SIRI Archive

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Sirius XM Float Reduced by 200 Million Upon Lent Share Return

By
king1
– October 19, 2011
On October 19th, 2011, Sirius XM filed a 8K report stating that in October, Morgan Stanley returned the borrowed shares in the 2014 convertible bond offering, issued in 2008. These shares were mostly the reason the deal was considered "toxic debt", as their stated purpose would be to "hedge" a bond position. The shares were shorted and Sirius XM went from $2.70 a share in 2008 to .05 cents in 2009. Since then the stock has recovered to as high as $2.44 in 2011 but has been experiencing some rough trading as of late and now trades at $1.77 a share. This is now a non issue as Morgan Stanley no longer considers needing these shares to hedge. This could have been hindering forward movement of the stock. This could help stabalize the price as well as allow higher prices to be more achievable. This removes a major headwind on the mechanics of the stock trading. As for the fundamental model, it doesn't affect anything. Here is what the filing stated.

By Relmor Demitrius

On October 19th, 2011, Sirius XM filed a 8K report stating that in October, Morgan Stanley returned the borrowed shares in the 2014 convertible bond offering, issued in 2008. These shares were mostly the reason the deal was considered “toxic debt”, as their stated purpose would be to “hedge” a bond position. The shares were shorted and Sirius XM went from $2.70 a share in 2008 to .05 cents in 2009. Since then the stock has recovered to as high as $2.44 in 2011 but has been experiencing some rough trading as of late and now trades at $1.77 a share. This is now a non issue as Morgan Stanley no longer considers needing these shares to hedge. This could have been hindering forward movement of the stock. This could help stabalize the price as well as allow higher prices to be more achievable. This removes a major headwind on the mechanics of the stock trading. As for the fundamental model, it doesn’t affect anything. Here is what the filing stated.

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“In October 2011, an aggregate of approximately 202,400,000 shares of our common stock were returned to us from Morgan Stanley Capital Services Inc. and UBS AG, which we retired upon receipt. After giving effect to the retirement of these shares, as of September 30, 2011, we would have had 3,749,546,009 shares of common stock issued and outstanding. This figure excludes shares of our common stock issuable upon the conversion of the preferred stock held by an affiliate of Liberty Media and other convertible securities and upon the exercise of warrants and stock options that are currently outstanding.
In August 2008, we loaned 262,400,000 shares of our common stock to Morgan Stanley and UBS to facilitate the offering of our 7% Exchangeable Senior Subordinated Notes due 2014. In July 2009, Morgan Stanley returned to us 60,000,000 shares of our common stock that were borrowed. These shares were also retired upon receipt.
We did not pay Morgan Stanley or UBS any consideration in connection with the return of the shares. Once borrowed shares are returned, they may not be reborrowed under the share lending agreements.
The shares loaned to Morgan Stanley and UBS were issued and outstanding for corporate law purposes. Under GAAP, the borrowed shares were not considered outstanding for the purpose of computing and reporting net income (loss) per common share. The retirement of these shares will have no effect on the calculation of our earnings per share. ”

 

These shares counted in the float, could be traded, and affected stock trading. Although they were not used in calculating earnings per share, this is a big piece of news for the company and another sign that times are changing.

You will hear from the peanut gallery many authors claiming they know why this happened. You will hear fancy words like reverse morris trusts and converting shares or refinancing debt. None of these things will probably happen and ignore the maddness.

The only thing that matters is they have been returned and 200 million shares that were circulating in the float are now gone.

Nothing bad about this and it is all good news.

This also increases our P/E ratio, as those shares were temporarily counted as outstanding shares.

This also removes 80 million shares from Liberty’s holding in outstanding for conversion of their 40% ownership.

In July of 2009, UBS had returned around 60 million of these shares already.  This final return closes out the entire amount lent.

So as you can see there are many reasons why this is a good thing going forward for the company. With a buyback coming in 2012, according to Mel Karmazin (CEO of Sirius XM Radio), the release of 2.0, and the upcoming new pricing tiers, 2012 should be an exciting year for investors and consumers of the product.

Disclosure: Long SIRI

www.kingofalltrades.comwww.radiowars.com

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2

Sirius XM vs. Pandora/Internet Radio: Apples and Oranges?

By
king1
– October 3, 2011
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Relmor Demitrius

 

      Sirius XM Radio (NASDAQ:SIRI) has many competitors. In this series of articles, first of which was Sirius XM vs. HD Radio, I look to find which competitors are valid and which are fiction. I was going to write individually about Pandora (NYSE:P), Spotify and I Heart Radio, but I decided there is no point. In 6 months I’d have to talk about another start up or existing internet service that is going to “crush Sirius XM”. So in lieu of rewriting this article every 2 weeks, I have decided to just include all internet services in this comparision. First we must clearly define what this segment of the competition offers.

Music choices. Lots of them. Hundreds of them. There are literally hundreds of internet sites that store, hold, allow downloaded, or allow a random order of music to your computer or internet device(i.e. car, Ipod, laptop, or smart phone). In fact, there are probably more internet radio options every day. The car was the latest place to add the internet. OEM manufactures didn’t want to let the other guy allow easy internet access and went futher and allowed a few of the more popular programs to be accessed “hands free”. Nice features for any new car. What others won’t tell you is these features are also for use with Sirius XM Radio as well, which include their weather, traffic, and entertainment data services. These can all be accessed hands off with Fords Sync and Dodges U Connect as well as Pandora. So when you read somewhere that a car is “adding Pandora”, what they are really doing is adding the internet and making it easy to get to Pandora. You can get there anyway, regardless.

There are literally thousands of pay ways and free ways to access music on the internet. It has been this way since around 1994. Smart phones began allowing instant music access anywhere around 2005. The internet in the car has been around for about 2 years now, on a large scale. When I say large scale, do I in no way mean the majority of cars and trucks. This as a standard feature in all cars is still years and years away. Yes, all those cheap non discretionary money spenders will have to wait.

Spotify entered the US market recently as a competitor of Rhapsody. Every day more and more music choices are on the internet. The internet is the huge medium for music access. Terrestrial radio entered this market with many online products as well. On November 7, 1994, WXYC 89.3 FM in CHapel Hill, NC became the first traditional radio station to announce broadcasting on the Internet. So internet radio has been around 7 years before Sirius XM began its service. The internet itself and allowing music access through sites like Napster.com have been around for decades now, even decades before Sirius XM began service. I will include internet companies like Pandora and Slacker (much better product than Pandora, not even close) as a courtesy, even though these companies are not even close to radio, nor is Spotify. CBS Radio online streaming and I Heart Radio are the main competitors here, as these are actually radio services.

