CBC's Sirius Satellite Radio a huge financial risk
(QMI Agency files)
MONTREAL – CBC spent millions of public dollars on a radio project with questionable results, documents reveal.
Documents obtained by QMI Agency under access to information and an examination of annual reports show CBC took significant risks by investing $12 million in 2005 in Sirius Satellite Radio.
According to a financial report, the accumulated deficit of Sirius Canada — in which CBC owned a 25.5% stake in until its fusion with XM Satellite Radio in May 2011 — sat at $100.7 million at the time of the merger.
The loss incurred for investors was $71.3 million, including $36 million poured into the company in 2005 by its three founding partners.
CBC's financial state reflected those investment losses until the merger.
Satellite radio is offered through subscription, primarily to buyers of new vehicles, and airs a variety of stations, including some controversial material like The Howard Stern Show.
At the time of the merger, Sirius had accumulated a million subscribers.
When contacted for comment, CBC spokesman Angus McKinnon acknowledged the losses for shareholders in 2010.
However, he said that Sirius eventually reached profitability — a fact that was reflected in the money and shares CBC earned in its merge with XM in May 2011.
“We received $18 million in cash and shares for a value of $53 million,” said McKinnon
McKinnon added Sirius's bankruptcy would not have cost the broadcaster more than $12 million because shareholders' responsibility is limited.
“It's an important platform that allows CBC to occupy airwaves all around North America,” he said, adding that satellite radio is a “profitable strategic investment” that is in line with the broadcaster's strategic plan.
That's far from certain, said radio industry expert Richard Paradis, president of Group CIC, a research and analysis company.
A SiriusXM annual report published in January said the company's “cumulative spending and losses were significant.” Its debt sat at $146 million and the accumulated deficit was $107 million.
“Many people receive satellite radio for free when they buy a car, but after six months, they aren't ready to pay $20 per month to continue receiving it,” Paradis said.
In the last quarterly results, SiriusXM saw profits of $248,000, compared to losses of $4.4 million a year earlier.
Paradis said that is slow progress.
The state broadcaster, however, said this type of radio is very successful in the country and boasts than more than two million subscribers.