Sirius XM: Can It Tune into Markets Beyond Cars?

Sirius XM Radio's (SIRI) best source of business — new car sales — has effectively disappeared. So instead of looking backwards at Detroit's big three, Sirius XM has finally realized it needs to look forward: to new technologies and new ways to monetize its content. Sirius XM, reporting a 94 percent slowdown in subscriber growth year over year, is wisely ditching its reliance on people buying the satellite radio receivers and trying to make its business more accessible.

Now we'll see if this innovation is too little too late, or if it can help the struggling company turn profitable.

In a conference call this morning Sirius XM announced it's planning to stream its radio system to Apple's iPhone and iPod Touch (AAPL) starting this spring. A smart move, aiming to attract new subscribers by giving them the service without making them buy more hardware. It could also keep some existing subscribers hooked, giving them a new way to access their favorite satellite radio stations. Reacting to auto sales, the company is trying to install more of its satellite radios in used cars, although I think that's unlikely to make a significant difference.

Beyond looking to the power of Apple, Mel Karmazin's company, now trading below a quarter, may find more hope in its alliance with DirecTV. Liberty Media (LINTA), which owns a controlling stake in DirecTV, invested $530 million in Sirius XM last month, saving the company from bankruptcy. CEO Karmazin says the company is looking at the potential to bundle its service with DirecTV's satellite TV, which could be promising.

I'd be curious to see if there are any potential cost savings if the two merge operations.

Sirius reported earnings but refuses to give guidance on revenue and subscriber numbers. Still, Karmazin continues to be optimistic about the big picture, saying he expects the company to turn around in 2009 after reporting over $300 million in EBITDA earnings this year. Overall, Sirius reported a fourth quarter loss of $248.5 million, better than its year-earlier loss of $405 million, and on higher revenue than the year-ago quarter. But remember, the company has yet to be profitable.

And the prospects of growing a non-essential consumer business in this recession are anything but strong.

Comments

[rustybliz:]

Julia- I believe Sirius is looking to "reactivate" radios already installed in used cars, not install new radio in used cars. Providing some incentives to used car dealers and/or free trials to used car buyers could produce positive results. Also, the Subscriber Aquisition Cost would be very cheap... the radio is already paid for and installed, just turn it on for the free trial.

Mar 12 04:38 PM

[hernje:]

Smart and pretty! Just the way I like 'em. Julia, will you marry me?

Mar 12 05:24 PM

[relmar2003:]

Then you would be marrying a moron. She didnt even research the company, obviously before spewing her garbage.
"Reacting to auto sales, the company is trying to install more of its satellite radios in used cars, although i think that's unlikely to make a significant difference."
Is she retarded? Of course it would make a differnce. Not to mention just turning on existing radios sold out of used car lots(certified used cars). This is easy. YOu give the dealer a kick back for plugging the sat radio, and whola, free subs. No cost to acquire pratically.
"But remember, the company has yet to be profitable."
Yes, Julia, I wouldnt want anyone to actually read your report and get some silly notion of actually buying this stock, which is below enterprise value. Your overall negative attitude was obvious, but if the brain dead still didnt get it ,they got it with that sentence. Like saying a report about Apple, then saying you know, theve never been to the moon. Im pretty sure we all know this.

Mar 12 05:40 PM

[Neal Barkett:]

There are approx. 40 million Sirius Xm radios(give or take a few million) that are in cars but about 20 million are currently not activated. I beleive they are thinking of activating all the non-activated radios for free. The content would be limited and would have a commercial based fromat to go head to head w/ Am Fm radio. Even as car sales have slowed down dramitcally a much larger percentage of these cars are coming off the assembly lines with pre-installed Sirus Xm radios. So it would make sense to start 2 formats, paid subscription or free but w/ commercials. It could be the best of both worlds for both the consumer & Sirius Xm. This very well could lead to well over 40 million potential listeners by the end of this year alone. With this format millions of new cars each year would be adding new listeners and of course as the percentage of new cars w/ pre-installed Sat. radios keeps getting higher the number of listeners could very easily grow at a staggering pace for years to come.