What is Radio? I define, in the 21st century, Radio as a two way communication device that broadcasts content to a mass audience. Talk, sports, weather, data services, and all forms of audio entertainment define radio. Unfortunately Spotify, Rhapsody, Slacker, and Pandora type services don’t qualify as radio. I Heart Radio and CBS Radio streaming is radio. It is just terrestrial radio rebroadcasted online. So it’s simply the poor product that created the need for satellite radio in the first place on the internet. And the other sites are Napster basically. Napster has been around since 1990′s, I hate to break it to all the Spotify and Rhapsody fans. Pandora is a new concept, a random music generator. Definitely not radio, but a cute niche free service that has no surge in revenue potential. Too easy to mimic and no unique content. Availablility is irrelevant in 5 years. Everything will be available almost everywhere on any device in 5 years. Your going to need more than “available” to make it in the future. What is radio is a good question but let’s focus on other aspects right now.

As you can see, there are many competitors for online music. Even traditional terrestrial radio has an online precense that competes with Sirius XM. So where does Sirius XM come in?

- Sirius XM is a unique service that doesn’t have an equal. It is true radio. Its closest competitor is terrestrial online radio companies. Here is where they differ.

- Commericals. It’s still the same radio you can get on your AM/FM radio. No difference. Doesn’t sound better, last longer, or have few commericials. They are not better DJ‘s, fewer commercials, or anything else to differentiate itself from their broadcasted airways counterparts.

- Availablility. Sirius XM coverage area is still the most of any music service in the United States. No close second. None.
- Consistant pricing. Sirius XM has no additional charges to the consumer if your not in a “wi fi” hot spot. Same price in the city or in the country. Data charges start racking up for internet mobile users once wi fi hot spots are not being used.

- More than music. As is terrestrial radio more than music, so is Sirius XM Radio. Here is where Pandora and Spotify have to say good bye and all random music generators or music storage programs. These services do not offer human interaction. They do not offer traffic services, weather services, or allow emergency or relevant news to be communicated quickly to many people over a large area. They don’t cover the news, offer opinions, or an outlet to communicate to its listeners. Want to call in and talk about the presidential election? Pandora will not answer your phone call. Why? Because its not radio. Anyone who calls Pandora a Radio company doesn’t understand the space, ignore them and move on. Look at them like they are crazy and offer them professional councelling. Netflix (NASDAQ:NFLX) investors had the same look in their eyes when I told them their is nothing unique about your company. You have no content, hence no real power. Its hard for investors to grasp “power paradigms” but in some cases it just takes a bit of common sense. The key to any business is what makes you unique and the control you have over your content or product. Netflix wasn’t unique, in any way. What made them powerful was……………

AVAILABILITY!!! You guessed it. First to the XBOX, first to the internet and first to your mailbox. But what is Netflix? It is a 100% content distribution company. Some see Netflix as a Sirius XM. A content distrubution company. Not entirely true. They have a ton of unqique content you can only find on Sirius XM. It is also a content mega store. Want CNBC, NFL, and Martha Stewart on one service? Look no further. Want to hear local traffic and Bloomberg radio without missing your favorite stock quotes? Simply record your Bloomberg show and listen to the traffic. Then go back and listen to your Bloomberg Finance show at your convienience. Can Pandora do that? Of course not. Because its not really a competitor of Sirius XM. Analysts pumping Pandora and brokers would love to convince you that it is competition, but the numbers say otherwise. Let’s look at total revenue from radio and how it breaks down.

At end of year 2010, there was a total of 18.8 billion dollars in revenue generated by the radio industry. Although I do not include many of these companies in this space personally, Sirius XM has so I will include them here to humor them. Of that revenue, terrestrial radio produced $15 billion or 80% of it. Now that’s Sirius XM’s competition right there. Of that money, Sirius XM received 3 billion dollars. All internet radio companies combined, excluding Spotify which was not in the United States yet, was only 5%, or less than 1 billion dollars. So Sirius XM alone gross’s more than 3 times as much as all the internet radio companies combined. Who do you think record labels and performing artists like more? The 80% paying next to nothing in royalties, or Sirius XM paying 7% of their revenue? Even the pittance for a combined internet radio space doesn’t excite anyone. So who’s rooting for who here? Don’t discount where the content kings want their content to appear in the future. Part of a free business model with limited return, or a subscriber business model with consistant cash flow?

As for pay subscription service money for radio, Sirius XM is king. They receive 90% of all subscription money paid into the radio space. Of the total 3.1 billion dollars estimated for end of year 2010, 2.8 billion of that was Sirius XM’s. So approximately 300 million dollars left for all other services combined.

But you say, how much does each user generate for the radio companies involved. At the end of year 2009, Sirius XM generated $172 per subscriber and $72 a listener. Terrestrial radio generated $10 to $12 a listener and internet radio generated around $1.25 per user. If you were an advertiser, where would you pay more to advertise? Which of these user groups do you think has the highest percentage of disposable income? Sirius XM does of course. An Arbitron study done from 2010 clearly showed that. Age and income of the Sirius XM user is higher than those who listen to free music. It’s common sense. So can Pandora tap more free users? Of course they can. Can Sirius XM tap even more higher income users would prefer actual radio content over free? Of course they can. This isn’t an article to say if internet radio’s business models are substainable. Although recent comments from the founder of Pandora seem to indicate he isn’t even bullish his own model. This quote from Tim Westergren is revealing:

“One that is still fresh in my mind was the fight over royalty rates when we almost went out of business because the rates imposed by the copyright tribunal were astronomically high.

Our next great challenge is going to be tackling the licensing issues internationally.”

Basically Pandora was out of business if those representing the royalty side, SoundExchange or whoever it happened to be, got what they wanted, seen to them as a fair deal for their rights. They settled on a temporary agreement that now puts revenue step and step with costs. As their revenue goes up so do their costs. As more users use the product, so do their costs. Once Sirius XM adds a subcriber, that cost is 100% done. They system is already in use, and their total revenue is adjusted percentage wise, 7%, to pay the royalties on that added revenue. Also 1 difference. That money is paid by the consumer, not Sirius XM. Sirius XM passed along this free to its customers and they paid it and the company still added over 1 million subscribers since it was instituted. Here is another quote from Westergren.

