XM Radio 2004 Annual Report Download - page 2

XM Satellite Radio experienced phenomenal growth in 2004. As the market leader in satellite
radio, XM expanded its subscriber base by 135 percent in twelve months, adding more than 1.8
million new net subscribers for a year-end total of 3.2 million subscribers. During the first
quarter of 2005, XM surpassed the 3.7 million subscriber mark, which firmly positions the
company to exceed its 5.5 million subscriber goal by year’s end.
XM will continue to rapidly increase its subscriber base with initiatives launched in early 2005,
including the introduction of 16 channels devoted to Major League Baseball® – featuring play-
by-play of every team, all season long, and exclusive IndyCar® Series and PGA TOUR broadcasts.
XM successfully launched its award-winning, portable, hand-held Delphi MyFi™ XM2go™ radio
and recently introduced the first XM-Ready home entertainment products from Yamaha with XM “Connect-and-Play” technology. On the
automotive front, XM and Hyundai Motor America recently announced that XM will be standard, factory-installed equipment in Hyundai vehicles
beginning in 2006. XM also announced a change in its monthly rate from $9.99 to $12.95 effective April 2, 2005, but offered all existing subscribers,
who helped XM grow to this size, an opportunity to lock-in at the lower rate by signing up for a multi-year, pre-paid subscription plan.
XM’s strong start in 2005 follows the exceptional achievements of 2004, which include:
Outstanding Subscriber Gains: XM’s year-end total of 3.2 million subscribers included more than 713,000 net new subscribers added during the
fourth quarter of 2004 – the best quarter in XM history. A key factor in this rapid subscriber growth was a hugely successful holiday season. More
than 240,000 subscribers activated XM service during the last eight days of December, including over 50,000 on Christmas Day alone.
Expanding XM’s Lead in the New Vehicle Market: XM has a commanding lead in the new car market, with XM now available as a feature in more
than 120 vehicle models by GM, Honda, Toyota, Nissan, Volkswagen/Audi and Porsche for the 2005 model year. The preference for XM among
automakers grew considerably in 2004, capped by Toyota’s announcement in December to make XM its sole supplier of factory-installed satellite
radios and the Hyundai announcement last month. GM signed up its 1 millionth XM customer and expanded XM’s availability to more than 50
vehicle models. American Honda doubled its production of Honda and Acura vehicles equipped with XM, and introduced the revolutionary XM
NavTraffic™ service, in the Acura RL. XM NavTraffic, which delivers current traffic information to the vehicle’s navigation system, was also added as an
option to the 2005 Cadillac CTS. Honda, GM, Toyota, and Nissan each announced long-term agreements with XM for satellite-delivered data services,
such as in-vehicle messaging and XM NavTraffic.
Award-Winning Programming: XM debuted exclusive, original programming in 2004, including the Artist Confidential concert series and the
Starbucks Hear Music channel. XM significantly expanded its sports lineup with Major League Baseball,® and ACC, Big Ten and PAC-10 college sports
conferences. XM also launched new talk and news programming, including XM Public Radio featuring legendary journalist Bob Edwards, popular
radio personalities Opie & Anthony, plus MSNBC, Air America and America Right, and 21 dedicated channels of Instant Traffic & Weather.
Breakthrough Products Arrived at Retail: XM expanded its retail presence to more than 8,000 outlets including Best Buy, Circuit City, Wal-Mart and
most recently, Target. The XM technology advantage escalated dramatically in 2004 with the introduction of the Delphi MyFi XM2go radio, the first-
ever portable, hand-held satellite radio receiver. XM and Delphi also launched the SKYFi2™ and the Roady2,® the next-generation models of two of
the best-selling satellite radios. Audiovox unveiled its first plug-and-play XM radio, the XR9, Polk Audio debuted the first dedicated XM home stereo
tuner and Panasonic joined the long list of manufacturers to offer XM-Ready car stereos.
Strong Financial Performance: In 2004, XM continued to execute its business plan by growing revenues to $244 million from $92 million in 2003.
The company also lowered subscriber acquisition costs (SAC) to an average of $62 during 2004 from $75 during 2003. At December 31, 2004, XM
had total liquidity of $853 million including cash and cash equivalents plus untapped revolving credit and equity facilities. During 2004, XM lowered
its cost of capital through de-leveraging transactions which eliminated over $900 million in future interest, dividends, accretion and principal
payments as well as 27 million shares of incremental dilution. These improved financial measures combined with XM's continued business execution
were rewarded in the financial markets through a dramatic increase in the value of our public securities.
