Last week, when the $3.8 million settlement of Sirius XM Holdings (NASDAQ:SIRI) was announced, the company came out to be on the losing end. But apparently, the satellite radio providing company has more things to worry about. On Thursday December 4, 2014, a consortium of attorney generals of the state announced that legal action would be taken against Sirius XM Holdings (NASDAQ:SIRI) and the company would be rightfully penalized for its unfair billing practices.
Also, reimbursing ex-subscribers and the current subscribers in around 46 states and in the District of Columbia. The company is also being blames for projecting a distorted image of cancellations, and deceiving its customers into taking automatic renewals after subjecting them to low introductory prices, and also for neglecting to provide timely discounts. The total amount isn’t a lot to pay for Sirius XM Holdings (NASDAQ:SIRI).
Sirius XM Holdings (NASDAQ:SIRI) is hoping to generate $1.12 billion in free cash flow by the end o 2014. So, shelling out $3.8 million to displeased members is not a very big deal for the company. Even if it offers discounts is not going to burn up all available resources. Be that as it may, the risky part of the settlement is persuading how legitimate the company’s retention rate has been previously.
Lately, the monthly churn rate of self-pay towards the company itself has been oscillating between 1.8%-1.9%. Sirius XM Holdings (NASDAQ:SIRI) has lost almost 2% of its customers in the previous months. The churn rate of the company was as low as 1.4% around nine years ago, but the constant push for acquiring the mainstream audiences and the array of in-car sound entertainment choice has pushed the month to month churn to 1.9% in the most recent quarter of Sirius XM Holdings (NASDAQ:SIRI).
Investors are now wondering whether this churn rate was kept low as an aftereffect of Sirius XM Holdings (NASDAQ:SIRI) faulty marketing strategies. According to Sirius XM Holdings (NASDAQ:SIRI), the company has officially attended to all these misrepresentations about it, but its telling that the course of events of the settlements offers discounts and refunds for those charges that were unfair between July 2007 and December 2014.
Terms of the settlement will incorporate the company notifying its subscribers with promising renewals and for arrangements that would last longer than six months and modifying the strategies to make it simpler to cancel their subscription. Client service representatives won’t be remunerated based on maintenance, making one of the biggest complaints on the internet about the customer service interactions of Sirius XM Holdings (NASDAQ:SIRI).
These moves could prompt an uptick in cancellations, and then we will wait to watch how all this plays out in the advancing quarters. It wouldn’t be a surprise if the month to month churn begins working its path north of 2%. Sirius XM Holdings (NASDAQ:SIRI) is making the best decision by accommodating its subscribers. The real question is whether it will be doing the right thing for its investors. Now we have to wait to see as to whether Sirius XM Holdings (NASDAQ:SIRI) satisfies its end of the settlement or not.