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SIRIUS XM HOLDINGS INC (SIRI)
Student Name
American Public University
BUSN620: Strategic Management
Instructor Name
Date
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Executive Summary
Sirius XM Holdings Inc. (NYSE & NASDAQ: SIRI) is headquartered in New York, NY, with
4,534 employees. Sirius XM is the leading audio entertainment company that also includes its
subsidiary Pandora. Sirius XM and Pandora combined reach over 100 million customers each
month with their services. Sirius XM is an audio streaming service accessible by over 30
devices with satellite receivers. The primary way to get Sirius XM services is with a car radio
that is programmed to receive their signal, one of their proprietary receivers, or via their internet
application (app). The fees for Sirius XM services range with three different packages that vary
in the number of channels, on-demand service, and ways to stream.
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Sirius XM Holdings Inc
Company Overview (SIRI)
Sirius XM Holdings Inc (SIRI), is the only satellite radio broadcast service in the US and
has changed the way radio is heard. Because of the new technologies that have come out of the
process of receiving radio broadcasts, the technology has changed program content (Kemppainen,
2012). Sirius XM uses three geo-synchronous satellites along with online services. To provide
this service, they take advantage of satellite digital audio services, that uses a multi-channel
algorithm (Nassar, Senega, Lindenmeier, 2018). Sirius XM experienced massive growth in 2003,
reporting $12.87 million; five years later, they made one billion (Watson, 2018). The company
offers subscription service of over 150 channels that provide everything from music, talk shows,
and sports. Their services can be heard via radio receivers or their app.
Company History
Sirius XM has a history dating back 1990, starting as Satellite CD Radio, Inc out of
Washington, D.C., by former NASA engineer Robert Briskman. This company started knowing
that they could broadcast a digital signal from specifically formatted satellites. Briskman
expanded operations by adding his partner, a Canadian venture capitalist, David Margolese, who
made a $1 million investment of the company and was named CEO. The idea of the business
was to offer a radio signal that customers paid to receive; to make that happen, they also required
a particular receiver to hear the signal. Since this was a new way for folks to listen to the radio,
it was not governed by the Federal Communications Commission (FCC), making the rode to
what is now Sirius XM a new area.
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Satellite CD radio became the sole subsidiary of the company CD Radio Inc in 1992.
While there was new competition in 1993, CD Radio Inc spent $2 million to buy out the top
competitors Sky Highway Radio Corp. This would not be the company’s final buyout as there
most significant acquisition happened later.
Since the was a new market, the company had spent $10 million in its development,
which led to them losing $9.5 million in 1994. In an attempt to recover the $9.5 million, the
leadership team made the company publicly traded on the NASDAQ, and this brought in $7.5
million. To that money, the company had stated that for less than $10 a month, their customers
would receive, via “S-Band” radio receivers, 30 channels that would be commercial-free and
have the same sound quality as CDs, the highest commercial sound at the time.
The biggest challenge for this to work was getting the satellites into space and having the
programming, which they estimated would cost them in excess of $500 million. To get the
satellites built, the CD radio reached out to the Loral Corp, who was working on an FCC license.
The firm spent $83.3 million at an auction for the first of two FCC licenses signals; the other
licenses were sold for $89.9 million to American Mobile Satellite Corp.
In 1998, the company had its most significant shares of stock purchased at $135 million
and an option to purchase $65 million within a year from Apollo Management L.P. By May
1999, the company had a plan to launch its service with 100 channels for its subscribers by 2000.
The growth of the company called for a headquarters, so they moved to a 100,00-square-foot
location in Manhattan, NY, for $38 million that came with various broadcasting studios, a music
library, and a satellite tracking center. Along with the new home came a name change to Sirius
Satellite Radio for the most significant stat in the night sky.
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Sirius believed that most of their customers would use the service while in the vehicles
and made deals with seven top car manufacturers to put their receivers in the cars and two
trucking companies. In need of more funding in 2000, they went to Lehman Brothers for a $150
million line of credit, and this was contingent on a successful system demo.
The company launched its first satellite from a former Soviet facility in Kazakhstan in
July of 2000, with the next two being launched by the end of December of 2000. Now having
the three satellites in place the company focused on attaining its customer base, they needed two
million customers to break even. The customers they targeted were those seeking to eliminate
the number of commercials that came along with the broadcast AM/FM radio. Before the
company had generated any revenue, it had invested more than $1.5 billion in startup costs.
Before the company started, they sold $230 million in stocks, in May of 2001, they announced
the pricing of $12.95 a month; this was an increase of $3 from what they first planned. Because
of this increase, Sirius shareholders filed a class-action lawsuit. During the time of the lawsuit
Margolese, who was with the company almost from the start, quit and was replaced by former
executive vice-president of Global Crossing Ltd., Joseph Clayton.
Launching in four states on February 14, 2002, and reaching all other stats by July 1 of
the same year, Sirius still found it was behind their top competitor, XM Radio, who launched
their service five months earlier in September 2001. By October 2002, almost in bankruptcy,
Sirius unvalued a recapitalization plan of converting $700 million in debt and $525 million in
preferred stocks into common stock for $200 million in cash from Oppenheimer Global Funds,
Blackstone Group LP, and affiliates of Apollo Management LP. In 2006, Sirius announced its
first profit of the business.
