At SeekingAlpha Rich Vanden Boogard just wrote: “They continue to lose more and more money as they grow subscibers. Adding subscribers doesn’t mean value’s been added and the stock should go up.”
In this case I would argue that it does mean that value has been added. Each month 1.8% of SIRIUS’ subscribers quit, according to the first quarter results announced by SIRIUS. That means that each year about 21.6% of Sirius’ subscribers quit. That means that the average customer stays with Sirius for (1/21.6%) 4.6 years. At $13 / month, 12 months / year that means that for every subscriber SIRIUS gets $722 in revenue, over 4.6 years for each subscriber that they sign up.
It costs SIRIUS $122 for each subscriber that they attract, according to SIRIUS’ 1Q results announcement.
In my view, that means that every time SIRIUS signs up a subscriber, they are netting $600 in profit. Why then wouldn’t value be added each time a subscriber signs up?