XM Radio 2008 Annual Report Download - page 6

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(All dollar amounts referenced in this Section are in thousands, unless otherwise stated)
Executive Summary
We broadcast in the United States our music, sports, news, talk, entertainment, traffic and weather channels for
a subscription fee through our proprietary satellite radio systems — the SIRIUS system and the XM system. On
July 28, 2008, our wholly owned subsidiary, Vernon Merger Corporation, merged (the “Merger”) with and into XM
Satellite Radio Holdings Inc. and, as a result, XM Satellite Radio Holdings Inc. is now our wholly owned subsidiary.
The SIRIUS system consists of three in-orbit satellites, approximately 120 terrestrial repeaters that receive and
retransmit signals, satellite uplink facilities and studios. The XM system consists of four in-orbit satellites, over 700
terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers can also
receive certain of our music and other channels over the Internet.
Our satellite radios are primarily distributed through automakers (“OEMs”); through more than 19,000 retail
locations; and through our websites. We have agreements with every major automaker to offer SIRIUS or XM
satellite radios as factory or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also offered to
customers of rental car companies, including Hertz and Avis.
As of December 31, 2008, we had 19,003,856 subscribers. Our subscriber totals include subscribers under our
regular pricing plans; discounted pricing plans; subscribers that have prepaid, including payments either made or
due from automakers for prepaid subscriptions included in the sale or lease price of a new vehicle; active SIRIUS
radios under our agreement with Hertz; active XM radios under our agreement with Avis; subscribers to SIRIUS
Internet Radio and XM Internet Radio, our Internet services; and certain subscribers to our weather, traffic, data and
video services.
Our primary source of revenue is subscription fees, with most of our customers subscribing on an annual, semi-
annual, quarterly or monthly basis. We offer discounts for pre-paid and long-term subscriptions as well as discounts
for multiple subscriptions on each platform. In 2009, we increased the discounted price for additional subscriptions
from $6.99 per month to $8.99 per month. We also derive revenue from activation fees, the sale of advertising on
select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our
Backseat TV, data and weather services.
In certain cases, automakers include a subscription to our radio services in the sale or lease price of vehicles.
The length of these prepaid subscriptions varies, but is typically three to twelve months. In many cases, we receive
subscription payments from automakers in advance of the activation of our service. We also reimburse various
automakers for certain costs associated with satellite radios installed in their vehicles.
We also have an interest in the satellite radio services offered in Canada. Subscribers to the SIRIUS Canada
service and the XM Canada service are not included in our subscriber count.
On August 5, 2008, Sirius Satellite Radio Inc. changed its name to Sirius XM Radio Inc. XM Satellite Radio
Holdings Inc., together with its subsidiaries, is operated as an unrestricted subsidiary under the agreements
governing our existing indebtedness. As an unrestricted subsidiary, transactions between the companies are
required to comply with various contractual provisions in our respective debt instruments.
Unaudited Pro Forma Information
The following discussion of our pro forma information includes non-GAAP financial results and measures that
assume the Merger occurred on January 1, 2006. These financial results exclude the impact of purchase price
accounting adjustments and refinancing transactions. We believe this non-GAAP financial information provides
meaningful supplemental information regarding our operating performance and is used for internal management
purposes, when publicly providing the business outlook, and as a means to evaluate period-to-period comparisons.
Please refer to the footnotes (pages 26 to 44) following our discussion of results of operations for the definitions and
further discussion of usefulness of such non-GAAP financial measures.
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