Sirius XM Is Finally Free … to Raise Prices
Sirius XM Radio hasn’t raised its base subscription fee since it first launched nearly a decade ago. But it will do so next year, now that the Federal Communication Commission has decided not to extend the price freeze that has hamstrung the company for the past three years. During a call held to discuss the company’s strong second-quarter earnings, CEO Mel Karmazin said the company expects to raise its prices come 2012.
“We continue to believe it would be appropriate for us to increase our pricing to be able to continue investing in and delivering the best audio content in the world,” Karmazin said. “Early next year, for the first time since the merger, we will be able to price our service as we see fit.”
He offered no further details beyond that and said nothing about the size of the increase the company is mulling. But the company’s clearly aware it’s treading toward dangerous territory here. As CFO David Frear observed during the call, higher prices could result in subscriber attrition, something the company would prefer to avoid.
“Generally, when you raise prices you tend to dampen demand,” Frear said. “But I think you’ve heard us say that pretty clearly that overall, for this business, that we think that price increases make a lot of sense, given the programming we’re delivering and given how long we’ve left the price unchanged. It just makes a lot of sense to increase it in the future.”
I’m sure it does. With aggregate subscriber levels that exceeded 21 million this quarter, Sirius is by far the most popular music subscription service in the world (Spotify isn’t even a distant second with a self-reported 1.6 million). With the federally mandated freeze lifted, it’s time to milk it for all it’s worth.