This presentation contains forward-looking...
Transcript of This presentation contains forward-looking...
This presentation contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and are subject to risks, uncertainties, and other factors that could cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the effects of economic conditions, competition, programming availability and quality, technological developments, developmental difficulties and delays, the availability of capital to finance growth, the impact of government regulations, and other factors detailed, from time to time, in the Company’s filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this presentation. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Huge Market Opportunity
The Satellite Radio Industry reached 9M subscribers in only 4 years
This represents less than 5% penetration of the 230M total radiolisteners
XM plans to exceed 20M Subscribers by 2010Implies 2.8M Net Adds per year to reach goal
In 2006, XM plans to add more than 3.1M Net Subscribers, puttingus well on track to achieving our goal
By 2008, annual OEM factory installations of XM will reach nearly 5M vehicles per year
More growth beyond 201020M Subscribers still represents less than 10% of total radio listeners
XM’s Rapidly Growing Subscriber Base
0.00.3
1.4
3.2
5.9
9.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Subs
crib
ers
(mill
ions
)2001 2002 2003 2004 2005 2006
Over 9 Million Subs by year end 2006
Exceeding 20 Million by 2010
Actual Results Guidance
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Net
Add
itio
ns /
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Cable TV Internet Cellphone MP3 Players XM
One of the fastest growing consumer electronics products
Source: Greystone Communications
2005 Highlights
Subscriber ResultsAdded 2.7M Net Subscribers exceeding 5.9M at year end
84% YoY Ending Subscriber growth
Extended subscriber lead over competition by approx. 500K
Achieved 6M ending Subscribers within 4 days of year end
Other Major EventsEntered into exclusive arrangements with Toyota, Nissan and Hyundai; XM’s OEM partners now represent approximately 60% of US vehicle sales
Expanded programming relationships in sports, talk and music
Launched service in Canada, leveraging XM’s brand and infrastructure
4th Quarter Marketing Strategy
Defend market share in face of unique Stern introduction and softness in OEM sales
Expand overall appeal of XM Satellite Radio during critical Holiday Season
Promote mass market appeal of XM’s programming by featuring diverse content and personalitiesOffer a portfolio of products at very attractive price pointsEnsure strong inventory levels
Added nearly 900K Net New SubscribersOver three quarters of a million Aftermarket Net Subscriber Additions, approximately 56% increase YoYOver 100K OEM Net Subscriber Additions, decreased approximately 50% YoY - soft GM sales in 4th Quarter (particularly SUVs and trucks) and trial falloff from record June/July sales (employee discountprogram)Roughly 100K Subscriber activations on Christmas DayLarge Holiday gift volumes (Sold But Not Activated Radios) with slower activation rate relative to past years
XM maintained approximately 50% retail market share where consumers had a choice between satellite radio providers
Sirius strong in Stern radio markets; XM strong across the rest of the country
Added unique, diversified programming valued by current and future XM subscribers (Dylan, Ellen, Good Morning America, NHL)
4th Quarter Preliminary Results
2006 XM OutlookOver 9M YE 2006 XM Subscribers, representing 3.1M Net Adds, a YoY Ending Subscriber growth in excess of 50%
New breakthrough products (with MP3 capabilities) and affordable Plug-&-Play radios to drive strong growth
Positive 2006 OEM growth, mainly from GM and Honda, dramatically ramping in 2007 and 2008 with vehicles from Hyundai, Nissan and Toyota
