• by Erik Sass  @eriksass1, December 6, 2006

Satellite radio suffered another setback on Monday with Sirius Satellite Radio's announcement that it was going to miss its subscription forecast for the end of the year, giving a jolt to the company's stock as it joined competitor XM in the missed-forecast doghouse.

Sirius reported that it will cut its year-end subscriber forecast from 6.3 million to a range between 5.9 and 6.1 million, due to sluggish post-Thanksgiving sales. At the end of the third quarter, Sirius had a total subscriber base of about 5.12 million.

According to Banc of America analyst Jonathan Jacoby, retail sales of satellite radio sets may fall by up to 20% in the fourth quarter.

Meanwhile, rival XM has revised its subscription forecasts downward three times in 2006. The latest announcement from Sirius is further evidence that a broad structural slowdown in the satellite radio market is here.

In the third quarter, Sirius signed up about 441,000 new subscribers--a noticeable decline from its net addition of about 600,000 in the second quarter and 761,000 in the first. XM has also experienced a slowdown in new subscriber additions, with just 286,000 new subscriptions in the third quarter, compared to 640,000 in the second quarter and 569,000 in the first.

One small consolation: Although the rate of new additions is slowing, both companies are posting smaller losses than before, and finding favor with Wall Street.

In the third quarter, Sirius' net loss was $162.9 million--down from $180.4 million in the third quarter of 2005. It's an even bigger drop from the company's second-quarter loss of $237.8 million and a first-quarter loss of $458.5 million, associated with high marketing costs surrounding Howard Stern's move to the company.

For its part, XM's third-quarter loss was at $83.8 million--down from $131.9 million in the same quarter last year. That's also a huge drop from the company's second-quarter loss of $229 million and first-quarter loss of $149.2 million.