Our adage that one should never, ever trust what media conglomerates promise the public, rings true in the case of this proposed merger. One minute they promise competition, diverse programming, pricing, etc. The next minute, the big media skybabies are asking for a public bailout. Here are excerpts from both Sirius and XM’s most recent annual 10 K report to the SEC. Doesn’t sound like they were so desperate that long ago. As lawmakers, regulators, journalists, investors, retirement funds, subscribers and the public examine the deal—keep in mind the financial promises made, and broken, by AOL, Time Warner, Enron, Worldcom, etc. These media deals require serious scrutiny (that means the Congress better make sure those Anti-trust folks at the DOJ actually protect the public this time). Keep in mind too that serious public interest commitments—enforceable by policy and rigorous oversight—are the minimum requirements for any deal to even be considered.
Excerpt from Sirius Satellite Radio (SIRI) 10 K to SEC, 3/16/06:
“In 2005 we achieved significant financial and operational milestones, including:
• Satellite radio market share parity in the retail channel—retail market share of 54% for the full-year and 60% for the fourth quarter, according to the NPD Group;
• rapid acceleration in OEM subscriber additions;
• extended long-term exclusive agreements with DaimlerChrysler, Ford and BMW;
• material reduction in subscriber acquisition costs (SAC) per gross subscriber addition;
• new programming agreements with Martha Stewart, Richard Simmons, the NBA, Adam Curry’s Podcast Show and NASCAR;
• introduction of the SIRIUS S50, the satellite radio industry’s first wearable device with MP3/WMA capabilities;
• enhanced financial position and liquidity through a $500,000 debt offering of our 9 5 ℠8 % Senior Notes due 2013;
• redeemed our outstanding 15% Senior Secured Discount Notes due 2007 and our 14 1 ℠2 % Senior Secured Notes due 2009; and
• launched SIRIUS music on the Sprint wireless network, an industry first.
On January 9, 2006, Howard Stern moved his radio show to SIRIUS from terrestrial radio as part of two channels programmed by Howard Stern and us.
Subscribers:
As of December 31, 2005, we had 3,316,560 subscribers compared with 1,143,258 subscribers as of December 31, 2004. Our subscriber totals include subscribers under our regular pricing plans, as well as subscribers currently in promotional periods; subscribers that have prepaid, including payments received from automakers for prepaid subscriptions included in the sale or lease price of a new vehicle; and active SIRIUS radios under our agreement with Hertz…. Programming
We offer a dynamic programming lineup including 69 channels of 100% commercial-free music and 64 channels of sports, news, talk, entertainment, traffic, weather and data. Our programming lineup changes from time to time as we strive to attract new subscribers, to create content that appeals to a broad range of audiences and to satisfy our existing subscriber base.
Since the beginning of 2005, we have expanded our lineup of exclusive channels and announced plans to introduce new exclusive channels, including:
• “Howard Stern 100 and 101,†two channels programmed by Howard Stern featuring The Howard Stern Show (debuted January 2006) and the innovative Howard 100 News (launched November 2005), as well as other unique programming and personalities;
• “Martha Stewart Living Radio,†a channel featuring guidance and advice from Martha Stewart and lifestyle experts on all aspects of good living, including cooking, decorating, fitness, homekeeping and projects for parents and kids (launched November 2005);
• “Cosmo Radio,†a channel featuring a diverse array of topics, including love, relationships, beauty, style, health, entertainment and fashion produced with the creative team at Cosmopolitan Magazine (to launch in March 2006);
• “Playboy Radio,†an adult entertainment channel originating from Playboy’s studios in Los Angeles and featuring Playboy personalities and programming (to launch in March 2006);
• “BBC Radio 1,†the influential and highly acclaimed music channel from the BBC in the UK (launched August 2005);
• “Radio Margaritaville,†a channel produced by Jimmy Buffett featuring a variety of music as well as broadcasts of Buffett concerts (launched June 2005);
• “Radio Korea,†a channel featuring news, entertainment and music programming which is broadcast in Korean (launched August 2005); and
• “Blue Collar Comedy,†a channel featuring comedians Jeff Foxworthy, Larry the Cable Guy, Bill Engvall and many others (to launch in March 2006).
As part of our programming strategy, we plan to offer special feature channels from time-to-time focused on the works of specific artists and of interest to other audiences.
