XM Radio 2009 Annual Report Download - page 120

channel increased 224,173, or 103%, in the three months ended December 31, 2009 compared to 2008. Net
subscriber additions in our retail channel decreased 68,821, or 52%, in the three months ended December 31, 2009
compared to 2008. Deactivation rates for self-pay subscriptions in the quarter increased to 2.0% per month
reflecting reductions in consumer discretionary spending, subscriber response to our increase in prices for multi-
subscription accounts, channel line-up changes in 2008, the institution of a monthly charge for our streaming
service and the introduction of the U.S. Music Royalty Fee.
We ended the fourth quarter of 2008 with 19,003,856 subscribers, an increase of 10,682,071 subscribers, or
128%. The increase was primarily a result of the additional subscribers acquired in the Merger. Net subscriber
additions decreased 571,364, or 87%, in the three months ended December 31, 2008 compared to 2007. Net
subscriber additions in our OEM channel decreased 225,995, or 51%, in the three months ended December 31, 2008
compared to 2007. Net subscriber additions in our retail channel decreased 343,295, or 162%, in the three months
ended December 31, 2008 compared to 2007. Deactivations include the results of XM in the quarter. Deactivations
for self-pay subscriptions increased slightly to 1.8% per month; non-conversions of subscribers in paid promotional
trial periods increased as production penetration rates increased.
ARPU. For the three months ended December 31, 2009 and 2008, total ARPU was $10.81 and $10.30,
respectively. The increase was driven by the revenues earned for “Best of” programming, increased rates on multi-
subscription packages and internet subscriptions.
For the three months ended December 31, 2008 and 2007, total ARPU was $10.30 and $10.05, respectively.
The increase was driven by the start of our “Best of” package sales and by a lower mix of prepaid subscriptions from
automakers in vehicles which have not sold through to customers. These factors were partially offset by an increase
in the mix of discounted OEM promotional trials, subscriber win-back programs, second subscribers, the effect of
purchase price accounting adjustments and a decline in net advertising revenue per average subscriber as subscriber
growth exceeded the growth in ad revenues.
We expect ARPU to fluctuate based on promotions, rebates offered to subscribers and corresponding take-
rates, plan mix, subscription prices, advertising sales and the identification of additional revenue from subscribers.
SAC, As Adjusted, Per Gross Subscriber Addition. For the three months ended December 31, 2009 and 2008,
SAC, as adjusted, per gross subscriber addition was $55 and $59, respectively. The decrease in SAC was primarily
due to lower OEM subsidies, lower chip set costs and lower aftermarket acquisition costs, partially offset by higher
aftermarket inventory related charges compared to the three months ended December 31, 2008.
For the three months ended December 31, 2008 and 2007, SAC, as adjusted, per gross subscriber addition was
$59 and $87, respectively. The decrease was primarily driven by lower retail and OEM subsidies due to better
product economics, the effect of purchase price accounting adjustments and improved equipment margins.
We expect SAC, as adjusted, per gross subscriber addition to decline as the costs of subsidized components of
SIRIUS and XM radios decrease in the future. Our SAC, as adjusted, per gross subscriber addition will be impacted
by our increasing mix of OEM additions and the effects of purchase price accounting adjustments.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the three months ended
December 31, 2009 and 2008, customer service and billing expenses, as adjusted, per average subscriber was $1.06
and $1.18, respectively.
For the three months ended December 31, 2008 and 2007, Customer service and billing expenses, as adjusted,
per average subscriber decreased $1.18 and $1.23, respectively. The decline was primarily due to efficiencies across
a larger subscriber base.
We expect customer service and billing expenses, as adjusted, per average subscriber to decrease on an annual
basis as our subscriber base grows due to scale efficiencies in our call centers and other customer care and billing
operations.
Adjusted Income (Loss) from Operations. For the three months ended December 31, 2009 and 2008, our
adjusted income (loss) from operations was $170,566 and $72,155, respectively. Adjusted income (loss) from
operations was favorably impacted by an increase of 9%, or $53,990, in revenues and a decrease of 8%, or $44,421,
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