Sirius XM (SIRI) announces that the company is now offering full integration between Sirius XM Satellite Radio and Sirius XM Internet Radio in 2014 model year cars with Ford (F), GM, Chrysler, Toyota (TM), and Nissan (OTCPK:NSANY). The merging of satellite and Internet delivered content will allow subscribers to experience a more robust service capable of delivering features such as On-Demand, station refinement through My SXM, and the ability to create play-lists of programming for playback at any time.
The satellite radio technology is unique in that it can deliver the best attributes of both satellite and Internet delivered content. From the company's satellite constellation, subscribers will receive unparalleled signal coverage, while the Internet feed will deliver the types of customization that today's consumer demands. The default listening setting with Satellite radio 3.0 is the feed from the company's orbiting satellites. When a user wants customized features, the software will make the switch to an internet feed automatically so that from the consumer point of view the switch is seamless.
Please note. Everything written above is a fabrication. It sounded great though didn't it? That is where, in my opinion, this company needs to get to solidify its place in the world of audio entertainment.
Sirius XM satellite radio has many great attributes. Sirius XM Internet Radio has many great attributes as well. Combine the two into a seamless environment and you have some pretty compelling attributes. The reason we want to see this sooner rather than later is that the dashboard is getting mighty crowded these days. It is no longer AM, FM, and Sirius XM. Pandora (P), Slacker, iHeart, Aha Radio, Spotify, HD radio, and others are vying for their own respective space in this game.
While Pandora has remained pretty much a simple music service, companies like Slacker have stepped up in the content world to offer news, sports, and more. In the case of Aha, a platform has been created for audio entertainment companies making it the home for 30,000 stations, pod-casts, and more. In fact Slacker is available on the Aha platform. The significance in this is that Aha has been busy adding automakers to its line-up. Ford, Chrysler, Honda (HMC), Toyota and six other automakers all boast the Aha platform now. Essentially, while Aha and HD Radio are announcing more deals with new car makers, Sirius XM is announcing a concentration in the used car market.
First things first. Sirius XM has some very distinct advantages in audio entertainment that are not going to disappear overnight. However, what I want to see is the company stretching its wings a bit and really taking control of its course. I want to see a proactive company that does not allow others to grab headlines.
Over the past several months, Sirius XM has been languishing in a trading range that frustrates investors. This is happening when auto sales are climbing, EBITDA is growing, and a $2 billion share buyback is on the table. The Street wants something compelling and Sirius XM taking a stand and being an innovator once again could be the catalyst we all want to see.
In 2011, Sirius XM spoke many times about Satellite Radio 2.0. Instead of being a compelling event, it turned out to be a drawn out process that never seemed to make a material difference to many subscribers. Sirius XM should not tease something like my theoretical Sirius XM 3.0. They should storm the Street with it.
Sirius XM needs some excitement to get the ball rolling again on this equity. We are all expecting good quarters. We are all expecting cash flow and EBITDA growth. These are good, and can deliver investor value over time, but this company needs to raise the bar again like what we saw a decade ago when the company was known as a compelling innovator. Back then satellite radio could not afford to make these things happen, but took the big risk to bring about something awesome. Investors want awesome again. Ironically, now that the company has the cash to afford it, it seems to be playing more defense than offense.
As we get ready for the company to announce Q1 results in a few weeks, the only real surprise I can see on the table is whether or not Sirius XM has bought back any shares. Subscribers will be a predictable 450,000 or so, revenue will be good, as will free cash flow. A surprise to the upside would not only be nice, it would be a driver of taking this equity to the next level.
The Sirius XM story has become one of conflicting desires. Long-term holders are torn between a desire to see the company buy back shares for a low price, and wanting the satisfaction of seeing the price driven by the share buyback. Personally, I would rather see the company driving the share price up and continuing to do so for years to come. Yes, I am in for the longer term, but why give up value today for a bet on a more competitive tomorrow? Carpe Diem Sirius XM.
Additional disclosure: I have no position in Pandora.