Mar 12 05:58 PM

[Neal Barkett:]

Julia, I think relmor2003 is right on. You need to look a lot closer at what is actually going on with Sirius Xm. Even with this recession they are positioning themselves to become a media giant. The stock has been beaten down unfairly by market & media manipulation. I think you'll see shortly the market & media changing there tune and jumping on the Sirius Xm band wagon.

Mar 12 06:12 PM

[cos1000:]

The Author said: I'd be curious to see if there are any potential cost savings if the two merge operations.

As relmor said above, research is fundamental to writing an informed opinion that educates the reader....(well he didn't say it that way but...) There is no plan to merge operations, period. Cost savings from this fantasy is you going down a dark, dead end, tunnel....

Sorry dear, but it is clear that you have no fondness for this company and your words are but another attempt to spin an otherwise good report, into more gloom and doubtful comment... The company is showing an ability to be flexible and capitalize on investments already made in the auto platform, while developing new partnerships, and you manage to totally misinterpret those efforts...

Sorry, but not a good read and very poorly researched...

Mar 12 06:39 PM

[gearhead924:]

With the IPHONE/IPOD app coming online will SIRIXM no longer be OEM dependant due to the fact that any vehicle with an MP3 port will now be satellite radio capable. If so will SIRIXM continue to pay the autos commisions for new subs? I think once the app is online cutting the commisions will be a great way to keep cash on hand. Satellite radio will be available in almost every auto in america!

Mar 12 06:42 PM

[buddylee:]

I think to bring in the younger crowd they need to offer ala-cart subs for internet. A lot of young people aren't going to spend 12.95 a month on anything. That'll buy 4 beers at most bars.

Mar 12 06:55 PM

[La Marque:]

HD Radio is free over-the-air. Many of the HD2 stations are commercial free. This is my choice.

Mar 12 07:30 PM

[GO SIRIUS!!...:]

I know everyone has heard this before but NOW IS THE TIME TO BUY! BUY! BUY! BUY! BUY! and keeping on BUYING!

Mar 12 08:35 PM

[tech man:]

didn't care for the article, negative conation is forever going on. tired of the negative views. sirixm is going to make it big. And the nay sayers are going to put to shame. so if you are smart, now is the time to buy the stock. it may take a while, but watch out. looking good. now is the time to go for it. t.m.

Mar 12 09:01 PM

[Crosstrain:]

WELL SPOKEN!!!!! This was a TERRIBLY BIAS report and comments.


On Mar 12 05:40 PM relmar2003 wrote:

> Then you would be marrying a moron. She didnt even research the company,
> obviously before spewing her garbage.
> "Reacting to auto sales, the company is trying to install more of
> its satellite radios in used cars, although i think that's unlikely
> to make a significant difference."
> Is she retarded? Of course it would make a differnce. Not to mention
> just turning on existing radios sold out of used car lots(certified
> used cars). This is easy. YOu give the dealer a kick back for plugging
> the sat radio, and whola, free subs. No cost to acquire pratically.
>
> "But remember, the company has yet to be profitable."
> Yes, Julia, I wouldnt want anyone to actually read your report and
> get some silly notion of actually buying this stock, which is below
> enterprise value. Your overall negative attitude was obvious, but
> if the brain dead still didnt get it ,they got it with that sentence.
> Like saying a report about Apple, then saying you know, theve never
> been to the moon. Im pretty sure we all know this.
>
>
>

Mar 13 10:47 AM

[KenC:]

Actually, I learned alot from the comments. So, they have 40M installed devices, but only 20M or so subs. Re-activating those 20M or so unused devices makes sense to me, with free and limited service. Sort of how developers may have a free and a paid app in the iPhone AppStore. Some percentage of listeners may upgrade from the free service to the paid one.

Adding iPhone and iPod touch listeners is a good idea, much like Amazon's Kindle app. There are 23+M iPhones and iPod touches already out there, so tapping into that installed base makes sense. They've just doubled their addressable device market. Let's hope the free and paid service story is correct. I will certainly try the free one on my iPhone.

Mar 13 01:27 PM