Music Channels
Our music channels offer nearly every music genre—from classic rock, pop, heavy metal and hip-hop to country, dance, jazz, Latin and classical. Within each genre we offer a breadth of formats, styles and recordings, many of which are not generally available on terrestrial radio.
Our music channels are broadcast commercial-free. Our channels are programmed and hosted by a team of experts in their fields, including musical performers and other unique personalities. Each channel is operated as an individual radio station, with a distinct format and branding.
Sports, News, Entertainment and Talk Channels
In addition to our music programming, we currently offer 64 channels of news, sports, talk, entertainment, traffic, weather and data, most of which include commercial advertising.
Sports . Live play-by-play sports is an important part of our programming strategy. We are the Official Satellite Radio Partner of the National Football League, with exclusive rights to use the NFL “shield†logo and collective NFL team trademarks. We carry all NFL regular season, pre-season and post-season games. In most cases, we carry both the home and visiting team game broadcasts, and in 2005, we added Spanish language broadcasts of select games. We also carry the Super Bowl, which we broadcasted in 2006 in seven foreign languages. We also produce and broadcast “SIRIUS NFL Radio,†an around-the-clock exclusive channel of NFL content for our subscribers. Our agreement with the NFL expires at the end of the 2010-2011 NFL season.
In February 2005, we entered into an agreement with NASCAR to broadcast live all NASCAR Nextel Cup Series, NASCAR Busch Series and NASCAR Craftsman Truck Series races over a five-year period starting in 2007. We will create a new around-the-clock channel of NASCAR-related programming and will become the Official Satellite Radio Partner of NASCAR with exclusive trademark and marketing rights and the right to sell advertising time on the NASCAR channel and during races.
In November 2005, we became the Official Satellite Radio Partner of the NBA and in December 2005 added NBA Radio, a talk channel devoted to the NBA. We transmit live play-by-play broadcasts of more than 1,000 NBA games during each season, including the NBA playoffs and The Finals.
We also have the right to broadcast all games of the NCAA Division I men’s basketball tournament through 2007. We also broadcast live play-by-play broadcasts of more than 1,000 NHL games each season, as well as the Stanley Cup playoffs and finals. We are the Official Satellite Radio Partner of the NHL through the 2006-2007 season.
In 2005, we added the Ivy League conference schools to our extensive live play-by-play coverage of college football and basketball games. Our broadcasts include football, basketball and other sports from schools in 20 NCAA Division I conferences.
In 2005, we became the Official Satellite Radio Partner of Wimbledon, offering live coverage of matches as well as commentary of the entire tournament. As the official satellite radio broadcaster of Barclays English Premier League soccer, we have the right to air matches of the top 20 clubs in the United Kingdom, including Manchester United, through 2007.
The Howard Stern Show. On January 9, 2006, Howard Stern moved his radio show to SIRIUS from terrestrial radio as part of two channels being programmed by Howard Stern and us. Our financial obligations under our agreement with Stern consist of both fixed and incentive payments in cash and common stock, and are substantial. Our agreement with Stern will expire on December 31, 2010.
Other News, Talk and Entertainment. We offer a range of national, international and financial news channels, including FOX News, ABC News & Talk, CNN, NPR, CNBC and Bloomberg. Our talk radio offerings feature many popular talk personalities, including Howard Stern, Martha Stewart, Richard Simmons, Jim Breuer and Senator Bill Bradley, and represent a diverse spectrum of opinions, on channels such as Sirius Left, Sirius Stars, NPR Talk and Sirius OutQ. We also offer an array of sports talk and variety programming, including ESPN Radio, ESPN News, ESPN’s Spanish language programming, ESPN Deportes, three comedy channels, MAXIM Radio, children’s programming, including Radio Disney and Kid’s Stuff, and international programming.
During 2005, we continued to add to the quality and breadth of our news, talk and entertainment offerings, with the addition of:
• CNN Headline News;
• “Christian Talk Channel,†a channel of faith based programming from the Southern Baptist Convention; and
• “Radio Korea,†a channel featuring news, entertainment and music programming, which is broadcast in Korean.
