Mel Karmazin staying upbeat during crisis
EmptyNEW YORK -- The weak economy and tight credit markets don't scare Sirius XM CEO Mel Karmazin.
The merged satellite radio firm has been looking to refinance more than $2 billion in debt, and Karmazin said at the Media and Money Conference, organized here by Dow Jones and Hollywood Reporter parent the Nielsen Co., that a refinancing deal will be struck sooner or later.
"I believe we'll be able to refinance it, even in this market," he said, adding talks with lenders are ongoing.
In the current environment, companies with strong balance sheets get rewarded. Sirius XM doesn't have that, but will, Karmazin vowed.
He also pleaded with investors to allow his company time to get to free cash flow, pointing out that cable companies took decades to get there.
The former radio ad sales guru also touted the advantage in a weak economy of getting about 96% of revenue from subscriptions rather than ads.
Asked if lower car production in a sluggish economy would hurt Sirius XM, Karmazin said he was not concerned about this.
"Next year, we'll have 50% penetration" of new cars, he said. Predictions call for about 13 million new cars to come off assembly lines next year.
Karmazin calculated that if there were only 12 million cars sold, 6 million would offer satellite radio.
He cited surveys showing that 50% of people who get offered satellite radio in their new car, will take it.
That would translate into $300 million-$400 million in added revenue next year if Sirius XM retains its current subscribers, Karmazin said.
And retention is key in a tough economy as subscriber acquisitions cost money. "Right now it's more efficient to keep our subscribers," Karmazin said.
The Sirius XM CEO also signaled little interest in syndicating more of his company's content to terrestrial radio or other media, arguing it undercuts the value subscribers get from his firm's service.
"Why would they pay $12.95?" he asked. "It's because they can't get it anywhere else."