We thank all of you for your support in 2004, and we look forward to even greater success in 2005.
Sincerely,
Dear Shareholders
Many of the biggest names in news and talk are now on XM Satellite Radio. Bob Edwards,
“the voice of public radio” for over 30 years and Radio Hall of Fame inductee, now hosts a
morning interview show broadcast exclusively on XM Public Radio. Top-rated talk radio stars
Opie & Anthony bring their unique, off-beat style of comedy
to XM on the High Voltage channel. Other recent additions to
XM’s talk family include Dr. Laura, Air America’s Al Franken, G.
Gordon Liddy and sports commentator Tony Kornheiser, co-
host of ESPN’s highly-rated “Pardon the Interruption.”
According to Fortune Magazine, one of the reasons that XM is the satellite radio leader is its “superior
technology.“ With the introduction of the Delphi MyFi, the first XM2go personal, hand-held satellite
radio, XM launched an entirely new category of satellite radio products. The MyFi features a
rechargeable battery and the first-ever record and store feature. It was named one of the year’s best
tech products by USA Today and BusinessWeek, as well as the “Best of Innovations” award winner for the
portable audio category at the 2005 Consumer Electronics Show. This year, Pioneer and TAO will
introduce their own portable XM2go radios.
XM and Delphi also launched the SKYFi2 and Roady2 plug-and-play radios in 2004. The SKYFi2, which
received the Popular Science “Best of What’s New” award, offers the first satellite radio Pause and Replay
feature, so that favorite songs can be replayed for up to 30 minutes. The Roady2 is the smallest and
lightest satellite radio available, leading PC Magazine to name it “Editor’s Choice” in a five-star review.
Pioneer, Alpine, Dual, Sony and other major brands continue to carry a broad line of XM-Ready car
stereos. Several other manufacturers introduced XM radios in 2004, including Audiovox, with its first XM
plug-and-play radio; Panasonic, with a full line of XM-Ready car stereos; and Polk Audio, with the first
dedicated XM home stereo tuner. Yamaha became the first in a series of companies that will offer home
entertainment products with the new XM “Connect-and-Play” technology, which allows the consumer
to receive XM simply by plugging a digital antenna into their entertainment system, with no other
accessories needed.
XM Satellite Radio
Annual Report
2004
The Most Advanced Satellite Radio Products
Award-Winning Radios and Technology
News and Talk All-Stars
Bob Edwards, Opie & Anthony, Tony Kornheiser and More... Exclusively on XM
The Most Sports Play-by-Play in Satellite Radio
XM Adds Major League Baseball®, College Sports, IndyCar® Series and the PGA TOUR
Gary Parsons
Chairman
Hugh Panero
President and CEO
Gary Parsons
Chairman Hugh Panero President and CEO
XM is Now Available in Over 120 New Vehicles
Plus Airlines and Rental Vehicles
XM is the leader in satellite radio and data services for the automobile market through partnerships with
GM, Honda, Toyota, Nissan, Volkswagen/Audi, Porsche and in 2006, Hyundai. XM is also available in Avis,
National and Alamo rental cars, on AirTran Airways, and later this year, on JetBlue Airways.
In 2004 and early 2005, XM added 27 new sports channels to its lineup. XM is proud to be the Official
Satellite Radio Network of Major League Baseball,® with play-by-play for every team, all season long.
MLB Home Plate,™ XM channel 175, is the world’s only 24-hour Major League Baseball® news and talk
radio channel with original programming hosted by baseball legend Cal Ripken, Jr., Bill Ripken, Kevin
Kennedy, Rob Dibble, Mark Patrick and more. XM is also the exclusive satellite radio service of ACC,
Big Ten and PAC-10 football and men’s and women’s basketball. Recently, XM announced exclusive
satellite radio coverage of the IndyCar® Series and the PGA TOUR, beginning this season. And XM
expanded its NASCAR® programming with in-race driver audio, so listeners can follow many of the
drivers as they talk to their teams.
Cal Ripken, Jr.
Bob Edwards
Opie & Anthony