sirius enabled program vehicles, the company expects to run more than 4 million trials in the second owner car market in current fiscal year. With a constant growth and turnover of vehicles with radios, Sirius anticipates substantial increase in used car additions in the coming years.
Sirius seems to be on track to grow self-pay additions in the auto segment from approximately 1.5 million last year to close to 2 million this year.
Enhancing Portfolio for growth
The company recently announced with NBC news to launch their Today Show, radio channel, delivering the iconic and respected daily programming, with feeds from both coasts and hit summer concert series. It has also added business radio, powered by the Wharton School, a new full time channel dedicated to giving business owners, executives or anyone with an interest in starting a business insight and advice from the stars of the business and finance world.
The company is also focused on its connected vehicle business which is still in inception stage, but is confident to achieve growth. It aims on improving what is offer to its OEM customers and ultimately to their self-pay customers. The company competes with its competitor by providing a rich content as compared to their competitors. Creating and broadcasting unrivalled content is the core of its business and vital for attracting new subscribers while keeping the existing ones.
Guidance for Fiscal 2014
- Additions new subscriber base of approximately 1.25 million,
- Revenue of over $4.0 billion,
- Adjusted EBITDA of approximately $1.38 billion
- Free cash flow approaching $1.1 billion.
Conclusion
Sirius is all focused to increase its customer base to leverage a healthy top and bottom line with increased future cash flows. I recommend a buy on these stocks.
