Sirius XM: What to do given the recent news

Last week, recently merged Sirius XM mailed some of its subscribers with a "special opportunity" to avoid a price hike on their second satellite radio receivers by prepaying for one, two, or three years of service at the old rates, in advance of the March 11 date when rates will change. This week, in turn, came more news on the woes of the company, including a further drop in its stock price, which is trading at 6 cents today, and a possible bankruptcy filing next week.

Here are some of the questions raised by the offer and the recent news, followed by our advice on what to do in response:

Is the price hike even kosher? Wasn't holding the line on price increases a condition of the companies' merger?

Yes—on service to the first radio in your subscription. Because the imminent price hike is to additional radios, it's allowed, at least under the letter of the merger agreement. After March 11, the cost to Sirius XM subscribers for each additional receiver goes up to $9 per radio from $7. And listening to Sirius XM over the Internet, which used to be free, will now cost $3 extra a month, for all subscribers.

What if the company indeed goes into bankruptcy?

It depends on the type of bankruptcy they might declare. If Sirius XM does file for bankruptcy, it's anticipated to be a reorganization under Chapter 11, in which the company is expected to continue to provide service. Of course, it's possible that the company might at some point file for Chapter 7 liquidation, in which programming and customer service would likely come to an abrupt halt.

What would happen to the subscription I prepaid if the company discontinues service?

If you paid by credit card, you might be able to retrieve your prepayment by disputing the payment. But act quickly; you may have only 60 days after the date the bill was mailed to dispute a charge. Failing that, you could file a claim in bankruptcy court, where, as an unsecured creditor, you would likely receive only pennies on the dollar—if anything—on your prepaid subscription.

What to do?

Our advice:

• If you're a current subscriber with multiple radios, think hard before prepaying your subscription. First, consider how much you need and want two or more satellite radios; maybe you should drop the extra one and skip the price hike—and the prepayment decision.


• If you do prepay, limit your commitment. Prepay for a year, and avoid the two- and three-year offers that are available.


• If you're a prospective new satellite subscriber, sign on a month-to-month basis, even if you have to pay a little more for the radio itself (as you might for higher-priced XM or Sirius models costing $100 and up). Also, while a survey a few years back by the Consumer Reports National Research Center showed high satisfaction with satellite-radio service, consider the growing number of free alternatives to it. Those include the likes of free applications that bring the no-cost music-streaming services Pandora.com and Slacker.com to smart phones, which you might then pipe into your car radio or home entertainment system.

—Mike Gikas & Anthony Giorgianni