Traffic and Weather. We offer continuous, local traffic reports for 20 metropolitan markets throughout the United States. We broadcast these reports, together with local weather reports from The Weather Channel, on eleven of our channels, two of which are devoted to single metropolitan areas (New York and Los Angeles). We also broadcast national and regional weather reports produced by The Weather Channel on our weather and emergency channel.â€
Here’s what XM Satellite Radio filed at the SEC on March 16, 2006 (XMSR, 10K annual report):
“We are America’s leading satellite radio service company, providing music, news, talk, information, entertainment and sports programming for reception by vehicle, home and portable radios nationwide and over the Internet to over 6 million subscribers. Our basic monthly subscription fee is $12.95. We believe XM Radio appeals to consumers because of our innovative and diverse programming, nationwide coverage, our many commercial-free music channels and digital sound quality.
The full channel lineup as of January 31, 2006 includes over 160 channels, featuring 67 commercial-free music channels; 34 news, talk and entertainment channels; 39 sports channels; 21 Instant Traffic & Weather channels; and one emergency alert channel. We broadcast from our studios in Washington, DC, New York City, including Jazz at Lincoln Center, and the Country Music Hall of Fame in Nashville. We continue to add new and innovative programming to our core channel categories of music, sports, news, talk and entertainment. Also included in the XM radio service, at no additional charge, are the XM customizable sports and stock tickers available to users of the latest receivers such as SkyFi 2, XM2go and Roady XT.
XM offers commercial-free music channels covering genres including Decades, Country, Pop & Hits, Christian, Rock, Hip-Hop/Urban, Jazz & Blues, Lifestyle, Dance, Latin, World and Classical. Our programming includes the most popular hits, as well as deep and eclectic playlists. XM’s original exclusive music programming features our Artist Confidential series showcasing performances and interviews from artists such as Paul McCartney, Coldplay, Santana, Phil Collins and Bonnie Raitt in our studios in front of a live audience. In total, we have hosted more than 1,000 live performances at XM. We also offer music programming featuring celebrity talent. Bob Dylan will host a new music show beginning in Spring 2006. We recently named Snoop Dogg executive producer of our classic hip-hop channel The Rhyme. Other shows include Tom Petty’s Buried Treasure and Quincy Jones’ From Bebop to Hip-Hop. XM also broadcasts live from major music events. In July 2005, we dedicated seven XM channels to broadcast more than 55 hours of concert performances from the global concert event, LIVE 8 (held in London, Paris, Rome, Berlin, Philadelphia and Toronto).
XM currently provides over 5,000 live sports programming events annually and the most sports talk and live sports coverage in radio. We are the Official Satellite Radio Network of Major League Baseball ® (“MLBâ€) and offer our 24×7 MLB Homeplate channel, as well as play-by-play channels, and Spanish-language broadcasts. We recently announced a multi-year agreement to become the exclusive satellite radio network of the National Hockey League ® beginning with the 2007-2008 season. We broadcast college football and men’s and women’s basketball from the Atlantic Coast, Pacific-10, Big East and Big Ten Conferences. During 2005, we launched our PGA Tour ® Channel and XM Deportivo, which features Hispanic sports and the 2006 FIFA World Cupâ„¢. Motor sports coverage includes our NASCAR channel and the Indy Racing League races. New shows in 2006 will feature NASCAR drivers Jimmie Johnson and Dale Earnhardt, Jr. We also offer US Open Tennis coverage. Our sports talk lineup is complemented by ESPN and Fox Sports.
In February 2006, we announced an exclusive, three-year, $55 million agreement to launch the new Oprah & Friends channel, which will feature a weekly radio show with Oprah Winfrey and Gayle King. This channel will debut in September 2006 and include regular segments hosted by personalities from The Oprah Winfrey Show and O, The Oprah Magazine. Oprah & Friends will complement our current women’s interest channel Take Five, which features the Ellen DeGeneres Show, the Tyra Banks Show, the Food Network, HGTV and, in 2006, the Good Morning America Radio Show.
We offer premium news/talk programming including Fox News, Fox Talk, CNN, CNN Headline News, ABC News & Talk and MSNBC. We feature business news from CNBC and Bloomberg as well as public affairs programming on our XM Public Radio channel, BBC Worldservice and C-SPAN. We are the exclusive satellite radio provider of Air America, featuring Al Franken. We serve the African American audience with The Power and the Hispanic audience with CNN en Español. We offer three comedy channels as well as the High Voltage channel, which features The Opie & Anthony Show.