“Pandora plays the music of over 90,000 artists. This translates into a substantially larger number of rights owners — the artists themselves, labels, publishers, etc.

Without a one-stop shop for licensing, it’s administratively difficult to enable the service. Where these centralized entities do exist, they have demanded royalty rates that are completely uneconomic. I would argue that in so doing, they are failing to serve their very constituents.”

I would argue, uneconomical for who? So Pandora feels that royalty demands should fit into their model. That’s ludicrious. Could you imagine if a corporation called the IRS and asked them to suspend their tax payments because they are ”unable to fit them into their model”. They would laugh at the company and hang up. That is what the Sound Exchange and other agencies representing the music performers/labels and songwritiers should have told them. Never heard such illogical ranting in my life from a “CEO” of a company. Terrestrial radio business model relies on a basically free royalty situation. Artists and record labels have fought long and hard to break the NAB controlled FCC and Congress on this issue. Without legal protection from the government, terrestrial radio’s business model becomes obsolute as well. The times of music labels and record companies needing terrestrial radio to promote their new music offerings are over. Sirius XM not only will promote your music, they will pay you more than anyone else for it, per dollar of revenue generated from that music. I sense a larger relationship between Sirius XM and record companies in the future. We should just call them music content originators really. Some analysts even see trickery in how Pandora reported their latest earnings. By delaying royalty payments and with cash from the IPO, they appear stronger then they really are. So Pandora, in my opinion, is in big trouble. I believe their model is unsubstainable. According to Jim Edwards of BNET, the SEC has informed Pandora that their model is unsubstainable. Seems like there is some agreement here from higher parties as well. Here is what the SEC stated.

“In order to provide greater balance to your summary, highlight that:

You currently operate under a business plan strongly reliant on lobbied concessions and federal court and federal agency consent decrees and settlements, setting reduced royalty and licensing rates that expire in 2015 and that ordinary rates, not subject to such extraordinary measures, to which you may be subject upon the expiration of these exceptions make your current business plan unsustainable, as discussed in your risk factors on page 15 and 16;”

So as you can see, some are some aren’t. One thing is true always since the .com explosion. Internet companies will come and go, and they usually are never bigger than when the media is pumping them. Yahoo has been around for decades now. They still struggle with growth. Ebay has trouble growing. Amazon.com is good. Google is a search engine and Facebook is our social network. Can you name 10 websites that have stood the test of time outside of these for 10 years? I can’t either. Actually you couldn’t even include Facebook if you go back 10 years. Anyone remember Myspace? Exactly. At least no sites that generate signficant profits and are exploding with growth potential still 10 years later. Why? Because in the end, forget the website or where you can access it, it ultimately comes down to unique service and content.  Just because Pandora is heard in a car, doesn’t mean the driver is watching the ads stroll by, or they get better users. Geez, I hope not. Internet radio is unsafe then as well. If these ads turn to audible ads, then you are no better than what Sirius XM was created for; to avoid commericials and noisy interruptions in your day, and maximum variety. If I wanted to be blasted with ads and listen to the same songs over and over I’d just turn on my AM/FM radio and probably get better reception and no data charges to boot.

Terrestrial radio is becoming less powerful by the day as Clear Channel is struggling and other companies are selling off markets to local control. It’s all about the nationally syndicated shows now and the national advertising dollars. The evolution of any business is that way. Look at the cable and satellite TV industries. Local shows are practically extinct except for the local news now and a few day time TV shows run by individual networks. My local radio stations pick up a ton of national content now. Most talk stations run national shows now not local shows. This pulls them further out of the communities and ironically makes them less of a competitior to satellite radio due to its declining influence on the community itself. National syndicated shows are all over Sirius XM already and easily available. You don’t need to worry about if or when your local station manager will pick up this guy or that guy. Your one stop radio site is already available.

If internet radio appears to be growing, it probably is. In 2006 the OEM side was in its infancy. Penetration into the OEM market was a tiny 21%. The next wave of new car buyers, about every 5 year cycle, would not have been exposed to the product as of yet. Sirius XM is still expanding their exposure. By 2015 approximatetly 75 million cars will have a satellite radio in it. One difference. The two industries are not going after the same audience. Those who have no money for discretionary spending are internet radio listeners mostly. Those who can afford to pay for radio will. Those who can’t will find nice cheap options. So as you can see, there is an entire country still to expose to both sets of products. With added internet availablility and access will come more exposure to their services. But it’s still free, it’s still not radio and it’s still not Sirius XM’s target customer base. Availability, OEM cars, wi fi, or whatever expands exposure to all these products. As Sirius XM customer base grows so could internet radio’s customer base. Anyone who is foolish enough to point out that growth in Spotify or Pandora means declining interest in satellite radio doesn’t understand this concept, has a poor grasp of the sector, and probably shouldn’t have an opinion on the subject.

Another problem now with internet radio is you can’t hear it anywhere you can’t hear Sirius XM. Period. Not one place, not one car, not one computer. Not one cell phone,Ipad or Ipod. If you can get online, you can access Sirius XM. If you have a satellite radio you will pick up the signal anywhere within the continental United States, parts of Canada, Mexico, and Alaska. Off the coast, in the desert, or on a river in the middle of no where, it doesn’t matter. So still Sirius XM has a greater coverage area. Sirius XM is still expanding their exposure with used car markets and new car buyers. Internet radio is as well. Keep in mind, Sirius XM has grown through the introduction of internet radio.

Still free is free. It’s never been a business model that has been a game changer. Facebook has 500 million users worldwide, and they still don’t generate the revenue Sirius XM does with only 21 million subscribers. In the world of business models, subsciber ones are simply better than ad based free models. It takes an insane amount of users to even hint at big profits in this format. If terrestrial radio ever had to pay streaming rights on their station’s rebroadcasts over the internet, I Heart Radio would fail the next day. If Spotify, Rhapsody, and Pandora ever had to pay up for their real usage like satellite radio does, they would be out of business in short order. Basically any internet music company is a law away from extinction. As is they are stuggling with a very small market share of money to divide up.

