Is Sirius XM Satellite Radio preparing to file for bankruptcy?
The company is working with restructuring expert Joseph A. Bondi of Alvarez & Marsal and attorney Mark Thompson of Simpson, Thatcher & Barlett on a possible Chapter 11 bankruptcy filing, according to the New York Times.
The paper also reported the company is working with investment bank Evercore Partners.
One company that has a stake in what Sirius does is satellite outfit EchoStar. Charles Ergen, who controls that company as well as Dish Network, recently acquired most of the $300 million debt that matures Feb. 17.
Industry watchers are speculating as to whether Ergen will bid to purchase Sirius. A bankruptcy filing by the company could force him to bid now rather than wait for his chance to make an offer in bankruptcy court.
Why is Sirius even considering a BK filing? Like many complex business issues, there are no easy answers.
But what is obvious is the company has spent a lot of money on promotion and marketing.
One of the most high-profile expenses incurred by Sirius during the last few years would be the 2006 hiring of Howard Stern, which published reports claim cost the company anywhere from a one-time $225 million stock bonus for meeting subscriber quotas to Sirius paying the shock jock and his staff $500 million.
Another factor may be falling new car sales. MarketWatch reports the current drop of U.S. auto sales means fewer cars equipped with satellite receivers going out showroom doors.
If Sirius files for bankruptcy, it will be the second-largest company to do so this year, says the Times, citing stats from Capital IQ’s database. Sirius has more than $5 billion in assets.
The No. 1 BK slot for the year so far belongs to Smurfit-Stone Container Corporation, which had more than $7 billion in assets before it filed for BK in January.
Of course, if Sirius does file for BK one thing is for sure. It will give Stern something to talk about.
Ruckus No More
College students won’t be able to raise a Ruckus anymore. The online music service especially designed for colleges and universities has closed its virtual doors.
Launched at Northern Illinois University in 2004, Ruckus was supposed to offer students an alternative to downloading copyright-infringing tracks. Owned by TotalMusic – the digital music effort formed by Sony BMG and Universal Music Group – Ruckus started as a subscription service but moved to a 100 percent ad-supported business model in 2006. At one time the service had partnered with more than 80 campuses, according to PC World.
But Ruckus couldn’t compete with the times. The service’s music held on to DRM long after DRM-free stores like Amazon MP3 launched, and even after iTunes announced it would drop copy protection.
The service shut down Feb. 6. Students trying to log in were greeted with the message, “Unfortunately the Ruckus service will no longer be provided. Thanks.”
Of course, you can blame the shutdown on an ever-worsening economy, but Ruckus had enough flaws to prevent it from competing with other services even in the most robust of financial times.
One of Ruckus’ most obvious flaws was that music downloaded from the site wasn’t compatible with iPods, iPhones or Macs. Other blemishes in the Ruckus service included a smaller library than most services, an inconsistency in file-naming conventions, no clear policy on differing between “clean” and “explicit” tracks and the inability for customers to transfer tracks to mobile devices.
Ruckus product management VP Jason Herskowitz wrote on his blog, “I only hope that someone else figures out how to crack this music-on-the-Web nut in a way that is a win for everyone in the value chain. The problem is that to make a music service a win for everyone, then all of the famished participants have to sit at the table – and be content to let all the others have a little bit to eat, even though they are still hungry themselves.”
Mark Cuban’s Capital Venture
The usual game plan for new businesses is secrecy. People behind new businesses are often secretive about everything from business models to secret formulas for frying chicken, if only to ward off competitors or to prevent the disclosure of trade secrets.
That’s where Mark Cuban, owner of NBA’s Dallas Mavericks and one of the first bonafide dot-com billionaires, has a better idea. Or so he thinks.
Cuban is offering new businesses, and people contemplating new businesses, venture capital. However, he wants those businesses to be totally transparent. In other words, no secrecy.
Cuban calls his idea an “open source funding environment.” Writing on his blog – BlogMaverick.com – Cuban described his quite visible business plan.
“Rather than trying to be a Venture Capitalist, I was looking for an idea that hopefully could inspire people to create businesses that could quickly become self-funding,” Cuban wrote. “Businesses that just needed a jump start to get the ball rolling and create jobs. I’m a big believer that entrepreneurs will lead us out of this mess. I just needed a way to help.”
Then Cuban invited his readers to post their biz plans. That is, as long as they could accept his rules and regs.
For example, Cuban rules out any business that derives or plans on deriving any revenue from advertising. “Because I want this to be a business where you sell something and get paid for it,” Cuban explained. “That’s the only way to get and stay profitable in such a short period of time.”
Another rule insists a company must become profitable within 90 days. Another rule says, “Everybody must work.”
So far, Cuban is getting plenty of offers to take his money.
One proposal involved developing software for businesses conducting networking events online. Hmmm… Sounds interesting, but Cuban hasn’t yet responded.
Another submitted idea called for portable furnaces on wheels for collecting and burning tumbleweeds. Cuban did have an answer for that one.
“Honestly, it’s not an area I know enough about to make an informed decision,” Cuban responded. “Sorry.”