Free Internet Radio No Longer Free: Pandora, Sirius XM Now on Equal Ground 37 comments
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By Brandon Matthews
Yes, it’s true. Webcasters have reached a deal with the recording industry that offers them a temporary reprieve, much like a death row inmate that has been granted a stay of execution. In the end, however, the result will be the same in my opinion. Both the inmate and streaming radio sites will cease to exist.
My initial reaction upon reading the terms of the deal was one of immediate skepticism. The deal allows for a lower rate than the proposed .19 per song that had been established; reducing the flat rate to a staggered rate of .08 cent for songs streamed in 2006 and increasing to .14 cent in 2015. The net effect is that companies like Pandora will be able to continue to operate for the near future, although it is clear to me that long term prospects remain bleak for such webcasters. The incentives to grow are now gone. The more the company grows, the more it pays.
Apparently, Pandora agrees. The company has just announced a new plan to begin charging its users on a monthly basis. The initial fee calls for users to be charged only .99 per month for the 10% of its users that listen to Pandora for more than 40 hours per month. Limiting access will certainly harm the ability of the company to sell advertising space. To be blunt, a dollar is not nearly enough to keep the company afloat and will result in a loss of subscribers. Once the unlimited free aspect of the service is removed, users of such services will be forced to look elsewhere.
As ad revenues decrease (and you can bet your bottom dollar that they will), the costs to consumers will have to increase. Pandora (and Slacker for that matter) are now playing on an even playing field with Sirius XM Radio (SIRI). Neither can match the Satellite Radio provider’s exclusive content.
Already Sirius XM’s iPhone and iPod Touch application has become the most popular music download at Apples iTunes store. Other applications will soon follow. Recently it was suggested that Sirius XM Radio could begin offering A La Carte channels as well. I see this as very likely. Such a move would further erode the listener base of free webcasters.
In the end, it has again been proven that free is never a good business model.
Position: Long SIRI
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This article has 37 comments:
they are buried - they will never get out.
Already Sirius XM’s iPhone and iPod Touch application has become the most popular music download at Apples iTunes store. Other applications will soon follow. Recently it was suggested that Sirius XM Radio could begin offering A La Carte channels as well. I see this as very likely. Such a move would further erode the listener base of free webcasters.
In the end, it has again been proven that free is never a good business model.
In the end - it's all about content - and Sirius has it all.
> In the end, it's all about content...... the end - it's all about content - and Sirius has it all.
1) the less than 20mil people who care about the 'exceptional content' on Sirius are already there -- you and all of your fellow subscribers. It's incredibly important to all of you, but if it was important to others, they'd already be subscribing, and Sirius would not be losing customers.
2) the satellite delivery platform is becoming less valuable by the day, as the internet becomes more and more ubiqioutous and the bandwidth wider
a few years ago, Sirius bulls would not even consider internet competition, they apparently thought it would stop evolving -- even last year, people were saying I was crazy because I said internet would be in your car by '09, which it now is.
so as the assets (satellites) lose value, the debt remains the same (and growing, actually)... as the internet radio stations continue to evolve, they will start to take the content away from Sirius -- a debt free radio station will easily overmatch a Sirius bid as the contracts run out -- all of Siruis' money is going toward debt servicing, so they will not be able to compete.
this game has been over for a while, Mel & Co are just seeing how long they can keep paying themselves huge salaries before they go bankrupt and leave shareholders with zero
I find it an interesting case study of a whole segment of people so enamored by the product, that they throw fundamental analysis straight out the window. Most of these people just love their Sirius - they can't live without it, and so they think that makes a great stock, paying no mind ot the balance sheet and the writing on the wall. They pin their hopes on whatever greenshoot of the moment (currently an auto recovery and the iPhone application), when even a crude study of the numbers shows that in the rosiest of scenarios it will make no difference in the end.
I also have a big problem with your cheerleader, Sat Waves (forgot his name - Tyler?), who spins every insignificant piece of news positive, and misreports facts -- his report on the latest debt, for example, misreported the interest rate and said it was a refinancing (when actually $375mil of it was NEW debt -- zero mention of this).... even Mel giving himself a raise was inexplicably reported as a 'good' thing... Tyler has never once addressed the mountain of debt or any analysis or plan to pay it off. Not once -- it's like it doesn't exist.
This is a company that has never made money, is now losing subscribers, and goes deeper and deeper into debt every few months.... and yet the stock is pumped and pumped by Sat Waves and posters... it's really a unique situation - I find it somewhat facsinating - I am learning from it.
I have no positions - I was a bull until about 18mos ago.
I post a little out of curiosity -- I want to see if anyone - anyone at all -will address my specific points about the debt. So far no one has.
...and if just a few people wise up from my posts, not that I'd ever know, it's worth it jsut for that. I mean, how much have people lost - for years - while Mel&Co are just raking in money? and these people keep holding on as the situation gets worse and worse... jsut looking at their Sirius receiver saying, "what a great product", completely oblivious to the balance sheet...
I have found that whatever I say, or you for that matter, people are going to act upon their own ideas and whims and rational logic usually has little to do with it.
Finally, another point that most people are missing and I never see anyone else mention is that Satellite radio is not the only service offered by SIRIUS/XM. But that is the prime focus and what everyone seems to hinge all their decisions around.
There is of course the internet radio, and yes if Pandora were made to charge 2.99 as SIRIUS does, then it would be a more even playing field, but that's not what American business is about. It seems as if everyone wants to put their competition at a great disadvantage. They are working with the mentality of limited resources and everyone wants the lion's share.