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In 2003 and 2004, Sirius made deals that would lead to their long term success. The first
was in December with a seven-year $220 million contract with NFL to broadcast all their games,
and they had also entered into a similar type of deal with the National Hockey League. In 2004
the company made significant additions; the first was adding service to Canada. The other deal
made was a deal with DISH Networks to offer Sirius services to their selected subscribers. Their
third was a deal with both Wal-mart and Radio Shack to have their stores feature Sirius
receivers. The final and most substantial addition came in October when Sirius completed a five
year $100 million contract with Howard Stern. This deal would make Sirius the only place to
hear Stern without FCC rules.
The final part of Sirius's history was made in 2007 when the FCC approved the merger of
Sirius with XM, its sole competitor. The merger offered the combination of all customers under
one service making the new company worth $13 billion and eliminating all competition
(Schwankert, 2007).
Products and Services
The products that Sirius XM offers are two radio receivers, the first is the Onyx EZR at
$79.99. This is the newest radio that offers a ten channel preset, white on black or black on
white text display, split-screen to show what is on your favorite stations and create your own
channel with TuneMix. The other receiver is the Onyx Plus at $99.99, and this device works in
and out of the customer's vehicle. The features are up to 20 channels preset, full-color display
along with album art, access to pause, rewind and replay up to 30 minutes, and create your own
channel with TuneMix. They also offer accessories for the devices, like docking stations to
listen to in the house or portable to listen while on the go.
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The service that Sirius XM offers are contained within three packages, the first is Mostly
Music at $10.99 a month offering a selection of ad-free music channels. The second option is
Select for $16.99 a month and has more to provide with, Sirius XM video online, On-Demand
shows, add-free channels, exclusive artist-dedicated channels like the Beatles, 24/7 comedy
channels, world-class news like Fox, some access to channels base on upgrades and receiver,
college sports, traffic, and weather. And 100 plus online Xtra channels. The final package is All
Access for $21.99 and comes everything in the Select package plus, personalized stations
powered by Pandora, Howard Stern, NFL, Nascar, MLB, NBA, NHL, and PGA Tour.
Operations
Sirius XM operations are headquartered in New City, NY, where they broadcast their signal
using three satellites. Part of their broadcast includes two exclusive channels of Howard Stern,
and commercial-free music covering many decades and genres. They also offer a large selection
of talk -shows and all major sporting events. This service comes with 10,000 hours of content that
its customers can get on-demand.
Vision
Sirius XM's vision statement is “to be a diverse, vibrant, and valued service in audio
entertainment that is vital to listeners.” The way that the accomplish that goal is by providing their
customers with music selections that cover all periods and styles. Matching the various available
music, they also have workers to match, with a mix of all races, ages, and both males and females
on their staff.
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Mission Statement
Sirius XM’s mission statement is they are a broadcasting company in America that
provides three satellite radio and online radio services. To accomplish that mission, they provide
their customers' service wherever and whenever to listen to various styles of music. The music
quality they broadcast to their customers to be the clearest possible at any location in the US or
Canada.
Corporate Values & Culture
Sirius XM values are integrity, excellence, and diversity for all its employees. The slogan
is “doing what we love and loving what we do.” To accomplish the values and slogan, they hire
workers that have qualities like creative, quick thinking and have an entrepreneurial spirit. Their
hiring covers all age and ethnical groups and sex. To get the best employees, they offer benefits
like medical, dental, vision, short and long term disability, life insurance, flex spending account,
and employee assistance plan. Some of the financial benefits they offer are 401k match, paid time
off, parental leave, pre-tax commuter benefits, identity theft protection, subscription of all access
for Sirius XM, and premium Pandora account.
To foster a creative work environment, they conduct work events like ice cream socials,
summer BBQ, fall festival, holiday part, lotteries to attend special events, bring you children to
work, and summer Fridays. These events give the workers a way to socialize with other employees
and build new relationships.
The final thing that Sirius XM does to foster their values and culture is by giving their
employees paid time off to volunteer with any registered 501c3 events. They also have a program
where they match charitable donations.
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Strength, Weaknesses, Opportunities, & Threats (SWOT) Analysis
The SWOT analysis for Sirius XM Holdings Inc is very balanced for a company of its size.
Looking first at the strengths: distribution and reach, the company has a large number of outlets
across each state that is supported by a network distribution to reach their customers (Williamson,
2018). The next strength is the low-cost structure that allows them to produce their service at low
cost and sell for low prices to the customer; this is also back with a reliable dealer relationship that
promotes Sirius XM’s produce (Williamson, 2018). One of the ways that they can reduce cost is
with automation in different stages of their production, giving them the ability to either scale up
or down of the production as needed (Williamson, 2018). They have a more substantial social
media footprint with millions over Facebook, Twitter and Instagram, to go along with they have a
user-friendly website and a well established IT system to support both internal and external issues.