Itunes, Amazon.com, Rhaspody, Spotify, and Pandora all make money on the backs of artists and record labels who are catching on to what is really important, content. Netflix is starting to see that too. With Starz bolting , just wait until Sony, EMI, or BMG pulls their rights from all internet radio stations for more money and control of content flow. When their libraries start shrinking you will see the last dying grasp of a chaotic industry that never should have existed. Record labels have failed their artists and industries allowing this to run rampant. Sirius XM is a record label companys greatest supporter. They pay more money a year than any online site combined. Sirius XM pays over 220 million dollars a year for the rights to play its music selection. If Pandora had to pay that, they have more users why shouldnt they, you wouldn’t see them pumping that 90 million users, you would watch it drop to 5 million faster than you can blink. Their honesty would be forthcoming then. Well , we really don’t have that many users, it’s more like 5 million, not 90 million. Hilarious of course. Numbers are fun to play with aren’t they?  Reality is this. Pandora generates around zero dollars in cash profit. Sirius XM is generating around 180 million dollars a quarter and rising in profits. Sirius XM with cash on hand could buy out Pandora today. At least a majority stake. Why hasn’t Mel Kamarazin? Because he’s not stupid thats why. Do you think Pandora  going to an IPO is a coincidence.  No, it’s called getting venture capilatists their money back. Same reason Facebook sold some control. Hard to monetize a online business like Facebook, FORGET PANDORA. Pandora is near impossible to value. With no barrier to entry and no loyal fan base (any random music generator online would suffice if exposed) I don’t see Pandora or any internet music company competition for Sirius XM.

With the advent of internet radio, Sirius XM has grown from zero subscribers to over 21 million subscribers. Effect of internet radio to date: None. No effect shown. I will update this topic every year to make sure. Remember, internet radio was available over 6 years before the very first Sirius XM subcriber even existed.

Next up: Sirius XM Vs. Terrestrial Radio

Disclosure: Long SIRI

For investor comments on all topics, visit www.kingofalltrades.com

www.Radiowars.com

 

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19

Sirius XM vs. HD Radio: The Battle For the Dashboard

By
king1
– September 21, 2011
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By Relmor Demitrius

     Sirius XM Radio (NASDAQ:SIRI) has many competitors.  Some are valid, some are fiction.  In this first installment of this article series discussing all Sirius XM competitors, I’d like to take a moment out of your day to try to find out which one of these HD radio falls into.  Even on Sirius XM SEC filings they list HD radio as a competitor.  So they are worth a look.  HD Radio after all was helpful in getting the merger approved, ironically.  Sirius XM simply used their own bullishness on the product against them to show how the struggling duopoly needed to be one company.  But is there any fact in the argument?   Let’s examine HD Radio closely to determine whether HD radio as a competitor for Sirius XM is a fact or a myth.

Here is what Sirius XM says on their own 10Q filing for Q2.

“our competitive position versus other forms of audio and video entertainment including terrestrial radio, HD radio,..”

HD (Hybrid Digital) Radio was introduced to the market in 2005.  The concept is to broadcast a digital signal from terrestrial repeaters imbedded in the existing analog signal.  The Radio station simultaneously creates a digital and analog audio broadcast where the digital signal is compressed and sent on to the repeater station.  The repeater stations then rebroadcast this signal to your home and cars.  The concept was to get a better signal around buildings and structures as well as add a clearer audio signal than normal terrestrial radio stations.  You can purchase HD radios over the counter from retail outlets like Amazon.com.  There is also some availability in the OEM car option as well, as some radios have HD capability built in.  There have been reported problems with this system however.

There are many consumer complaints about the product itself, some that even the company themselves, iBiquity Digital Corporation, has admitted too.  The first one is the antennae and reception.  They admit that consumers are upset with their antennas, side channels drop out, and adding an external antenna has done little to help.  Their solution on this issue was to simply to ask the FCC to allow them to broadcast EVERYTHING at a more powerful frequency.  This however does not solve other issues, nor has it been approved that I am aware of.  If passed would require huge spending to existing terrestrial radio stations to boost their power signals.  But that doesn’t solve the interference issue.

Consumers are also noticing interference when interpreting between the digital and analog signals.  Remember, its broadcasted together, in one stream.  Makes sense then doesn’t it.  Also the range on the HD signal is far weaker than the analog signal, frustrating consumers even more.  There is of course a purchase required to hear these stations at all, as no existing standard radio is capable.  So there is a cost also associated with the product.  Also keep in mind these stations still send commercials.  It is not commercial free.

Here is wording directly from WKSU in Ohio on these issues.

Can everyone in WKSU’s listening area hear the three HD.o channels?

“Unfortunately, no. In order to maximize the sound quality for both analog and digital listeners, the HD Radio signals are broadcast at a limited power level. The further away the HD Radio is from one of our towers, the more likely the HD Radio may drop out. Adjusting your antennae to its most-optimal position will also increase your ability to connect with a strong signal. Drop-outs primarily affect people listening to WKSU HD-2, HD-3, and HD-4; WKSU’s primary signal will automatically switch to an analog signal in an area where the digital signal is unavailable.”

They themselves are telling you the signal is weak and unreliable.  This was from September 2011.  One of the issues is a lack of power. The digital signals are limited to just one one-hundredth of the analog power of a radio station.   This would mean that in some cases, you need to be within a few miles of the source to pick up HD radio.  Not good.  For home and personal radio use, using smaller antennas, this problem is magnified. 

That’s all fine and good but what about the popularity of the product.  Google trends shows that hits from HD Radio topped out when it was introduced in 2005/6 and has been sharply down trending ever since.  Today, Ford Sync gets more hits than HD Radio combined. 

Google trends are cute and consumers will complain, but what about an icon in the audio entertainment industry.  What did Pioneer have to say about HD Radio in 2008?  This is in response to a standardized radio, the evolution of terrestrial radio evolving into an HD landscape.  Basically if consumers don’t want it, they can be forced to integrate the technology.  FCC is a fine partner for the NAB after all right?

“The iBiquity conditions would limit the breadth of radio product offerings to consumers, limit which radio component supplier’s products be designed into radio, have the effect of decreasing AM/FM tuning performance, unnecessarily increase costs to consumers uninterested in HD Radio, and interfere with the useful and healthy free-market mechanisms extant in radio electronics purchases.”

This next quote is from Gorman Media on their website, in regards to HD radio.

“38 percent of analog’s coverage area. If the digital power is increased to 10 percent, however, car radio coverage actually is better than analog, at 117 percent. For home and portable use, it increases to slightly more than 80 percent. However, increasing the power of digital broadcasts would cause substantial interference, decreasing analog coverage areas as much as 50 percent.  Stations you once heard may just disappear on your current radio.”