Continue refinement of XM programming with a balanced combination of third-party brands/talent and internally developed content that appeals to the mass market
Effectively market extraordinary content – XM programming is unparalleled in satellite radio and traditional radio doesn’t compare
Grow advertising revenue on our targeted non-music channels
XM – Leading the Industry
XM is the Satellite Radio Industry LeaderWith over 6M subscribers, nearly twice the size of our competitor –extended lead in 2005 by roughly 500K Subs
XM continues to maintain solid market share in the aftermarket and has partnerships with approximately 60% of the OEM market
XM will continue to be the Industry LeaderThe best in music, sports, talk and news to appeal to the mass market
Cutting Edge Technology that delivers features customers want atattractive prices
Distribution strategy that includes partnerships with top retailers and the biggest and fastest growing OEM partners
AGENDAProgramming Strategy Eric Logan
EVP, ProgrammingTechnology Strategy Stell Patsiokas
EVP, Technology & EngineeringMarketing Strategy Steve Cook
EVP, Sales & MarketingOEM Partners
Honda Charles KochManager, New Business Development & Planning
GM Rick LeeVP, Satellite Radio Services
Nissan Larry HaddadCorporate Manager, Cross Carline Product Planning
Hyundai Doug MottramNational Manager, Product Planning
Toyota Jon BucciCorporate Manager, Advanced Technology Department
XM Canada John BitoveChairman & CEO, CSR
Q&A
Content Strategy
Appeal to the Mass MarketDeliver programming that broadly appeals to current mainstream demandProvide a diversity of programming not widely available from traditional radio
Target Growth SegmentsCreate programming to reach key growth markets and expand subscriber appeal
Balance the Cost of Content“Franchise” content (MLB)Widely known/desired talent and brands (Ellen, Good Morning America, Dylan)
Develop XM Brands and TalentIncubate Internal Talent by increasing exposure and leveraging our significant subscriber base
Develop Content that is Appealing to Advertisers
Content Focus
Subscriber Target Demographics1. Mainstream America - Persons 25-54 with average age of 35
2. Mainstream America - Persons 18-24 and Persons 55+
3. Growth Segments:
Device - Content – Platform IntegrationCommerce
XM+NapsterAudible
DevicesOn-demand Content
Alternate DistributionXM Radio Online – DirecTV - AOL
Sports Talk/InformationEntertainment
NewsMusic
`
Females Males African Americans Hispanics Other
EthnicitiesLifestyles/Interests
Millennial Generation (12-17)
Talk Stars: Bill O’Reilly, Al Franken, Ellen, Dr. Laura, Opie & Anthony, Tyra Banks
Appeal to the Mass Market
The Most 100% Commercial-Free Music
The Most Play-by-Play Sports
21 Dedicated Channels of XM Instant Traffic & Weather
Hispanic Music, Sports & News
The Most Sports Talk
Aligning with Major Music Brands
Creating New Categories:Comedy, Books and Drama
Program DiversityXM vs. Traditional Radio
XM broadcasts 67 music formats nationwideTraditional radio provides a very limited number of musical formats, both in urban and rural markets
XM features live play-by-play coverage of over 5,000 sporting events per year, satisfying dislocated sports fans wherever they are
Traditional radio provides coverage of only local teams. XM covers the national picture and many sports not covered at all:
XM offers other programming not widely available from traditional radioComedy and Opie & AnthonyWomen’s TalkHispanic Sports, News & TalkAfrican American TalkChristian TalkTruckers’ TalkBooks on Tape
XM’s Technology Demonstrates Fidelity Superiority by broadcasting in 5.1 Surround Sound
Two Channels being broadcast 24/7 in 5.1 Surround SoundInnovation called XM HD Surround
XM’s Exclusive Music ProgrammingTargeting Music Enthusiasts
