Satellite radio took a hit this past week as WorldSpace filed for Chapter 11 bankruptcy. Only two weeks ago, both Chief Operating Officers resigned.
WorldSpace is a subscription-based service that broadcasts news, sports, music and educational programming to over 150,000 people. They charge $5.00 – $10.00 per month for their plans and provide more than 100 channels. WorldSpace offers the only satellite radio service outside the U.S. (except Japan and South Korea). Sirius XM is the licensed provider of satellite radio here. Judith Pryor, Senior Vice President of Worldspace, told me that they do not expect for the U.S. to ever be in their market. With a reorganization and probable sale in its immediate future, it is uncertain who their audience will be.
Chapter 11 allows WorldSpace to continue on with business while these changes are being made.
Worldspace’s objective is to come up with a way to pay back some outstanding debts. Pryor says, “This we expect to do by either a sale of the Company or its assets or a recapitalization of the Company.” Worldspace had a decent 2006 with major relationships and agreements made with CNN and ESPN. That was followed by a disastrous year financially in 2007 with a shareholder lawsuit, and with this year looking even worse, the call for change should not come as a surprise.
- Worldspace pioneered broadcasting from company-owned and launched satellites.
- Worldspace was one of the principal founding shareholders of XM Satellite Radio.
- Worldspace’s Global Content and Programming Department puts out four of the original content channels heard on XM Satellite Radio.
- Worldspace technology is used in every XM receiver.
- Worldspace’s receivers act as modems and are capable of downloading data, video, and other media content.
Sirius XM is having a pressured year also, not nearly as bad as Worldspace, but they did cut 50 jobs last week. Sirius is seeking approval for a reverse stock split in order to increase their stock value and to avoid getting delisted from Nasdaq. Sirius is also under scrutiny for inhumane working conditions for women in their factory in Korea who assemble the satellite radios. A press conference is supposed to be held today (Tuesday, October 21) to discuss some very scary discrimination and abuse accusations.
Good news for both companies: both their stocks at closing yesterday were up (a little).