Even pro HD radio comments have no facts to support their claims.  They consider it a success but admit

they don’t even know how many use it.  Interesting. 

Ron Schott, chief engineer for WJBC(AM) in Bloomington, Ill., said the station has received no interference complaints — “to others, or ourselves” — since the station began broadcasting in AM HD in 2007.

“The HD experience for WJBC is hard to classify without a large base of (HD) receivers in the market,” Schott said

I consider (AM HD) a success. I think the improvement in sound quality is incredible,” said Brett Gilbert, director of engineering for the Clear Channel Tulsa cluster, which includes KTBZ(AM-HD) and KAKC(AM-HD).

“Unfortunately, I don’t know how many listeners we have that use HD radios.”

This station scrapped HD radio altogether. 

WKAR(AM) in East Lansing, Mich began HD Radio in 2005 but stopped in 2009, according to Harold Beer, chief engineer for WKAR.

“After years of encouraging listeners to get better quality wideband AM radios, we ended up degrading their listening experience with a 5 kHz bandwidth, –35 dB SNR analog signal once we turned on the IBOC digital,” Beer said.

“We also collected a number of negative comments due to the digital carrier, including complaints about the buzz that was always present, especially if a listener had an analog tuned radio that was slightly off-channel.” WKAR is a daytime directional AM operating on 870 kHz with 10 kW.

Sounds like they may have challenges but I keep reading about these deals they are getting with OEM car manufacturers to include their radios standard.  That’s fair.  Let’s do some digging around and see what’s available.  Proof is in the pudding right? 

The number 1 car sold in American is the Ford F-150.  Next is the Silverado.  We know Ford, GM, and Chrysler, as well as Toyota dominate the car market.  HD radio claims to have expanded  working agreement with these 7 automakers;  Ford, Hyundai, BMW, Lincoln, Volvo, Scion, and Kia.  So I would assume going to these car websites and calling these dealers would provide me with a wealth of information about the product and easy and quick information about the radios availability.  First let’s discuss the F-150 and Ford. 

A quick glance notices that it is never a factory installed option.  There is a system with a CD player on the FX 2 model called the “plus package” that comes with a Sony Radio system that has HD capabilities included in the AM/FM Sirius package already.  It’s one radio system that allows all these functionalities.  No separate option to install a straight HD Radio.  Most packages and options are not standard equipment on Ford even on the high end.  Nowhere on a Ford website can I see HD radio being advertised.  Sirius yes.  Let’s see what the dealers themselves have to say about HD Radio. 

Jeff Vien, sales manager at Sanderson Ford in Arizona was very helpful.  He stated there is “no individual option to add an HD Radio to any Ford right now.”  No factory installed option on HD Radio as well for Ford.  Only way to get HD radio is through the plus packages on the F150, America’s bestselling car.  I asked, do people ask for HD radio? 
“Not very often”.  Doesn’t sound like an “extended partnership” agreement to me. It took this manager many minutes to even know if and where HD radio was available were in Fords. It was not even close to first hand knowledge for this sales manager. But that’s just Ford.  Let’s check the number 1 car seller in America, GM. 

I called Bob Hug, a GM sales manager and asked him if there were any ways to get HD radio in their cars and trucks.  Simple answer here is no.  None.  I asked him, what would you tell a guy who asked for HD Radio?

Bob:  “I don’t know, no one has ever asked”.  Too funny.  Let’s see what Toyota has to say.

According to Bell Road Toyota in Phoenix, they do not supply any vehicles with HD Radio.  It’s not even an option to add.  I wonder if this makes Toyota lose customers.  So I asked Doreen Fischer, sales manager, does not having HD Radio cost you customers?

Doreen: “I have never lost a customer due to not having an HD Radio”.

Next is Chrysler.   Nothing.  Same story.  In fact, Mary from Chrysler Earnhardt had never even heard of HD Radio before.  Interesting.  A supposedly hot item that is competition I keep hearing about for satellite radio, and this sales manager of an auto dealer had never even heard of it.

Getting a bit disappointed I was sure to find support for HD radio in a known dealer with HD Radio.  After all, HD Radio themselves list Scion as a partner.  So I called Bell Scion and talked to a very nice gentleman in parts named Dusty Edmund, who also used to work in sales.  No Scion comes standard with HD Radio.  But the best part were his comments.

Dusty:  “I have never been trained in selling or distributing HD Radio as a product.  And I used to sell cars at many dealers, not just Scion or Toyota.”

Relmor: Do you think HD Radio is dying?

Dusty:  “ I thought it was dead.”   

What I found out was that if there is no motivation to make money selling HD Radio, no incentive to the dealer for selling an HD radio, and consumers of automobiles don’t seem to even want it.  I found this comment by an analyst regarding this subject to be spot on in what I found.

“HD radio is pretty much going to be nonexistent, because they can’t figure out how to get the auto guys to include that as an option, and the auto guys that do include HD don’t let the consumers know about it, “.  Ms. Ryvicker of Wachovia Capital Markets.

I must say I agree with that comment 100%.  With revenue sharing programs between Sirius XM and all major automakers, there is incentive other than making a consumer happy.  There is money in it for them as well.  This is what services like HD Radio and Pandora can never offer an automaker.  Sure you can use your hand off voice command to activate your music files and Pandora, but you can do that with your traffic, weather, and Sirius XM radio channels with Ford Synch and Dodges’ Uconnect as well. 

Conclusion:  HD Radio is a fading product that will soon be nonexistent or so unnoticeable from regular radio that it will have no long term effect on Sirius XM Radio.  In 6 years of HD Radio I’d say there has been no significant damage done.  Do I have any facts to support this?  Yes.  Subscriber totals from 2006 compared to subscriber totals from 2011.  Since HD Radio was introduced, has there been a linkable decline in subscriber growth?  You be the judge.  In 2005 Sirius and XM had a combined 9 million subscribers approximately.  Today they have over 21 million subscribers.  In the company’s first 5 years of operations they reached 9 million subs.  In 2011 they had 21 million.  So the last 5 years with HD Radio as a service, Sirius XM has seen their subscriber growth increase.  No effect.  Myth is shattered.