Over 1,000 Live Performances at XM, including: Paul McCartney, Santana, Coldplay, Wynton Marsalis, Melissa Etheridge, Lenny Kravitz, Phil Collins and Willie Nelson
Original programming including:Artist Confidential Series
Then…Again…Live Series
XM Presents Jazz at Lincoln Center
Country Music Hall of Fame
Bob Dylan in January 2006
Welcome to Da Chuuch with Big Snoop Dogg
Tom Petty's Buried Treasure
From Be-bop to Hip-Hop featuring Quincy Jones
Investing in live programming production capabilities and enabling technologies
Network Live (AOL/XM/AEG): Joint venture producing concert series & original music specials
XM Productions/Effanel: Production experts for Grammy’s, MTV Music Awards
XM Exclusive Play-by-Play XM Original Sports Talk
Major League Baseball
Hispanic Sports and 2006 World Cup
Andres Cantor
Coach K, Tony Kornheiser, TJ Rives
Mark Messier, Phil Esposito
Dale Earnhardt, Jr., Jimmie Johnson, Claire B. Lang
Peter Kessler
Rob Dibble, Kevin Kennedy, Charley Steiner, Mark Patrick, Ronnie Lane, Joe Castellano, Cal Ripken, Bill Ripken, Buck Martinez, Mark Gray, Grant Paulsen, Holden Kushner, Orestes Destrade
Bud Collins
The Most Sports Talk & Live Play-by-Play
Strategic Approach to Key SegmentsExample: Women’s Content
62M Women between 25-54 yrs
Creation of an XM SuperBrandTake 5 – A dedicated Women’s interest and lifestyle Channel
Using Brand Name Talent to attract Subscribers
Leverage the platform to grow XM exclusive personalities
Advertisers desire highly targeted sales opportunities
Additional Target Growth MarketsHispanic
32 Million people 12+ yrs
Fastest growing segment in America
Creation of another XM SuperBrand
XM Deportivo – America’s first 24/7 all Hispanic talk and sports format
Long-form talk focuses on Baseball, Soccer and Boxing
African American
29 Million people 12+ yrs
Creation of XM SuperBrands
The most popular African American and Urban music formats
Utilize major Urban personalities to brand/attract this powerful segment
• Snoop Dogg• Ludacris
Goal: Increase Subscribers’ Usage of XM
XM Subscribers use on average 4 channels per week
Subscribers spend over 22 hours per week listening to XM compared to 19:15 for traditional radio
Challenge is exposing Subscribers to new/innovative and valued content
‘Road Blocking’ of long-form content in high profile times – not weekends
Extensive coverage of major events
• All shows from Live8, at the same time
• Multiple feeds from MLB Playoffs
No competition between XM channels, but “discovering XM” and increasing overall TSL of the XM service by promoting other XM channels and other distribution outlets
XM Radio On-line, AOL, DirecTV
Music Channels:Growing Subscriber Base and High Usage Drive Results
A comparative ranking of XM’s Total listeners against the top traditional radio stations places many of XM’s channels inside the top 20 cuming stations across the country
20 on 20 will cume over 1.6M total listeners each week • Making it the 4th biggest top 40 station in America
XM’s 70’s on 7 will cume over 1.8M total listeners each week • This channel is the 13th largest cuming channel with ALL formats
across America! Oldies is alive!
All of these channels will continue to increase in size as our subscriber base grows
• Many channels will become the number one destination for a given genre – due to size and growth of national audience
Talk & Entertainment ChannelsContent that Appeals to Subscribers…and Advertisers
Advertisers are looking for new ways to reach specific demographics and consumers who are migrating away from the ‘noise’ of traditional media
XM’s channels target highly desired, sellable demographics with a variety of formats and choices not found in traditional media
• Women, Hispanic, Sports, Commuter Traffic, Edgy Talk, Business News, Trucker Talk, etc.
XM’s unique presentation of content provides Advertisers the ability to align their brands and ‘own the event’
