The tally--201,500 subscribers as of the third quarter, with an expected 350,000 by Dec. 31--may be encouraging, but analysts said XM Satellite Radio and its only competitor, Sirius Satellite Radio, need to stave off growing amounts of debt from building their radio networks--and remain in business.
Both companies, which sell satellite radios and programming, say they need to have four million subscribers each to become profitable.
XM, launched in 1998, and Sirius Satellite, which debuted in July, say they are in financial jeopardy. XM Satellite Radio told the Securities and Exchange Commission (SEC) that it might run out of money by the first quarter of 2003 and discontinue operations. Sirius Satellite reported to the SEC in mid-August that it needs to raise $300 million by mid-2003 or it might file for bankruptcy protections.
"(XM and Sirius will) make an awfully good business once they've gone bankrupt and come out with lower debt loads," said analyst Will Strauss of Forward Concepts, a consulting company that specializes in the wireless industry, in reaction to Tuesday's XM announcement.
The company is expecting a new flush of subscribers in December, when it begins to sell a portable satellite radio calledand when the 400,000 GM cars with XM satellite receivers as an option start hitting showroom floors, XM Satellite said.
Satellite radios use a constellation of orbiting satellites instead of the land-based antennae used by all FM/AM radio stations. But unlike traditional radio stations, satellite radio companies charge monthly subscriptions. For example, XM charges $10 for programming, and Sirius charges $13.
XM Satellite said it hit its projections for the fourth straight quarter despite an unusually soft consumer-electronics business that quarter.
Sirius Satellite had about 8,000 subscribers as of its third quarter--about 10,000 less than it expected. The company plans to give an update on its subscriber numbers in November.