Next up: Sirius XM vs. Internet Radio

Disclosure:  Long SIRI

For up to date investor comments on all stocks and trades, visit www.kingofalltrades.com

www.radiowars.com

 

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2

What Exactly Does Sirius XM’s 2012 Guidance Actually Mean

By
king1
– September 20, 2011
Sirius XM Radio (NASDAQ:SIRI) CEO Mel Karmazin on September 14 announced during the BOA Media Conference their guidance for 2012. His presentation was almost entirely new information, which was a bit of a surprise to the media present and investors who were listening. In years past these conferences held tidbits and hints of information but this time Mel was candid and forthcoming with news on Sirius 2.0, the upcoming price increase, plans for the future, and in fact guidance for 2012 earlier than promised. Mel had stated that guidance for 2012 would come during the third quarter conference call in November. Why did Mel release this information earlier than planned? I’m sure at the time Mel knew he was presenting at the Bank of America conference. It could be possible Mel was so excited about the news of 2012 and what it meant for the company (2012 was a targeted crucial year in Sirius XM’s recovery) going forward. Apparently from the lack of upgrades, price target increases, and general malaise about the presentation, I apparently am needed to explain just what exactly Sirius XM is guiding. It is more than just some numbers on a piece of paper. But first let us address some of the other aspects of the conference and what we learned from his discussion other than guidance.

By Relmor Demitrius -

Sirius XM Radio (NASDAQ:SIRI) CEO Mel Karmazin on September 14 announced during the BOA Media Conference their guidance for 2012.  His presentation was almost entirely new information, which was a bit of a surprise to the media present and investors who were listening.  In years past these conferences held tidbits and hints of information but this time Mel was candid and forthcoming with news on Sirius 2.0, the upcoming price increase, plans for the future, and in fact guidance for 2012 earlier than promised.  Mel had stated that guidance for 2012 would come during the third quarter conference call in November.  Why did Mel release this information earlier than planned?  I’m sure at the time Mel knew he was presenting at the Bank of America conference.  It could be possible Mel was so excited about the news of 2012 and what it meant for the company (2012 was a targeted crucial year in Sirius XM’s recovery) going forward.  Apparently from the lack of upgrades, price target increases, and general malaise about the presentation, I apparently am needed to explain just what exactly Sirius XM is guiding.  It is more than just some numbers on a piece of paper.  But first let us address some of the other aspects of the conference and what we learned from his discussion other than guidance.

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I could talk about Mel’s hints and his tone.  I could discuss how Mel appears to show disdain toward the “Doctor”, John Malone, as he called him, to a huge laugh.  When an ignorant questioner tried to foment an opinion that wasn’t true about Malone and the stock price, Mel was quick to embarrass her and show that he isn’t amused anymore by media fomenting, especially on that touchy subject of Malone stealing 40% of the company.  He was clear in his intent that Liberty was a necessary evil and that he would prefer they not be involved in the company going forward.  Although he appreciates their board experience and input, he admitted there is no advantage to date of Liberty Media (NASDAQ:LINTA) investing in the company.  No cash transfer, no balance sheet help, no deals with sister companies, just a guy taking advantage of a cash cow while times were hard.  Mel’s plans to make Malone pay a premium to add to their Sirius XM ownership levels appears still his game plan and I felt by his comments that Malone’s end goal isn’t even clear to him.  Here he answers a question about his comments on how he would make it as expensive as possible for Malone to add control.  He has mentioned this concept in the past a few times.

Question: …..I know you expressed the idea before that if liberty took over they would have to pay some control premium.  Is buying you’re stock back in conflict with that idea.

Answer:   No.   I think the idea is that one of the sensitivities that we would have to deal with….. and we haven’t gotten this far with our board.. Our board .. you know the decision to do a buyback or a dividend or not do anything would be made at the board level. But we have no plans to ever thinking about shrinking our load so that Liberty would be able to get have more control than they do today and 40% is where Liberty is today. The idea wouldn’t be that we would buy back shares, and then therefore liberty would get an accretive therefore have a higher percentage of the company. This is something we would “balance” if the decision were made to do that.

This potentially solves the debate on a buyback increasing Liberty’s stake.  The answer to the question was no and Mel has no plans to shrink their load and they plan on doing a buyback.  It’s called logic.  You do the math.  Hard to argue with facts.  If they want to do a buyback, plan on doing a buyback, but have no plans to increase Liberty’s percentage of ownership…. Sounds like they have it covered to me.  Non-issue now at this point.  I feel confident that Mel will do what is in Sirius XM stockholders best interest with this issue.  I appreciate him answering this topic directly.  Do I still fully 100% understand exactly how a buyback would work in regards to Liberty?  No, but Mel seems to be consistent that a buyback is beneficial to stockholders and if Liberty’s percentage increased with a buyback, there would be no benefit other than a lower P/E ratio and a lower share count.  A buybacks intention is to increase shareholder value.   Remember, the question always asked to Mel is how does Sirius XM plan to return value to stockholders.  A buyback that increased Liberty’s percentage of ownership has NO VALUE to a Sirius XM Stockholder, hence it must not be the case.   Now let’s take a look at the guidance for 2012 and what it means.

Sirius XM guided revenue at 3.3 billion, an increase of $300 million or about 10% over 2011.  10% revenue growth is a nice increase for any company during a recession, especially if you are a 100% discretionary income company.  No one needs satellite radio to live.  Yet subscribers are still growing by the millions a year.  Some analysts were suggesting 3.37 was the expected amount.  Yet these are the same analysts who fail to even get close yearly earnings totals.  Interesting isn’t it.  They are low on earnings, but high on revenue.  Sounds to me they are either lying or incompetent, with no clue on how the model works or how to estimate margins or costs.  You decide.  Either way is pretty bad.  Sounds to me like you can ignore their “revenue miss” as full of crap.  If you can’t even estimate free cash flow at all, earnings for 2012 correctly, or EBITDA at all, then don’t bother with revenue.   That’s like saying the New York Knicks will score 110 points tonight, but you don’t know what the other team will score.  Not very useful in betting on the outcome is it?  Easy to guess high on revenue to make a company miss it.  What is hard is to show your estimates on FCF, earnings and EBITDA accurately if you have no clue how too in regards to this company.

