Sirius XM Radio expects to hike prices in 2012
Sirius XM Radio Inc. says it expects to raise its prices next year now that a federal mandate to freeze subscriber fees has been lifted.
“We continue to believe it would be appropriate for us to increase our pricing to be able to continue investing in and delivering the best audio content in the world,” said Sirius XM Chief Executive Mel Karmazin during a conference call with analysts Tuesday to discuss the New York company’s second-quarter earnings.
Karmazin did not say how much the increases would be, noting that the satellite radio company has not changed its monthly base fee of $12.95 since the merger of Sirius and XM in 2008. As a condition of approving the merger, regulators at the Federal Communications Commission barred the combined company from raising its prices. The FCC lifted that restriction Thursday.
David Frear, Sirius XM’s chief financial officer, acknowledged that higher prices could decrease the service’s number of paying subscribers, which surpassed 21 million in the quarter ended June 30.
“Generally, when you raise prices that you tend to dampen demand,” Frear said. “But … we think that price increases make a lot of sense, given the programming we’re delivering and given how long we’ve left the price unchanged. It just makes a lot of sense to increase it in the future.”
The announcement came as Sirius XM reported an 11-fold increase in second-quarter net income to $173.3 million on $744.4 million in revenue. It had earned $15.3 million a year earlier on $699.8 million in sales. It also raised the number of net new paying subscribers in 2011 to 1.6 million, up from its previous forecast of 1.4 million, thanks to the company’s push into used cars and other efforts to recruit customers.
Its shares, which closed at $2.11 on Monday, rose briefly to $2.21 after the morning earnings release before retreating alongside the overall weaker stock market. The shares closed at $2.07, down 4 cents.
