SiriusXM delivered a “truly outstanding” second quarter, but Liberty Media’s earnings were still hit by settlement costs related to the satellite radio company.
Liberty, which owns nearly 60% of SiriusXM, recorded a charge of $108 million in connection with a $210 million settlement reached in June with five music labels over royalty payments for music recorded before 1972. That took a bite out of Liberty’s operating income, dropping to $171 million from $231 million in the year-ago quarter. Net income was $50 million, down from $61 million in the year-ago quarter. Liberty Media’s total revenue grew 8% to $1.12 billion.
Despite the charge, the overall picture at SiriusXM is bright, according to Liberty Media CEO Greg Maffei. The sat-radio service added 692,000 subscribers in the quarter, reaching a total of 28.4 million, and recorded its lowest subscriber churn rate, 1.6%, since 2008. Liberty Media is continuing to increase its stake in SiriusXM, he said.
Maffei was pressed about the long-term future of SiriusXM, which remains largely rooted in older subscribers who listen in their cars. Maffei said Liberty had looked at a range of possible businesses in the same general sector — undoubtedly referring to streaming music services — but that they all had “relatively unattractive” cost structures when it comes to content.
“We remain interested but we are not yet convinced of how to play it,” he said. He acknowledged that over time SiriusXM needs to look at how to extend its service to a younger demographic that is more mobile, international and “less driven by the car and into other devices.”
Liberty Media’s sibling unit Liberty Broadband is in the midst of trying to win federal approval of its $55 billion acquisition of Time Warner Cable and Bright House Networks. There was little discussion of that merger during a conference call with analysts.
Maffei was asked to comment on whether he views French telecom conglom Altice as a competitor, now that the company has swooped into the U.S. market with its $9.1 billion acquisition of U.S. cable operator Suddenlink. He acknowledged that Altice’s presence in the market “probably pushed us higher on Time Warner than we would have liked,” and he offered a “tip of my hat” to Patrick Drahi, the company’s controlling shareholder, for Altice’s recent moves in the Europe, Latin America and the U.S.