Is 3.3 billion high enough revenue?   Most definitely because costs for 2012 are dropping from 2011 as well.  Satellite capital expenditures alone will drop around 120 million this year from 2011, 210 million from 2010, and 190 million from 2009.  That is almost 2 cents diluted earnings higher than 2011 right there from one line item on the cost side alone.  Add another 300 million in revenue and that is another  3 cents a share right there higher than 2011.  So just on these 2 things alone, right now Sirius XM investors can expect 5 cents diluted earnings HIGHER than what 2011 will bring.  Right now Sirius XM has 5 cents of earnings for 2011 already.  Remember, before the year started, estimates were around 3 to 5 cents total consensus.  We have already matched yearly estimates from a year ago on earnings.  See what I mean?  Low on earnings but high always on revenue….  Very confusing.  So like I said before, either analysts are incompetent or lying.  I hope they are incompetent for their sakes.  Right now analysts are expecting 3.37 billion in revenue, but only 5 cents of earnings.  What!!!  Someone is crazy or incompetent or lying to me.  How can revenue increase 300 million, costs drop at least 120 million, and get only a 140 million dollar increase out of it?  Not to mention the original model already is set to provide 5 cents in earnings to date in half a year in 2011?  Baffling?  Not really if you have been covering this stock for a while.  Actually very typical of this stocks coverage.

My 2012 earnings estimate based on facts and information Mel has provided is for 12 cents a share in 2012.  My revenue estimates are actually around 3.4 billion, slightly higher than analysts are expecting, just my earnings are a 7 cents or 490 million dollar difference.  How can they be so wrong?  Call them and ask them individually.  I would.  Now on to free cash flow and EBITDA.

Mel stated that free cash flow for 2012 would come in around $700 million.  This is a 75% growth year to year on this metric.  This is a decent gauge of actually how much cash on hand Sirius XM could grow in 2012.  In actuality, in a lot of times, cash will exceed this figure.  This is a metric that accounts for other balance sheet asset/liability situations, and is not an exact measure of incoming cash.  It could be more like 800 million in cash added in actuality.  This is extremely encouraging news because at this point Sirius XM is in their self-stated “cash hoarding mode” to pay off the 2013 bonds coming due.  This 770 million dollar 13% bond (the companies highest interest payment on the books) was especially damaging at the time in 2008 due to its perceived high interest rate.  This was indicative of the bond market at the time and since then Sirius XM has been able to renegotiate other bonds for around 7.5%.  This is a huge difference in only 1 years’ time.  It reflects the company’s growing fiscal position and their perception of value to those who matter most, the people who determine what your corporate bond rate will be, not some hack author or analyst who doesn’t even know the service or metrics.

What does this mean?  Well obviously this means that with 1 billion in cash on hand at the end of 2012(low ball), as stated by Mel as well, and 700 million in free cash flow, you can now consider the 2013 bonds paid in full.  They have basically guided out their 2013 payment as done.  Next.  2014 bonds are a convert at the $1.87 strike.  They will be removed with already factored in dilution of shares and 100% already factored into the stock price as a guaranteed conversion (with lent shares out as well in this deal, was one of the reasons the stock tanked to under $1 in the first place.)  So now Mel as basically guided away the “toxic debt” that the company took on in 2008 which caused the stock to tank in the first place.  Remember, this was way before Malone came in in February 2009.  This was an immediate tanking upon the news.  We’re talking minutes upon its release.  Exciting stuff for sure.  If the market is forward thinking and trusts Mel’s guidance (missed low for 2 years now so no reason to think you can’t) the stock should recover back to pre-merger levels now, in logic.   But you say not true, 40% of the value is gone.  I disagree.  Way more than that 40% has been added back in synergies, improved revenue, and subscriber growth since 2008.  So I would disagree with that.

Mel guidanced EBITDA for 2012 at 860 million, a 20% increase from 2011.  If you recall, Mel promised 20% EBITDA growth and has now delivered for 2 years in a row.  This is why I can safely and logically use a multiple of 20 when obtaining an EBITDA evaluation of their stock price.  A typical media company’s stock is valued as a multiple of EBITDA.  So take 860 million and multiply that by 20.  Now you would divide by their fully diluted share count (about 6.8 billion).  This gives you an EBITDA/EV value of $2.35 a share.  That is a 23% increase from current levels.  This accounts for none of the stated price increase, which I will discuss later, or any growth to other line items or reductions in costs.  Mel did not account for the price increase in his guidance.  I had these estimates myself, actually higher, as Mel is being conservative, before the price increase.

Based on guidance we can now calculate as well their forward 1 year p/e ratio of 15.  That means Sirius XM right now is not only a growth stock (20 multiple), it is a value stock with a low forward p/e ratio as well.  Not surprising that institutions have been steadily adding shares since its low percentage of 18% in 2009.  The percentage as of Q2 2011 is now 41%.  That is a 23% increase in only 2 years’ time.  Sounds to me like institutional money managers don’t read or factor in too many analysts opinions or journalists who claim the stock is a slow growth company.  If this company is slow growth, I’ll take slow growth any day.  My numbers are actually more realistic as our members have discovered than guidance.  I think 1 billion in EBITDA is reachable in 2012, giving my EV value much higher at actually $2.94.  This once again accounts from zero speculation and zero value to the price increase.  ARPU will rise all year now, maturing sometime in 2013 for full value to the revenue side.  Not only does locking in rates before the price increase drop churn and raise ARPU immediately before 2012, it will have an ongoing trickle effect all year as new subscribers begin paying the higher rates.  Mel stated in January of 2012 the basic rate will increase from $12.95 to $14.49.  I was expecting between a $1 and $2 increase to the basic package and it was dead on in the middle of that.  I am actually glad they sided a bit with caution here given the economic landscape.  Easier to go up again than back down.  Good move.  They will also have a tiered pricing service that will include best of and internet that will give consumers even more value at the high end than they are currently receiving.  So some customers might actually have a small drop in price.

I expect ARPU to rise to $12 minimum by the end of 2012.  By the end of 2013 it could hit $13.  This is a huge financial difference to overall revenue.  Just a $1.50 increase in the basic rate would generate approximately 375 million in additional revenue per year, or almost another 6 cents in earnings.  The price increase is one of the major synergies touted in 2008 and one that is just now going to begin paying dividends to stockholders.

As you can see by the guidance Mel has given that there is reason to be excited about what the company can now accomplish in the future.  Investors can now be armed with facts when a bear suggests that the company has debt issues.  Not true.  At one time they did, but at one time terrestrial radio was making a profit too.  Some things just change.  Best not to be stuck in old thought patterns when facts are hitting you on the head like a hammer.  There is an old saying in life that applies to investing as well..” You either change or die”.  Same is true with companies.  Sirius XM has been changing their model since 2008 when the merger was allowed.  They have added countless value to their service, expanded their internet service and content, and is now obtainable on most smart phones.  With the addition of 2.0 coming in December of 2011, Sirius XM customers have an even better product to look forward too.

