Take Sirius' News Seriously

| About: Sirius XM (SIRI)

On October 16th, Sirius Satellite Radio (NASDAQ:SIRI) announced the launch of Sirius Internet Radio. This new service allows users to listen to more than 75 channels of Sirius programming, without a radio, for the standard monthly subscription fee of $12.95. To mark this launch, Sirius.com visitors will be able to listen to Howard Stern for free on October 25th and 26th.

A one week chart of Sirius will show that this news has been written off as insignificant by Wall Street. Shares have actually fallen from $3.88 to $3.80 in the six trading days since news of Sirius Internet Radio has been out.

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However, the launch of Sirius Internet Radio is a significant event for the company. By streaming its content over the internet, programming is instantly much more broadly accessible to potential subscribers. While customers will still have to pay the same monthly fee to listen to Sirius online, they no longer have to purchase an equipped radio receiver. Sirius has amassed an impressive stable of exclusive content, the most noteworthy being Howard Stern. Sirius Internet Radio gives the company a second distribution channel to leverage this exclusive content, at very little in terms of cost.

Already leading the satellite radio industry in net subscriber additions for the past four quarters, Sirius Internet Radio should help bolster additions in the all important retail sales category, which has been dominated by Sirius since the signing of Howard Stern. It is reasonably optimistic to believe that this service could yield between 200,000 and 500,000 subscriber additions by the end of 2007. With a monthly fee of $12.95, that would translate to an additional $31 million to $77 million in annual subscription revenue. Additional subscribers will also help drive growth in advertisement revenue for the company.

For Sirius to achieve positive free cash flow, it will need to continue to add to its subscriber count while keeping costs under control. Sirius Internet Radio will help the company do just that, as it costs virtually nothing to stream content over the web yet makes its programming available to anyone with internet access.

Disclosure: The Marley Group does not have a position in Sirius Satellite Radio

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