Our 21 Instant Traffic & Weather channels are powered by Traffic.com and The Weather Channel and report continuously updated information from major markets such as New York, Los Angeles, Chicago and Washington, DC.
Our target market is the over 230 million registered vehicles and over 110 million households in the United States. In addition, some of our recent and upcoming product offerings focus on the portable and wearable audio markets. Our service has achieved broad listener appeal across subscribers of different ages.
Broad distribution of XM Radio through the new automobile market is a central element of our business strategy. We are the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda/Acura, Toyota/Lexus/Scion, Hyundai, Nissan/Infiniti, Porsche, Suzuki, and Isuzu. XM Radio is available in more than 130 different vehicle models for model year 2006. Through an exclusive arrangement with us, General Motors, an investor in our company, currently offers XM Radio in various makes and models, including passenger cars, light trucks and SUVs, and for the 2006 model year expanded the XM Radio factory-installed option to over 55 models, including Buick, Cadillac, Chevrolet, GMC, HUMMER, Pontiac, Saab and Saturn brand vehicles. In September 2005, General Motors announced that it had produced its three millionth vehicle with factory-installed XM Radio. Honda, also an investor in our company, currently offers XM Radio in certain Honda and most Acura models as a factory-installed feature and in other Honda models as a dealer-installed option. In March 2005, we and Hyundai Motor America announced that it will be the first automaker to launch XM as standard, factory-installed equipment in every vehicle across its entire model line-up. Nissan/Infiniti, Audi and Porsche offer XM Radio as a factory-installed or dealer-installed option in certain vehicle models while Toyota/Lexus/Scion and Suzuki currently offer XM Radio as a dealer-installed option. Lexus will introduce their first vehicle with factory-installed XM Radio later in 2006, and the Scion xB Release Series 3.0, launched in February 2006, is the first Toyota Motor Sales vehicle to come standard with XM Radio. In addition, in 2005, Nissan/Infiniti chose XM as its exclusive supplier of satellite radio and satellite-delivered data and telematics services, such as in-vehicle messaging and XM NavTraffic beginning in the 2008 model year, with the factory-installed data services beginning in 2006 on select models. Also, beginning in the 2006 model year, Harley-Davidson became the first manufacturer of motorcycles to offer XM Radio as an option on all six bikes in its touring lineup, including as standard equipment on their Screamin’ Eagle Ultra Classic Electra Glide.
XM radios are available in the aftermarket under the Delphi, Pioneer, Alpine, Audiovox, Tao, Sony, Polk and etón/Grundig brand names at national consumer electronics retailers, such as Best Buy, Circuit City, Wal-Mart and other national and regional retailers. These mass market retailers support our expanded line of car stereo, home stereo, plug and play and portable handheld products.
XM radios incorporate a proprietary chipset, designed by our own technology and innovation team in conjunction with others, to decode the signal from our satellites and repeaters. Our advancing chipset design has spawned a broad array of XM Radio products, including units significantly smaller and much less expensive than the first generation models. Many XM radios now feature customizable sports and stock tickers as well as TuneSelect, which notifies the listener when a favorite artist or song is playing on XM. The latest line of XM radios includes handheld units with memory features.
We have created brand awareness through the many ways in which potential subscribers can experience the XM service. The XM radios in General Motors, Honda/Acura and Porsche vehicles come pre-activated with service so dealers can offer the XM experience to new car prospects during vehicle test drives and to new car purchasers during the vehicle delivery process. We market our service online through arrangements with Napster and America Online (“AOLâ€). XM Radio also is available in many AVIS, Alamo, National and Zipcar rental cars and on AirTran and JetBlue airplanes. We have an exclusive multi-year strategic marketing alliance with Starbucks, which include the Starbucks Hear Music channel on XM and a multi-artist music compilation CD series.
In addition to our over 160 channel subscription service, our subscribers have online access to more than 85 of our channels over the Internet. We also offer a new online service through our arrangement with AOL, and provide online music purchase and playlist management capability with Napster. On November 15, 2005, 72 channels of XM’s music, children’s, and talk programming was made available to DIRECTV ® ’s over 14.6 million customers. In addition to music channels, we also offer DIRECTV ® ’s customers XM’s MLB Home Plate talk radio channel and XM’s High Voltage channel, featuring talk radio stars Opie and Anthony.