Disclosure:  Long SIRI

For up to date stock commentary and investor’s insight, visit www.kingofalltrades.com.

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6

Why Sirius XM’s Coming Price Increase Isn’t Really An Increase

By
king1
– September 6, 2011
Sirius XM Radio (NASDAQ:SIRI) agreed to voluntarily freeze their basic prices for 3 years following the merger in July of 2008. Sirius told the FCC they would not raise prices on their base package. In fact, Sirius XM has NEVER raised their prices, ONE PENNY, EVER. Yes, that’s right. 100% factual statement. Their base package price of $12.95 has been $12.95 since the year 2001. No other company can hold that claim. No cable company, phone company, satellite company, or any other pay subscriber service. Raised nothing. Not one dime. Now it is time for loyal subscribers to pay finally for the improved reception, channels, availability and content. I can’t think of a product were so much advanced value has been given for free for so long. Well Sirius XM is finally going to have to ask its customers to begin paying it back the added value over the years without ever raising the price one cent.

By Relmor Demitrius -

Sirius XM Radio (NASDAQ:SIRI) agreed to voluntarily freeze their basic prices for 3 years following the merger in July of 2008.  Sirius told the FCC they would not raise prices on their base package.  In fact, Sirius XM has NEVER raised their prices, ONE PENNY, EVER.  Yes, that’s right.  100% factual statement.  Their base package price of $12.95 has been $12.95 since the year 2001.  No other company can hold that claim.  No cable company, phone company, satellite company, or any other pay subscriber service.  Raised nothing.  Not one dime.  Now it is time for loyal subscribers to pay finally for the improved reception, channels, availability and content.  I can’t think of a product were so much advanced value has been given for free for so long.  Well Sirius XM is finally going to have to ask its customers to begin paying it back the added value over the years without ever raising the price one cent.

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Stockholders can finally rejoice.  No longer will content available in 2001 be the same charged for content available in 2011.  This is the real reason for the merger, in my opinion.  If not the main reason then it is close.  When Sirius and XM had to compete, it was impossible for one to raise rates without hurting itself.  Why?  Too similar of services with too similar of subscriber totals.

Forget inflation, just look at the differences in the companies from now till then.  This ultra-cheap service is about to up the media game a notch.  Finally real compensation for the best radio on the planet, period.  No close second.

  1. Howard Stern available on both services, mobile devices and internet.
  2. Howard Stern himself.
  3. Oprah Winfrey, NFL, NASCAR, College Basketball/Football/Hockey, MLB, NHL, CNBC, Bloomberg Radio, CNN, Opie and Anthony, Martha Stewart, British Soccer, Eminem, Jamie Foxx, and countless others.
  4. Countless news, sports and political talk shows never on before, including Glenn Beck.
  5. Better reception.
  6. Better Radios.
  7. Internet Option
  8. Wi Fi
  9. 2.0 Options coming (On demand, Replay, pause, on screen data, and more channels… possible Pandora like features as well..)

Now with the arrival soon of 2.0, there is even more reason to sign up and agree to pay the small increase on the basic package.

Here is what the new structure will look like.  Kingofalltrades.com discussed this scenario in length months ago on our radio show and used their own current structure on premium packages and common sense to arrive at this conclusion.

The basic rate of 12.95 will probably be increased to 14.99.  However, many customers will end up actually paying LESS not more.  Here is how.

They will announce a total package deal of $19.99 for everything.  That would include premium internet, Best of and all internet channels.  To buy all this separately right now would cost exactly $21.99. They are after the $20 subscriber business model.  Average rate per unit (ARPU) right now is only around $11.50.  They are trying to get this closer to $14 or $15.  This will help that greatly.  Also gone will be lifetime offers which has dramatically hurt ARPU.

Why would people do this?  Well they are paying it anyway.  Those who aren’t don’t like the difference between $12.95 and $21.99.  Well once its $15 instead of $13 they will think again about it.  Plus knocking some off the high end is in my mind more of a price decrease than anything.  Now the difference has gone from $12.95/$21.99, to $14.95/$19.99.  Now that looks much better to someone judging value.  Also, if price isn’t a huge issue anymore, who just buys the basic anything anymore?  Americans need the jumbo fries, the deluxe internet, and all the premium content.  Now that the price difference is dramatically closer, APRU should surge.  Also all new customers will see this difference and value and choose the $19.99 plan like the company wants them to do from day #1.  This will encourage upgrading.  So as you can see, if your adding internet and best of right now you would have to pay $22 a month.  So offering the whole thing at $20 a month would be actually lowering their prices.

But Relmor, that doesn’t make any sense.  If you are lowering your total price $2, how can you raise more money?  Because, it’s simple.  You are moving customers from 12.95 plan to the $20 plan, not the $15 plan.  Now they will just go for it all.  No point not too now.  It’s actually cheaper than it was before and you give customers a way to win without having to screw them.  So your top end payers will come down, but more bottom end payers will come up.  Hence more total revenue.  A lot more total revenue because every new subscriber from now on will have to pay at least the basic higher rate now.  And they will be more likely to take the higher package knowing how close it is to the lower base one.  If Sirius XM really wanted to make sure everyone upgraded their packages, they would raise the basic rate to $16.  That would ensure it for sure.

With the coming of 2.0 there will be a demand for cutting edge radios to go with the new service.  Great time to be a stockholder.  Price increase, new radios, new software upgrade, and finally a company not retrained by their own devices.  No competitor to hold them back on raising prices and no FCC to prevent them.

If old customers want to lock in the old rates, of course they can do that at any time.  Simply sign up for longer term plans now and pay ahead.  No big deal.  Anyone who wants to avoid the increase can.  It’s the new customers that will not have the option.

Notice I didn’t mention anything to do with any lawsuits in regards to this issue or the FCC allowing it.  I didn’t for a reason.  That is because there is absolutely nothing to prevent Sirius XM from now executing their plans.  Hence, it’s old news and not worth mentioning.    2.0 will be available for Christmas shoppers and the software upgrade will be out in January that will allow even more features to be available.

So all this talk over cancelling subscribers over a price increase is hog wash.  Fear mongers fomenting illogical assumptions.  In actuality, as I’ve shown here, there is no price increase.   Just a huge value increase.

 

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