NEW YORK – XM Satellite Radio Holdings Inc. (XMSR) Thursday said its quarterly loss widened on rising programming costs, and its shares fell on concern over a delayed digital music player and the pay-radio company's reliance on car makers for new users.
Both XM Satellite and rival Sirius Satellite Radio Inc.(SIRI) are growing rapidly in a nascent market, but losing money as they spend heavily on new technology and entertainment such as celebrity radio hosts to gain new customers. The companies aim to attract long-term users who will pay a monthly fee for years to come.
Both companies are growing rapidly but losing money as they spend freely on both technical innovation and entertainment, such as professional sports leagues and celebrity radio hosts, to help gain new customers. They aim to build a base of long-term users who will pay a monthly fee for years to come.
Revenue at Washington-based XM Satellite more than doubled to $153.1 million from $65.4 million, exceeding Wall Street's average expectation of $148.3 million, according to Reuters Estimates.
XM said total subscribers rose to 5.03 million from 2.51 million last year, on par with preliminary figures the company provided earlier this month.
Analyst said the results were in line with expectations, and they were encouraged by XM's forecast for an acceleration of subscriber and revenue growth through the fourth quarter, a typically strong period when satellite radio devices (search) are given as holiday gifts.
"By all indications, the inventory position going into the fourth quarter looks strong," said Craig Moffett of Bernstein & Co. Inc. "Having (previously) announced third-quarter subscribers ... there aren't a lot of surprises (in the report)."
Cost per gross subscriber addition was $89, unchanged from the previous year, XM said. The figures represent subscriber acquisition costs (SAC) of $53 each -- up slightly from this year's second quarter -- plus advertising and marketing expenses.
By contrast, SAC at Sirius, which launched its service about one year after XM, was about $161 in the second quarter. Sirius is expected to report third quarter financial results next week.
XM's third-quarter subscriber growth of 617,152 was driven by strong demand for its radios in cars, and the company said it still expects to exceed 6 million subscribers this year.
Shares of XM Satellite slipped 24 cents to $30.97 on Nasdaq. So far this year, shares of XM have fallen some 18 percent, only slightly better than Sirius stock, which has fallen almost 19 percent this year.