• Bank of America sponsors MLB Play-by-Play for all games, all season • Short-form Features across multiple channels that feature expert tips or
information – ‘The GM Drive Time Minutes’
Unique Spot Opportunities, Strategic Partnerships, Exclusive Sponsorships – all in an uncluttered environment
• Platform Wide Initiatives - Black History Month – Showcasing unique programming across Talk, Music and other channels
• Brand Association with Take 5, MLB, World Cup, Hispanic Programming, Event Underwriting, Public Radio and more
Technology Strategy & Initiatives
Dr. Stell Patsiokas
EVP, Technology & Engineering
XM Satellite Radio
Technology Development Strategy
Own Technology and StandardArchitectural controlLimit dependence on third parties for technology development
Reduce CostMinimize entry level costDrive an aggressive technology integration roadmap
Lead design and accelerate introduction of Breakthrough Technology and Applications
Product Pricing Driven by Ability to Reduce Direct Material Costs Over Time
Service/SourceDecoder
AntennaModule
RF TunerModule
ChannelDecoder
PLL
IFIC ADC
IFIC ADCTCXO
TERRDEMSAT1DEMSAT2DEM
CAP
TDMDEMUX
TDMCOMBINE
Control CONTROL
DATAPORT
SPEECHDECODER
AUDIODECODER
CONDITIONALACCESSSERVICEDEMUX
2001
PLL
IFIC ADC
IFIC ADCTCXO
TERRDEMSAT1DEMSAT2DEM
CAP
TDMDEMUX
TDMCOMBINE
Control CONTROL
DATAPORT
SPEECHDECODER
AUDIODECODER
CONDITIONALACCESSSERVICEDEMUX
2003
PLL
IFIC ADC
IFIC ADCTCXO
TERRDEMSAT1DEMSAT2DEM
CAP
TDMDEMUX
TDMCOMBINE
Control CONTROL
DATAPORT
SPEECHDECODER
AUDIODECODER
CONDITIONALACCESSSERVICEDEMUX
2005
4x
x
5x
Yoda ModuleLNA
AntennaRF Coax
XM Radio Architecture EvolutionXM-ReadyHead Unit XM-RCVR
In Trunk
XM RCVR LNA
Antenna
RF CoaxBus
SKYFi & Roady: Cost Effective Plug and Play devices
Platform 1:
Platform 2:
Avg User Cost*: $500 - $600
4 hours professional installation
Avg User Cost: $140 - $200
Self installation; introduction of radios to the home* Includes installation
XM Radio Architecture Evolution
LNA
Antenna
RF Coax
XM RCVR4-Wire XM Digital Bus
XM-Ready Device
Platform 3:
Connect-&-Play
Avg User Cost: $50
Avg User Cost: $50 - $150
Platform 4:
SKYFi2, Roady2, RoadyXT, & XM2go
Chips on Board
Embed XM Technology in other Consumer Devices: Connect-And-Play
Low cost technology to enable home audio equipment to become XM Ready, introduced at CES last year with 2 manufacturers
Today, over 20 manufacturers with 44 different models committed
Currently shipping: Yamaha, GPX & Eton
XM2go – only truly wearable “Live”satellite radio
Broad Portfolio of Products for All Consumers
Car Stereo
Plug & Play VersatilityPortable
Audiophiles
Compatible with all leading brands
Usable in multiple locations –auto, home, boombox
Complete stereo and home theater systems from respected manufacturers
Pioneer Inno
Available Date: 1st Quarter 2006
Size: 2.2”W x 3.7”H x 0.6”D
Weight: 4.5 Oz.
Display: 1.7” Color TFT
MSRP: $399.99
Product Features:
Get XM’s 160 digital channels live on the go, in the home and in the car
Record your favorite XM channels (no PC required)
Mix recorded XM with your MP3s and CDs
Create your own unique and original playlists
Manage playlists and files without computers & internet
Hear a great tune, tag it and purchase it online at XM+Napster
Samsung Helix
Available Date: 1st Quarter 2006
Size: 2.2”W x 3.7”H x 0.6”D
Weight: 4.5 Oz.
Display: 1.7” Color TFT
MSRP: $399.99
Product Features:
Get XM’s 160 digital channels live on the go, in the home and in the car
Record your favorite XM channels (no PC required)
Mix recorded XM with your MP3s and CDs
Create your own unique and original playlists
Manage playlists and files without computers & internet
Hear a great tune, tag it and purchase it online with XM+Napster
Samsung neXus
Available Date: 1st Quarter 2006
Size: 1.9”W x 3.4”H x 0.7”D
Weight: 4.4 Oz.
