XM Radio 2006 Annual Report Download - page 3

Hugh Panero
CEO
Nate Davis
President & COO
Gary Parsons
Chairman
2006 ANNUAL REPORT
Hugh Panero
CEO
Nate Davis
President & COO
Gary Parsons
Chairman
Retail Strategy Boosted by New Ad Campaign: XM continues to work at driving more subscriptions from the retail segment.
Retail sales of aftermarket radios are a key component in profitably growing XM subscribers. But the goal of growing retail
sales in 2006 was, of course, balanced with our goal of reaching positive cash flow in the fourth quarter. With new packaging
and merchandising, as well as XM’s new brand advertising, we made improvements in marketing our service and devices. In
fact our ad campaign was named among the best ads of the year by USA Today and Adweek. While discounts were not as
steep as in previous years and the number of new radios sold was not as high as in 2005, our percentage of radio sales that
converted into actual subscriptions increased in 2006, helping to improve our financial performance, as reflected in our lower
cost per gross additional subscriber. We added nearly 1.8 million retail gross subscribers and over 811,000 retail net
subscribers in 2006. This will be a key area of focus in 2007.
XM Expands Programming Choices and Data Services: The XM program lineup grew to more than 170 channels in 2006.
Oprah Winfrey launched the talk and lifestyle radio channel “Oprah & Friends.
™” XM premiered Bob Dylan’s weekly show
“Theme Time Radio Hour” to rave review and country legend Willie Nelson took the reins of XM’s traditional country music
channel “Willie’s Place.” College sports fans celebrated as XM added Big East games in 2006 and SEC games that start in
2007. Meanwhile, XM data services gained in popularity as Lexus, Nissan, and Infiniti became the latest automakers to offer
the real-time traffic navigation service XM NavTraffic,
®and XM unveiled plans to offer real-time weather tracking for vehicles
and portable navigation devices.
New Satellite System Completed: XM began broadcasting through its XM-4 satellite (known as “Blues”) in December 2006.
The combination of “Rhythm,” the XM-3 satellite launched in February 2005, and “Blues” provides a solid foundation to deliver
a full complement of digital broadcasts for at least the next 15 years.
In conclusion, XM’s balance sheet and liquidity were strongly enhanced in 2006, and our available funds significantly
increased with the recent XM-4 sale-leaseback. Subscriber additions in the automotive channel are expected to grow as car-
makers ramp up production of XM-equipped vehicles. The retail segment remains important, and we are attacking it with
improved messaging focused on our strength in programming content.
While we look forward to closing our merger with Sirius later this year, even without a merger, XM is well positioned to be a
strong and enduring leader in the audio entertainment marketplace.