XM has also been the leader in satellite-based data services with a range of products and services, using specialized hardware that expands the potential XM market opportunity. XM NavTraffic, the nation’s first satellite traffic data service, provides continuously updated real-time traffic information 24/7 on traffic incidents and flow (average speed) information for 22 major metropolitan cities, expanding to 31 in early 2006, across the United States for a monthly fee and is available today as a feature on the Acura RL, the Cadillac CTS, and various after market products made by companies such as Garmin, Alpine and Pioneer. For marine and aviation, the XM WX satellite weather service provides real-time graphical weather data for advanced situational awareness of prevailing weather conditions. Certified avionics from Garmin, Rockwell Collins, and Avidyne enable the XM WX service as a factory available option on over 80 percent of all new light aircraft built today.
We transmit the XM Radio signal throughout the continental United States from our two satellites (“XM-1â€) and (“XM-2â€), collocated at 115° West Longitude, and our third satellite (“XM-3â€), launched in February 2005 and placed into orbit at 85° West Longitude. In the second half of 2006, we plan to launch another satellite (“XM-4â€) to replace the collocated XM-1 and XM-2 satellites, which will then become in-orbit spares for a limited period of time. We also have a network of approximately 800 terrestrial repeaters, which receive and re-transmit the satellite signals in 60 markets to augment our satellite signal coverage where it might otherwise be affected by buildings, tunnels or terrain. We hold one of only two licenses issued by the Federal Communications Commission to provide satellite digital audio radio service in the United States.
In November 2005, Canadian Satellite Radio, operating under the name XM Canada, our exclusive Canadian licensee, launched its satellite radio service in Canada for a monthly subscription fee of CDN$12.99. XM Canada’s 85 channel line-up includes XM’s digital-quality commercial-free music, exclusive Canadian channels highlighting Canadian artists, National Hockey League ® play-by-play coverage of more than 40 games per week, and news/talk. For a further discussion of XM Canada, see the caption entitled “ Strategic Transactions in 2005 .â€
The Demand for Satellite Radio
Based on our experience in the marketplace to date, as well as market research, we believe that there is a significant demand for our satellite radio service.
Consumer response to our service has been positive. As of December 31, 2005, we had over 5.9 million subscribers. According to Greystone Communications, we have one of the fastest growing consumer electronics products having reached 5 million subscribers faster than new technology introductions such as cable television, Internet, cell phones and MP3 players…
Hallmarks of our satellite radio channel lineup include:
Broad range of music genres (commercial free) and live radio entertainment . We offer numerous channels of music-oriented entertainment. Each channel is programmed in its own distinct format, many generally not previously available on radio, and some newly created by us to appeal to emerging listening tastes.
Musical formats unavailable in many terrestrial radio markets . XM Radio offers many music formats that are popular but currently unavailable in many markets on radio. More than 70 percent of all Americans listening to radio are only listening to six programming formats: news/talk/sports, adult contemporary, contemporary hits, urban, Hispanic and country. Furthermore, the number of radio stations available to many consumers in their local market is limited in comparison to the over 160 channels we offer on a nationwide basis. We offer many types of music with significant popularity, as measured by recorded music sales and concert revenues, which are unavailable in many traditional AM/FM radio markets. Such music includes classical recordings and popular blues music that have retail appeal but are not commonly played on traditional AM/FM radio. We have channels devoted to all of these formats and many other popular musical styles that are not currently heard in many small and medium sized markets, such as heavy metal, modern electronic dance, disco and jazz.
Superserve popular music formats . We offer more specific programming choices than traditional AM/FM radio generally offers for even the most popular listening formats. For example, on traditional AM/FM radio oldies music is often aggregated on a single format. We segment this category by offering several channels devoted to the music of each decade from the 1940s to the 1990s. We also offer seven hip-hop/urban formats and seven country formats and thirteen rock formats.