Display: 1.5 in, 8-line
MSRP: $199.99 (512MB), $249.99 (1GB)
Product Features:
Dock your player to get XM’s 160 digital channels live in the home or car
Record your favorite XM channels at home or in the car (no PC required)
Includes XM Passport, which is compatible with other XM Ready products
Mix recorded XM with your MP3s and CDs
Create your own unique and original playlists
Manage playlists and files without computers & internet
Hear a great tune, tag it and purchase it online at XM+Napster
2006 Connect-and-Play Product ManufacturersPassport Compatible
Audiovox GPX Onkyo SamsungCrosley Harmon Kardon Orient Power Sharper ImageDenon JVC Pioneer SonyEton LGE Polk Audio Yamaha
Marantz SDI
Evolving XM Technology Smaller technology and devicesLower power consumption
Leads to integration into other consumer devices (MP3 players, cell phones, PDAs)
And expanding product features Today: artist & song title, stocks & sports ticker 1Q 2006: increased memory, MP3, WMA, internet compatibilityFuture: video, enhanced content downloading
Rapid Evolution of XM Portable Products
XM Advanced Applications/Service Capabilities
XM VideoStreaming or Cached Video
XM WeatherLinkHazardous driving condition alerts
XM NavTraffic with ParkingLinkReal-time traffic with parking space availability
XM VoiceCommandConversational speechinterface
XM DownloadsCached audio books from Audible.com
Key Marketing Strategy: Leverage Investments in Content and Technology to Drive Mass Market Penetration
Market to a range of important consumer segmentsMusic Enthusiasts
Sports Enthusiasts
Women
Drive cost-effective mass adoption by leveraging technology leadExploit growing enthusiasm for Portable Digital Music
Offer appealing hardware features and functionality
Maintain competitive pricing
Expand cost-effective distributionEnhance Aftermarket
Expand factory OEM
Build awareness and encourage trial
Loyalty and retention
Marketing to Important Consumer Segments
• Streaming sports scores• Sportscaster radio
− One-touch sports programming guide
− Preloaded presets (Home Plate, Home Ice, Sports Guide)
− Portable kit
• Most play-by-play− MLB, NHL, PGA, NASCAR, IRL,
World Cup, College• Original sports talk• Best names in sports talk
− Incl. ESPN, ESPN Radio, Fox Sports
Sports Enthusiasts
• New radio fit and finish options
• Ease of installation and portability
• Take 5 channel− Ellen DeGeneres− Good Morning America− Home & Garden Television− Tyra Banks− XM original talk
Women
• XM portable radios• Integrated XM/MP3
functionality• 5.1 Surround sound• Napster
• Artist Confidential• Exclusive artist shows• Largest, deepest playlists• Network Live JV
Music Enthusiasts
Hardware & TechnologyProgramming
Key Marketing Strategy: Leverage Investments in Content and Technology to Drive Mass Market Penetration
Market to a range of important consumer segmentsMusic Enthusiasts
Sports Enthusiasts
Women
Drive cost-effective mass adoption by leveraging technology leadExploit growing enthusiasm for Portable Digital Music
Offer appealing hardware features and functionality
Maintain competitive pricing
Expand cost-effective distributionEnhance Aftermarket
Expand factory OEM
Build awareness and encourage trial
Loyalty and retention
Leverage Demand For Portable Digital Music
Experienced strong demand for XM2go (portable) products in 2005
Helix and Inno will be the new standard in portable audio
Only XM offers live portable access to over 160 channels with MP3/WMA capability
Hear a song and save it at the push of a button
Nexus offers XM live in the car and the home, plus recorded content on the go
MP3/WMA formats combine with XM recorded content to provide custom playlist creation
$199 price points appeals to entry level market
Full Range of Products and Prices
$59.99XM Home Connect-And-Play System
$69-$99XM Car Direct System
$169.99XM Commander
$59.95AGT Sportscaster*
$79.99Audiovox XM Xpress*
$79.99Delphi XM Roady XT*
$149.99Delphi XM SkyFi2
$199.99Pioneer Airware
$224.99Delphi XM MyFi
$199.99Samsung neXus 25
$249.99Samsung neXus 50
$399.99Pioneer Inno
$399.99Samsung Helix
MSRPMP3XM2GoBoomboxAutoHomeXM Receiver
* Portable accessory kit available
Port
able
Plug
-And
-Pla
yC
ar &
Hom
eSt
ereo
Appeal to the Mass Market Lowering Barriers To Adoption
Maintain appealing subscription pricesFamily plan pricing increases revenue per householdGrow ARPU over time with enhanced programming and ancillary services