One of the biggest strengths is that they have several intellectual property rights, including various
trademarks and patents (Williams, 2018).
Some of the weaknesses are its research and development, and this is not from spending as
they spend more than the average company (Williams, 2018). One of the other weaknesses they
have it that a large part of their property is rented, this leads to the company having low levels of
assets. The next weakness area is with their workers, and they have a higher rate of turnover
driving training prices higher than the average, part of this is because of the workload each
employee has to complete, this also leads to lower morale (Williams, 2018).
Sirius XM has several opportunities; first of these is the internet; this could give the
company a place to reach more customers by streaming their services (Williams, 2018). The next
area is E-commerce, with the majority of people making purchases online, Sirius XM could move
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more sales towards this method. The final opportunity is with social media; they can use this
platform to keep it current and possible customers updated on events.
The threats that Sirius XM faces are part of their own doing; with the merger, there is less
competition making the few remain satellite companies able to develop new technologies to
compete against their service. New streaming services that are pulling customers is a threat that
is growing as more options for commercial-free music is being created; this leads to possible
competition (Williams, 2018). The final and most significant threat is the constant development
in technology; this forces them to have to keep training for the new technology.
Competition
In the satellite radio industry, there is no competition, since the merger between Sirius and
XM. From the start, it was always competition between Sirius, or any of the other names it had,
and XM. Now that the two have merged, they have created a monopoly on satellite radio. The
merge was voted on by both company shareholders, and they voted for the merger (Warf, 2008).
The only competition that Sirius XM faces is from AM/FM radio. The most significant
difference is that AM/FM is free, and you can listen to local stations if you can tune them correctly.
As you are driving around, you will lose and gain different radio stations; this is the advantage that
Sirius XM has over AM/FM. It does not matter where you go inside the US; you will have the
same song on the station, and it will never fade out. The advantage that AM/FM radio has over
Sirius XM is that there is no fee but comes with the downfall of what stations you can hear at
location-based.
Management team/Leadership
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Sirius XM has a management team and a board of directors. Having a board of directors
in place can be an outside voice that the top decision-makers take advice from (Yermack, 1996).
Sirius XM board of directors has ten directors, a lead independent director, chairman of the board
of directors and chief executive officer.
Sirius XM has twelve members of their management team with James Meyer, who is both
part of the management team and board of directors. Meyer holds the title of CEO and Director.
The other members of the management team are Scott Greenstein President and Chief Content
Officer, Jennifer Witz President, Sales, Marketing and Operations, David Frear Senior Executive
Vice President and Chief Financial Officer, Dara Altman Executive Vice President and Chief
Administrative Officer, and Jim Cady Executive Vice President, Chief Innovation Officer,
SiriusXM. Some of the other members are Stephen Cook Executive Vice President, Sales and
Automotive, SiriusXM, Barbara Daniel Senior Vice President and Head of Corporate Strategy,
Patrick Donnelly Executive Vice President and General Counsel, Chris Phillips Chief Product
Officer & Head of Technology, John Trimble Chief Revenue Officer, Pandora, and John
Verbrugge Executive Vice President and General Manager, Emerging Business, SiriusXM.
Financial Outlook
Sirius XM has seen an increase in their sales/revenue since 2015. They reported $4.57
billion in 2015, and have steadily increased sales to achieve 2016 $5.02 B, 2017 $5.43 B, and 2018
$5.77 B. From 2018 to 2019, the company saw the most substantial boost to $7.79B, over a 2
billion increase. They have also seen a slight increase in the cost of goods sold incl. D&A, in 2015
they had $2.65B growing to $4.37b in 2019.
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The gross income also has grown over time in 205; they had $1.92B, increasing to $3.42B
in 2019. The net income that the company received was almost half of the numbers in the gross
income, with $509.72 million growing to $914 million in 2019. In 2018 they had the highest net
income of $1.18 billion.
Since their first offering in stocks in October of 1994 for $3.80 a share, they have had a
steady rate. The most significant fluctuation occurred in February 1997 with stocks at $5.90,
reaching its highest price of $58.40 three years later before dropping back to a steady-state in 2003.
Since 2003 their stock has gone from $1.10 to its current rate of $5.31 as of May 23, 2020. The
data from the past most shows the stock dropping 30 cents; part of this reflects the effects of
COVID-19.
Strategies
The strategy that Sirius XM has taken is a strong one with the merger of the two companies
leaving no other companies in the satellite market or compete against. To stay relevant in the
music listening industry, Sirius XM keeps the options of what music and other listening to offer to
their members. One of these was adding on-demand stations, along with videos from specific
channels.
Conclusion
Sirius XM Holding Inc is a company that offers an excellent service that also has a match
culture and values. While their journey was a long one, they are now on top of the industry with
little competition. The company has a very balanced SWOT, with most being in the strengths
and opportunities. The company is had a steady finical period and is projected to increase
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growth while maintaining its stock prices. Sirius XM has a service that would draw in just about
any customer; they also have a workplace that the majority of people would love to work. The
final thing that Sirius XM has is that their stocks are worth investing in if you are looking to have
a safe investment, this stock could rise over time.
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