Live Music Programming . We offer diverse original content and live programming for our listeners. Our Artist Confidential series has featured performances from artists such as Paul McCartney, Coldplay, Santana, Phil Collins and Bonnie Raitt live in front of a studio audience in our XM Performance Theater. In 2005, we offered our listeners the most comprehensive coverage of the LIVE 8 performances from around the world with more than 55 hours of coverage. The LIVE 8 broadcast kicked off XM’s month-long celebration of live music, JULIVE. We also offered live broadcasts of the 20th Anniversary Farm Aid Concert as well as several hurricane Katrina benefit concerts. Our Network LIVE joint venture with AOL and AEG provided live concerts for broadcast on XM with artists such as Madonna, Bon Jovi and Keith Urban.
Sports Programming . XM’s sports category provides the most sports talk and live sports coverage in radio. Our lineup features Major League Baseball ® , National Hockey League ® , NASCAR and motor sports, college sports from the Atlantic Coast Conference, Pacific-10 Conference, Big East Conference and Big Ten Conference, PGA Tour ® , XM Deportivo including the 2006 FIFA World Cup™, and is complemented by ESPN Radio, ESPN News, Fox Sports, and Sporting News. ESPN Radio offers coverage of certain NBA play-by-play as well as the college football Bowl Championship Series play-by-play.
We are the Official Satellite Radio Network of Major League Baseball ® (“MLBâ€) and offer our 24×7 MLB Home Plate channel, as well as play-by-play channels, and Spanish-language broadcasts. Through the 2012 baseball season, we will carry both the regular season and the post-season MLB schedule of games, including the World Series. Our MLB Home Plate channel features live call-in programs hosted by former players and personalities such as Cal Ripken, Kevin Kennedy, and Rob Dibble, classic MLB games and other archived MLB material.
In 2005, we announced a multi-year agreement with the National Hockey League ® (“NHLâ€) to broadcast NHL games live and to become the Official Satellite Radio provider of the NHL. The 10-year, $100 million agreement makes XM the exclusive satellite radio network of the NHL beginning with the 2007-2008 season. In addition to providing live play-by-play coverage of more than 1,000 games per season, we have introduced Home Ice, an all hockey talk channel dedicated to providing an inside look at teams, players and the league. NHL games and the Home Ice channel also are available in Canada through XM Canada, our exclusive Canadian licensee, which is funding $69 million of this agreement. For a further discussion of XM Canada, see the caption entitled “ Strategic Transactions in 2005 .â€
Our ACC, PAC-10 and Big Ten channels offer college football and basketball games. In February 2006, we announced an agreement with the Big East to provide coverage of men’s and women’s Basketball Championships as well as select regular season basketball and football games.
In the motorsports category, we carry NASCAR and the Indy Racing League races. New shows in 2006 will feature NASCAR drivers Jimmie Johnson and Dale Earnhardt, Jr. XM Deportivo, our Hispanic sports channel, will provide exclusive coverage of the 2006 FIFA World Cup™. We also offer coverage of professional golf on our PGA Tour ® Network channel. In addition, we provide coverage of US Open Tennis.
News/Talk/Information/Entertainment Programming . In February 2006, we announced an exclusive, three-year, $55 million agreement to launch the new Oprah & Friends channel, which will feature a weekly radio show with Oprah Winfrey and Gayle King. This channel will debut in September 2006 and include regular segments hosted by personalities from The Oprah Winfrey Show and O, The Oprah Magazine. Oprah & Friends will complement our current women’s interest channel Take Five, which features the Ellen DeGeneres Show, the Tyra Banks Show, the Food Network, HGTV and, in 2006, the Good Morning America Radio Show.
We offer premium news/talk programming including Fox News, Fox Talk, CNN, CNN Headline News, ABC News & Talk and MSNBC. We feature business news from CNBC and Bloomberg as well as public affairs programming on our XM Public Radio channel, BBC Worldservice and C-SPAN. We are the exclusive satellite radio provider of Air America, featuring Al Franken. We serve the African American audience with The Power and Hispanic audience with CNN en Español. We offer three comedy channels as well as the High Voltage channel, which features The Opie & Anthony Show.
