Will XMSR Customer Complaints Kill its Stock?

Over a year ago, I noted the decaying customer service quality in a few companies: In particular, Dell got named as a significant offender. (More recently, I complained about obnoxious Dell preinstalls).

I collected a ton of emails from readers about consumer complaints (mostly from January 2005).

I should have paid closer attention. Although I did not have a position in Dell, I missed the opportunity to short it.

Since that deluge of criticism in January 2005 the stock has underperformed dramatically, down 35% from over $41 to under $27. The stock was recently downgraded to a SELL at Citigroup — see that red bar down towards the far right on big volume? That’s the downgrade.  The sell rating was due in part to customer service complaints.

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Dell, January 2005 to present
click for larger chart
Dell_1

 

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Next up: XMSR. I am not a subscriber, and get Sirius Radio via my DISH satellite TV — but have a read of the litany of complaints after the jump from XM subscribers (via the Lefsetz Letter).

The XM chart shows that I am already late to this kvetch-fest — it looks like XM may already have had their Dell moment — the stock is down even more — a 50% haircut from $40 to $20. Ouch!

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XMSR January 2005 to present
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Xmsr

 

There’s only so much any company can cut their "basic business concept" before they start causing a problem with their consumers. That obviously happened at Dell, via the degradation of their "vaunted customer service" and it appears to be going on at XMSR.

Quite bluntly, if your business model is based on a specific concept, you screw around with that at your own risk.  For Dell, it was cheap and direct sales coupled with great customer service; Saving a few pennies by outsourcing/cutting back on support, and/or switching to cheaper components (as some readers have complained about with Dell) seems to be corporate suicide.

For XM, it may be that cutting the variety of their offerings will be their Waterloo. Their raison d’etre seems to be a broad and deep variety of eclectic channels. But as Chrissy Hyndes sang so long ago:  But you mess with the goods doll, honey, you gotta pay. *


Here’s the post that started the calvalcade of complaints:

"I keep getting e-mail from disgruntled XM subscribers.  That their favorite channel, #51, Music Lab, has bitten the dust.  I’ll print one below.

This is totally fucked up.  The promise of satellite radio was to go deep, to provide something for EVERYONE!  But the new regime at XM, the Infinity assholes, are turning XM into the bullshit terrestrial radio that they came from.  And this makes me CRAZY!

First came channel 49, Big Tracks.  With the INANE tagline "Our Classic Rock".  This is just the kind of b.s. unlistenable terrestrial classic rock stations use.  And the station’s got no DEPTH!  Just the same fucking tracks over and over again.  With no surprises.

But now it’s worse.  Music Lab was booted and what did we get?  MORE HITS CHANNELS!!!

We’ve got XM 17, U.S. Country, Country Superstars of the 80s and 90s.

How about XM 26, Flight 26, Modern Hits 90s and Now.

Or XM 30.  Hitlist.  TODAY’S Hit Music.

Or 68, The Heat, RHYTHMIC HITS!

Or 91, Viva, Latin Pop Hits.

Oh, they brought back Liquid Metal, which had been banished before, but what we’ve now got is endless b.s. hits stations, replicating what is ALREADY AVAILABLE ON XM, their only saving grace being no commercials.

This is a big deal.  This is like the death of free-format FM radio, but WORSE!  The golden era is OVER!

And what about the people who subscribed to XM ONLY for Music Lab?  People like Craig Anderton, the electronic music and instrument GURU!  Who signed up for two years, EXPECTING he’d be able to listen to his kind of music.  Which he could get nowhere else, which is why he subscribed to XM.

The lunatics have taken over the asylum.  DO NOT SUBSCRIBE TO XM!  They don’t have Howard, and the people now running the place have their heads up their ass."

Reader responses follow . . .

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*  Pretender’s Tattooed Love Boys

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UPDATE: May 23, 2006 8:21am

Nice mention of this post in Wes Phillips’s  Stereophile Column this week

All of XM’s Trials
Wes Phillips
Stereophile, May 21, 2006
http://www.stereophile.com/news/052206xmtrials/

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UPDATE: May 24, 2006 5:21pm

Geesh! The stock got shellacked today on a downgrade on subscriber expectations:

XM, the nation’s largest satellite radio provider, lowered its subscriber forecast, citing unexpected weakness in demand for its satellite radio service as well as potential legal pitfalls from a recording industry lawsuit.

It now expects to reach 8.5 million subscribers by the end of 2006, lower than its previous guidance for nine million customers by year’s end. The company had 6.5 million subscribers at the end of the first quarter.

Shares tumbled on the news, losing 11%, or $1.76, to $13.75 at 4 p.m. on the Nasdaq Stock Market.

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