Hardware diversityRange of prices provide balanced subsidy portfolioEnhanced functionality creates new growth markets and hardware pricing opportunities
Ease of installation
Key Marketing Strategy: Leverage Investments in Content and Technology to Drive Mass Market Penetration
Market to a range of important consumer segmentsMusic Enthusiasts
Sports Enthusiasts
Women
Drive cost-effective mass adoption by leveraging technology leadExploit growing enthusiasm for Portable Digital Music
Offer appealing hardware features and functionality
Maintain competitive pricing
Expand cost-effective distributionEnhance Aftermarket
Expand factory OEM
Build awareness and encourage trial
Loyalty and retention
Enhance Distribution – Aftermarket
Early stage growth driven by Best Buy and Circuit City
Grow distribution in Wal-Mart and Target, and expand to other mass merchandisers (Costco, Staples, etc)
The right product for the right retailerElectronic Super Stores (Best Buy, Circuit City) Mass Merchants (Wal-Mart, Target, Costco, etc)Regional and IndependentDirect Sales
* Global Insight, November 2005
Total Vehicle Sales (CY 05 Est.)*
Other
XM is the exclusive OEM factory-installed partner with the largest and the fastest growing automakers
XM’s OEM partners include approximately 60% of the OEM market
Expand Distribution – OEM
54%
56%57%
59%60%
61%
2000 2001 2002 2003 2004 2005
Total XM Aligned
XM-Aligned Auto Makers Have Demonstrated Market Share Growth
Sources: based on GlobalInsight US Unit Sales by manufacturer
0
1,000
2,000
3,000
4,000
5,000
XM I
nsta
llatio
ns (
'000
s)
2002 2003 2004 2005 2006 2007 2008
Calendar Year
OtherHondaGM
Annual XM OEM Installations
Actual Forecast
Key Marketing Strategy: Leverage Investments in Content and Technology to Drive Mass Market Penetration
Market to a range of important consumer segmentsMusic Enthusiasts
Sports Enthusiasts
Women
Drive cost-effective mass adoption by leveraging technology leadExploit growing enthusiasm for Portable Digital Music
Offer appealing hardware features and functionality
Maintain competitive pricing
Expand cost-effective distributionEnhance Aftermarket
Expand factory OEM
Build awareness and encourage trial
Loyalty and retention
Current “Listen Large” Advertising Campaign Builds The XM Brand And Highlights Breadth Of Programming To Appeal To Core Segments
Music-Focused Program Integration
Promotion of Artist
ConfidentialOutdoor
Advertising
“Listen Large” TV Campaign
Airlines Car MakersRental CarsHotel/Retail
EntertainmentDistributors
Marketing Partnerships Facilitate Trial Of XM’s Programming And Subscriber Acquisition Opportunities
Key Marketing Strategy: Leverage Investments in Content and Technology to Drive Mass Market Penetration
Market to a range of important consumer segmentsMusic Enthusiasts
Sports Enthusiasts
Women
Drive cost-effective mass adoption by leveraging technology leadExploit growing enthusiasm for Portable Digital Music
Offer appealing hardware features and functionality
Maintain competitive pricing
Expand cost-effective distributionEnhance Aftermarket
Expand factory OEM
Build awareness and encourage trial
Loyalty and retention
Loyalty & RetentionMaintain low churn rate and high customer satisfaction
Dedicated retention teamsWinback programsRadio replacement programs
Improve OEM conversion rateLeverage strength of programmingBuyer experience at point-of-saleContact strategy during trial
Quality customer careSenior call center executive added to management teamMultiple vendor strategyEnhanced automated web and voice capabilities
OEM remarketingWith growth in XM awareness a significant number of used XM vehicle purchasers subscribe to XMCertified pre-owned programs provide new marketing opportunities
Create A Loyal Subscriber Base Of 9 Million In 2006
Maintain focus on key consumer segments
Keep barriers to entry low
Continue to leverage technology lead to offer superior hardware solutions
Maintain and leverage marketing and distribution partnerships
Pathway to 20 million by 2010
AGENDAProgramming Strategy Eric Logan
EVP, ProgrammingTechnology Strategy Stell Patsiokas
EVP, Technology & EngineeringMarketing Strategy Steve Cook
EVP, Sales & MarketingOEM Partners
Honda Charles KochManager, New Business Development & Planning
GM Rick LeeVP, Satellite Radio Services
Nissan Larry HaddadCorporate Manager, Cross Carline Product Planning
Hyundai Doug MottramNational Manager, Product Planning
Toyota Jon BucciCorporate Manager, Advanced Technology Department
XM Canada John BitoveChairman & CEO, CSR
Q&A