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Sirius XM Radio (NASDAQ:SIRI) has finally decided to provide an Internet alternative in Ford (NYSE:F) cars through SYNC AppLink. This entry will bring the Sirius XM MySXM Internet functionality to the dashboard of more than 1 million Ford cars on the road. It also is just a "me too" product that joins a very crowded space.

The MyFord Touch and SYNC are now sold on nearly 80% of Ford vehicles, and, according to Ford:

double the sales mix of infotainment systems sold with Toyota and Honda vehicles, and up from 68 percent in 2012; MyFord Touch mix of 55 percent increased from 12 percent in 2012.

More importantly, for Ford, these products are apparently key drivers to improving customer satisfaction. But what does it mean for Sirius XM? From the company's press release:

Once SiriusXM Internet Radio subscribers download the latest version of the SiriusXM Internet Radio App for their compatible iPhone or Android smartphone, they can connect to SYNC AppLink for safer in-vehicle control of MySXM and On Demand.

However, Sirius XM will not be alone in the Ford dashboard. Its Internet offering will join a long list of apps that include Pandora, Stitcher, OpenBeak, iHeartRadio, NPR News, TuneIn Radio, Slacker Radio, Scout by Telenav, Rhapsody, Aha, MLB.com At Bat, USA Today, SYNC Destinations and BeCouply.

The Ford SYNC system will allow hands-free voice activation of MySXM over an iPhone or Android smartphone. In many cases, there will also be a Sirius XM satellite radio in the car. Buyers of a new Ford

...vehicle equipped with satellite radio will receive a six-month subscription to SiriusXM's All Access Package with access to SiriusXM's premium programming lineup via satellite, including every NFL game, Howard Stern, every NASCAR® race, Oprah Radio® and MLB Network Radio™, and more, plus access to SiriusXM Internet Radio on smartphones and other connected devices as well as online at siriusxm.com.

Note that the trial is for six months and is for the All Access Package. The six-month period should provide ample time for the new car buyer to sample the service and decide if there is enough value to become a self-pay subscriber at the end of the trial.

MySXM is the Sirius XM answer to customized playlists. However, in order to use MySXM, the subscriber needs access to the Internet and subscribe to a Sirius XM plan that includes Internet access. Sirius XM typically charges an extra $3.50 per month if a subscriber wants both Internet and satellite reception. The All Access Package, at $199 for a one year agreement, includes not only satellite and Internet access, but also includes Premier programming, and represents a 23% discount over the standard monthly fees.

Many fans of Sirius XM tout the advantages of satellite over Internet delivery, especially if that Internet access is via a smartphone in a moving vehicle. Not only can there be issues with spotty cell phone coverage, but some cell phone plans charge extra when data use exceeds certain levels. Using MySXM with SYNC AppLink forces Internet access over a cellular network and reduces the benefits of the satellite-only delivery system.

From a Sirius XM investor viewpoint, there is also a different royalty cost structure when music is delivered over the Internet. Instead of a 9% of revenue royalty rate, there will be a small fee each time certain songs are delivered over the Internet. This is more in line with the Pandora (NYSE:P) cost structure. (Apple's (NASDAQ:AAPL) iTunes Radio will be different since the company is reported to have cut deals directly with the record labels rather than go through the CRB procedure. Apple's agreements apparently have it paying a small fee per song plus a percentage of advertising revenue.)

Summary

Sirius XM probably had little choice about competing in Ford's crowded dashboard. Failure to offer its product would be ceding a segment of the market to competitors and allow them to secure a stronger foothold with the OEMs. The surprise is, perhaps, that it took so long to enter the fray.

The announcement by Sirius XM, and its willingness to compete, also makes it clear that Sirius XM does not have a monopoly on infotainment systems in car dashboards.

Source: Sirius XM Decides To Compete

Additional disclosure: In addition to my long positions, I have January 2014 $3.50 covered calls written against most of my long positions in Sirius XM and June $3.50 covered calls on a short term trade. I also trade blocks of Apple and Sirius XM on a regular basis. I have no positions in any of the other companies mentioned in this article.