I have spent the past few days playing around with and putting Sirius XM's personaloized radio through its paces. The product is not yet commercially released and remains in beta, but for the first time we are getting a decent glimpse of what Sirius XM's (NASDAQ:SIRI) personalized radio is all about. Is it a game changer? The simple answer depends on what aspect of the game you are referring to.
From an investment perspective the answer is no. I define a game changer as an event that literally changes the landscape of the sector in favor of one particular product or company. Sirius XM's personalized radio is slick and awesome, but it does not change the rules of the audio entertainment landscape enough to qualify as a game changer.
Before passionate Sirius XM fans get all up in arms take a few minutes to read on.
The audio entertainment landscape is made up of satellite radio, terrestrial radio, services that broadcast over IP, and music library's of consumers. Even with the launch of a personalized radio service these methods of audio entertainment remain the same and there will not be a distinct shift in that dynamic. Sirius XM's personalized radio will create brand loyalty and will help to keep churn in check or perhaps even reduce it.
What Sirius XM Personalized Radio Is
- Sirius XM personalized radio is a value added service for existing subscribers.
- Sirius XM Personalized Radio is a product that will increase brand loyalty to Sirius XM. Because it offers new and compelling features it will keep more ears tuned to Sirius XM more often. Personally I am also a big fan of Slacker. I happen to like many of its play-lists better than Sirius XM. With Sirius XM Personalized Radio I now have more control over the music I hear. This could make me become more loyal to getting my audio entertainment through Sirius XM.
- Sirius XM Personalized Radio is something that will keep churn in check and perhaps improve the numbers. Because there is now more value to the Sirius XM experience it will become more difficult for consumers to leave the service. The more value a service has to a consumer the more likely they are to keep it. This point is important because as the self-pay subscriber base grows the absolute number of deactivations increases. This means it take more gross subscriber additions to add the same number of net subscribers as time passes. Reducing churn means that the net additions can maintain a growth rate that is acceptable to the street.
- Sirius XM Personalized Radio is "Customized Curation". The concept of Sirius XM Personalized Radio is to build more customization onto a platform of already expertly curated music channels. For example, let's look at the 80's. Having an 80's channel is not as easy as it sounds. The decade had the tail end of disco, harder rock, the emergence of punk, and the beginnings of a pop phase. How do you program an 80's channel to satisfy all of that? Within a few years you had Van Halen topping the charts and Michael Jackson doing the same. Sirius XM's solution is to allow the user to define the attributes of the 80's that best suit their current mood. That is awesome.
- Sirius XM Personalized Radio is a first step toward a more perfected service. This is one step along the way to what can potentially be the perfect one stop shop for audiophiles. It is a revolutionary concept for existing subscribers.
What Sirius XM Personalized Radio Is Not
- Sirius XM Personalized Radio is not a Pandora (NYSE:P) killer. While passionate Sirius XM investors may not want to hear this, it is the absolute truth. Pandora is free. Sirius XM costs $15 per month. The addition of personalized radio at a cost is not going to have Pandora fans leaving that streaming service in droves. In fact, Pandora probably will not even see a dent in its subscriber model. The service is compelling, great, and awesome, but it fits these categories more for existing subscribers than for bringing in new ones.
- Sirius XM Personalized radio is not a revenue driver. This is a value added service targeted at creating loyalty. It will not be a huge revenue generator for the company, and in reality will actually cost the company money to operate. This dynamic could shift in the future, but at this point do not look for personalized radio to bring in revenue.
- Sirius XM personalized Radio is not a new subscriber builder. The service is not geared toward, nor will it be marketed toward, getting people to sign up. There may be a day where this shifts, but it is not in the next year or two. It will help the subscriber line through the brand loyalty it creates.
- Sirius XM Personalized radio is not true On-Demand. A listener can not say, "I want to hear 'Time Stands Still' by Rush" and stream it right away. For that you will want to have that song in your personal library or use a service like Slacker of Spotify. It will allow you to customize a channel to a point where you are more likely to hear a song you want, but instant access is not part of personalized radio.
- Sirius XM personalized Radio is not a driver of the stock. I am not sure how much more simply I can state that. It is a great product, but not a stock driver. Over time it has attributes from a business perspective that will help the equity maintain certain levels by keeping certain metrics in check, but the most an investor can really hope for in terms of stock price is a stronger foundation.
Sirius XM Personalized radio is not a game changer in terms of the stock. It is not even really a game changer from a consumer perspective. It is a technological game changer of sorts in that it is establishing a foundation of what audio entertainment can be. Sirius XM Personalized Radio will cause a small shift in the audio entertainment dynamic and that is a good thing. It will, over time, help the company with metrics like loyalty and churn. It can also be the first step in creating a seamless experience between satellite and internet delivery. I will be conducting detailed reviews on the consumer and technical aspects of Sirius XM Personalized radio on SiriusBuzz. Stay Tuned.
Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I have no position in Pandora.