In my opinion Sirius XM tumbled Monday on the Apple (AAPL) news. While many may look to soon to be launched iRadio as the culprit, the bigger thing to watch is the IOS deals Apple is working on to get INTO the dashboard. That's right, the Apple IOS may be in cars as early as the 2014 model year. Manufacturers already include Honda, Mercedes Benz, Nissan, Ferrari, Chevy, Infiniti, Kia, Hyundai, Volvo, Jaguar, and Acura. With players like that already on board there will certainly be more to follow. Suddenly iRadio is not about simply streaming music via your phone into a connected car. Instead it is about an overall experience including Siri, Apple's voice activated virtual assistant.
The good news Monday was that the downward pressure was on lower than average volume. The bad news is that Sirius XM's (SIRI) dashboard dominance may have a more limited shelf life than many anticipate. I am not saying that 2014 and the emergence of Apple in the dashboard is the end of Sirius XM, but it does have the possibility of limiting upside. The "connected car" has been an emerging threat that can be contended with. The 800 pound gorilla of Apple is another matter altogether.
Sirius XM has enjoyed, and will still enjoy the advantages of satellite delivery. Apple can not compete with that. However, Sirius XM has not always been the swiftest on the technology front, a disadvantage when trying to compete with Apple. Sirius XM does have exclusive content that carries consumer appeal and value. Maintaining that content and those relationships will be a key element in Sirius XM strategy going forward.
I often have Sirius XM investors bring up the potential of telematics as a potential source for growth. The company did sign a deal with Nissan (NSANY.OB), but since then there has been no progress. Earlier this year Sirius XM expanded the Toyota (TM) deal but telemetics did not appear to be a part of it. Toyota signed a deal with Clear Channel offering telematics for free through the emerging HD radio technology. Apple plans to offer maps and other services as a part of its platform, making the world of telematics even more challenging.
Apple's iRadio announcement follows a similar announcement for a streaming service from Google (GOOG). Certainly the audio entertainment sector is heating up. For Apple I do not expect iRadio to be a huge generator of cash. Instead I expect it to be a power play for position. Apple is claiming real estate on the dashboard. That real estate can develop into other things should the business model prove to be fruitful. Should all else fail, Apple can parlay its dashboard position into a selling tool for its battle in the smartphone world.
For Sirius XM the focus will be maintaining a service that is valuable to consumers, expanding the brand to a bigger audience, and maximizing retention through adding value (our perceived value) to the consumer. Sirius XM suffered a small dip but has plenty of time, cash, and drive to maintain a top-dog position in the sector. Stay Tuned.
Additional disclosure: I have no position in Apple or Google.