Then there is WXworks. It is gaining subscribers every month at a starting level of $44.99.
It may be slow in coming, but I do disagree that SIRIUS is going away. I feel that in the long run it will eventually be profitable, with or without Mel.
Think about this one: Out of some 239 comments by jswede, nearly 120 are about SIRI. Now *that* is a great example of an altruistic commitment to making sure people know how much of a dog SIRI is ;)
Nothing like a posting history.
However, I don't think for a minute anyone is actually making personal decisions based on anything anyone here says -- contrary to what everyone here thinks about the weight of their opinions... har, har...
Besides, isn't everyone on this site a gajillionaire? A real brain trust of savvy investors...
Sadly, I do agree with the detractors about the odd phenomenon of 'average' investors being heavily represented in SIRI stock ownership. But then again, some of the best advice is to invest in what you use.
The problem with that is when the thing you are investing in is really just a tool to separate you from your money, which I think has been what SIRI has been used for by the 'big boys' for some time.
PC
anyhow, most of those posts are from 9-24 months ago, back when every single Sirius story had 150+ positive, "going to the moon", posts.... I was about the only bear, and had a ton of attacks to stand up to for every time I posted. It was hard work! lol
On Jul 09 05:31 PM Pseudonymous Coward wrote:
> Hawk...
>
> Think about this one: Out of some 239 comments by jswede, nearly
> 120 are about SIRI. Now *that* is a great example of an altruistic
> commitment to making sure people know how much of a dog SIRI is ;)
>
> Nothing like a posting history.
On Jul 10 10:55 AM R A F wrote:
> Keep in mind - minor moves of a few cents around the current norm
> of .40 means virtually nothing over time. There have been major improvements
> in the fundamental contributors to Sirius XM's business plan which
> will take time to flow to the bottom line. Presumably, all current
> holders of SIRI are in this for the long term positive outlook and
> not attempting to trade minor swings of a few cents. The technical
> framework remains strengthened through the bottoming formation of
> the last six months and current pullbacks appear to be normal (and
> contained) within this framework. Despite the "bashing" from the
> usual suspects - downloads in excess of one million Apps over the
> last two weeks are really a great success story, as this is broadening
> the landscape for Sirius to develop a base for substantial revenue
> increases in the future. This amount of interest, in this short a
> time period, indicates probability that substantial further downloads
> will continue in coming months. Don't lose the forest for the trees.
On Jul 10 11:42 AM ScroogeMcduck wrote:
> Hey jmsithy, did you eat alot of paintchips as a kid?
don't believe what CNBC tells you.
you are right they don't get a dime! THEY GET EITHER $2.99 IF YOU ALREADY ARE A SUBSCRIBER OR $12.99 IF YOU ARE NOT ALREADY A SUBSCRIBER.
that's not free....Siri does make money here!
On Jul 09 10:25 AM jmsithy wrote:
> Brandon you forgot to mention that SIrius is not seeing one dime
> from this application....
>
> Already Sirius XM’s iPhone and iPod Touch application has become
> the most popular music download at Apples iTunes store. Other applications
> will soon follow. Recently it was suggested that Sirius XM Radio
> could begin offering A La Carte channels as well. I see this as very
> likely. Such a move would further erode the listener base of free
> webcasters.
>
> In the end, it has again been proven that free is never a good business
> model.
On Jul 10 11:44 AM User 444878 wrote:
> jmsithy, you are wrong...
> don't believe what CNBC tells you.
> you are right they don't get a dime! THEY GET EITHER $2.99 IF YOU
> ALREADY ARE A SUBSCRIBER OR $12.99 IF YOU ARE NOT ALREADY A SUBSCRIBER.
>
> that's not free....Siri does make money here!
Something that is making a comeback sure isnt showing anything for it except short selling. God even GM is pulling out of its Bankruptcy with Sirius still at the same level as it was back in March right after the word came out that it got the 530 mil in loan to stay afloat. If you can prove me wrong on this, then I want to see it. Raising to .48 for 1 day then to drop to .35 with no bad news is not a comeback its not even enough to even take this stock seriously. If it stayed at .35 for almost 6 months then what is the time frame you would think it would take a dollar and dont make excuses that oh well the car subs are down, because that was 2 months ago time to get over that and start investing in a company that can actually do something such as Sirius, but have not seen it yet. It seems that things will always be the same with this company. so how much do you think it cost to create the Apps and look how long it took to bring it out. With nothing to show for it. Because it is still at the whoping .35 where it was before the Apps came out. I can understand if this dropped a few cents but to just go back to .35 you can not call an investment something from where it started at 0 to end up at 0.
Like I said I am not a basher I have been with the stock since Feb and it was a good run, but I think you can do more with your money. Than put it in an investment that has not shown any returns
On Jul 10 04:11 PM R A F wrote:
> All this chatter over 10cents!! Like it's a big long term deal!
On Jul 10 04:11 PM R A F wrote:
> All this chatter over 10cents!! Like it's a big long term deal!
On Jul 10 06:56 PM R A F wrote:
> This is a turnaround situation. Technical formations indicate increasing
> strength over the intermediate to longer term - based upon the bottoming
> of the last six months. I consider intermediate term to be six months
> to one year and longer term to be one year and out. To be reading
> too much into each 10 cent swing as the borroming formation continues
> to complete is not realistic within the longer term framework. Potential
> continues to be indicated toward 1.00+ over the next six months to
> one year, based upon the technical formation that currently exists.
I just dont understand why companies charge fee for something which is available free of charge online.