Local Traffic and Weather Programming . Our Instant Traffic & Weather service consists of 21 audio channels dedicated to keeping listeners informed with real-time in-depth updates on traffic and weather conditions in major metropolitan markets. Each market is served by a dedicated channel. These channels repeat weather and traffic information in a pattern familiar to listeners. Markets served include Baltimore, Chicago, Dallas/Ft. Worth, Detroit, Houston, Los Angeles, New York City, Orlando, Philadelphia, Phoenix, Pittsburgh, San Francisco/Oakland, St. Louis, Tampa/St. Petersburg, Washington, DC, Boston, Minneapolis/St. Paul, Seattle, San Diego, Atlanta and Miami/Ft. Lauderdale. We create the audio for the channels from our headquarters facility in Washington, DC. The data is provided by Traffic.com for traffic information and by The Weather Channel for weather information. We believe this is a valuable part of our service offering and that it offers several key advantages over what is currently available on terrestrial radio. These include greater in-depth updates, near instant availability due to the pattern of repeating information frequently, 24/7 availability of the service and wider availability as compared to terrestrial broadcasts available only to drivers within the coverage area.
A wide range of popular talk radio stars . Over the last two decades talk radio has emerged as a major component of radio listening. We showcase many well-known talk radio personalities on our channels, including Bob Edwards, Larry King, Bill O’Reilly, Sean Hannity, Alan Colmes, Geraldo Rivera, Brit Hume, Dr. Laura Schlessinger, Greta Van Susteren, Michael Reagan, Al Franken, Janeane Garofolo, Phil Hendrie, Laura Ingraham, Chris Matthews, Jerry Springer and many others.
State-of-the-art facilities . We create and distribute XM original and third party content for satellite broadcast, streaming and other new distribution platforms from our studio facilities in Washington, DC, locations in midtown Manhattan in New York City including Jazz at Lincoln Center, and in Nashville at the Country Music Hall of Fame. These interconnected facilities comprise an all digital radio complex that is one of the world’s largest, with over 80 sound-proof studios of different configurations. We produce most of our music channels and many of our sports, talk and entertainment channels from these facilities. Our music studios tap a centralized digital database of over 200,000 CDs and more than 1.5 million recordings. We also have two performance studios for visiting artist interviews and performances.
Dedicated, highly skilled staff . Collectively, our staff hold over 300 gold records reflecting their involvement with the music industry, have more than a thousand years of radio programming experience, 62 record industry awards, 2 Emmy awards, four New York Festival awards and include one Rock and Roll Hall of Fame inductee.
Superior digital sound quality . Our digital signal transmitted via satellite and our terrestrial repeater network provides nationwide, virtually uninterrupted coverage. Through a partnership with Neural Audio Corporation, a leading provider of digital signal processing and surround sound technology for the broadcast industry, we will begin to broadcast select channels in 5.1 Surround Sound twenty-four hours a day. XM HD Surround, beginning in early 2006, will provide our listeners with six discrete channels of digital full fidelity audio. In addition, a variety of special shows and live musical performances at the XM studios will also be broadcast in XM HD Surround.
Channel updates . We regularly review and update our channel line up to revise our overall offerings. We will add the Oprah & Friends channel in September 2006. In the first half of 2006, we expect to add certain new channels, including additional commercial-free music channels, to slightly increase our total number of commercial-free music channels. In addition, commercial advertisements will resume on music programming currently provided to us by Clear Channel. Certain
of these changes implement a settlement agreement and are in accordance with the preliminary decision of the arbitration panel for a dispute we had with Clear Channel relating to our respective rights and obligations under agreements entered into in connection with Clear Channel’s 1998 investment in us. From time to time, we make certain of the content we produce available for broadcast by others, including traditional AM/FM radio stations.
Subscriber and Advertising Revenue
We primarily derive revenues from subscriber fees for our satellite radio service. We charge subscribers a monthly fee for over 160 channels of our programming. We offer family plan discounts to subscribers who have multiple XM radios. We also offer pre-paid annual and multi-year subscription discounts. The family, annual and multi-year subscriptions are popular with our subscribers.
We derive some revenues from advertising. Our non-commercial free channels, including our traffic and weather channels, provide what we believe is an attractive advertising medium for national advertisers. We have advertising sales offices in several major media markets to sell directly to advertising agencies and media buying groups. We have sold advertising packages to a variety of advertisers and agencies, including Citrix, General Motors, Honda, Lexus, Cingular, Bank of America, Fox Broadcasting, ADT Security Systems, UPS, ExxonMobil and Pfizer.â€
