Rumor in the radio industry is that XM Sirius will be filing for Chapter 11 bankruptcy protection very soon.
It appears that the company will be trying to reorganize and refinance it’s debt. Part of the problem is that car sales are down, so new subscribers are slow to sign up. I’d also guess that some people who have become unemployed or seen their income drop are not resubscribing. The deal that Sirius made with Howard Stern seems not to be paying too many dividends at this point. Speaking of which, Sirius stock is down around $0.16 a share. If they go bankrupt, stock holders will be able to use their certificates for bird cage liners.
Echo Star (which owns Sling Box, among other things) has bought a significant amount of the commercial paper that XM Sirius has outstanding. If Sirius defaults on their $300 Million loan that is due on February 17, Echo Star could own a large part of the company. Conceivably, Echo Star could force XM Sirius into bankruptcy (Chapter 7) and acquire the company for relatively little money. By relatively, we’re talking hundreds of millions of dollars.
Whether Echo Star would just want the assets, which consist of three satellites and about 1,000 terrestrial transmitters between the two company, or would take over, capitalize, and try to expand the market base is open to speculation.
It’s encouraging that Ergen might see satellite radio as a potential high growth industry. If he can properly capitalize it, cut unprofitable channels, and renegotiate deals with people like Howard Stern, we might have something to listen to over the next several years.
If I were trying to expand my market, I’d look at fixed locations like restaurants, bars, stores, and coffee shops. I’d offer limited channel selections at less expensive prices.
Then again, I’m not Charles Ergen.
For reference purposes, here is a site where you can map Sirius ground transmitters.