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Sirius XM to raise prices on subscriptions in January

updated 07:10 pm EDT, Wed September 14, 2011

Had to wait until after post-merger period

Satellite radio provider Sirius XM, having been required to wait three years after it's merger with former rival service XM before changing prices, has announced that it will be modestly raising the monthly subscription fees beginning in January 2012. The company will also be rolling out a Pandora-like on-demand music service called Satellite Radio 2.0 sometime this fall that will be available to subscribers for a separate (but likely very modest) fee, Spencer Osborne of Seeking Alpha reports.

CEO Mel Karmazin announced the intention to raise prices by a modest $1.54 -- moving base subscriptions up from $12.95 to $14.49 per month -- at a Bank of America investor conference today. Adding internet listening to a subscription currently costs $3 extra, and Karmazin made no mention of changing the add-on price (a web-only subscription currently costs the same as the base radio subscription).

Investors have largely welcomed the news as a sign that the company is moving to secure its financial strength without alienating existing subscribers, many of whom are waiting for the Satellite Radio 2.0 roll-out to see if the company can continue attracting new customers. The increase is seen as reasonable and affordable to the target demographic, particularly if add-on pricing remains the same. Osborne had predicted that the company might raise prices as much as $3 per month, but include internet listening in a large price hike such as that.

Once the new subscription is fully implemented (which will take some time, as many of the 17 million subscribers are in contracts that keep their rate the same for months or even years to come), it will add $75 million per quarter to the company's income, not counting any change in add-on sales or additional subscribers. Investors are looking to new offerings such as Satellite Radio 2.0 to bring in new subscribers to further bolster the company's value.

Satellite Radio 2.0, which will play custom streams for users based on their tastes and make it possible to skip songs or "record" and store programming for later listening, is set to debut sometime in the fall. When released, the service will be available via iOS and Android apps, as well as through SiriusXM-compatible car stereo systems and other receivers. Pricing for the service, and whether it will be sold as an add-on to a regular subscription or as its own product, have yet to be announced.

The stock for SiriusXM (SIRI) has been stalled at under $2 per share for much of the year. It is currently trading at $1.80. [via Spencer Osborne]




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