With all the excitement surrounding the shift from PC focused websites to mobile apps, it has been enormously profitable for investors to identify winners in the app space. We’ve already seen huge stock price appreciation from Netflix (NFLX) and Priceline (PCLN) on this thesis. Who’s next? The latest rumor out of the blogosphere is that Apple (AAPL) will be holding an event with Rupert Murdoch to unveil the $30 million iPad-only subscription news publication called ‘The Daily’.
This announcement, however, is bigger than Murdoch. We think this will usher in a new era of app subscription services that will become significant profit generators for successful app developers. The a la cart model for newspaper and magazine publishers has never generated returns. The same can be said for television shows. Subscription payments, along with advertising, has proved to be the magic formula for content providers.
Which company is in the best position to take advantage of Apple's subscription offering? Logic suggests it will be a company that offers exclusive content. Nobody wants to pay for content that they can find elsewhere on the Internet. Netflix offers a subscription service of movies that cannot be streamed anywhere else and it has worked. I think we might see a similar thing happen with Sirius XM (SIRI).
Sirius has taken its lumps over the years because of its high cost structure to secure exclusive content, but if this company can re-sign Howard Stern, which looks very likely, and if they can get on stage with Steve Jobs to announce the app subscription service, this stock will soar. I'm not buying into the rumor that Apple is going to pay Howard Stern to come to iTunes. Stern is too crude for Apple's taste. Stern will renegotiate with Sirius which will give the stock a little bounce and then they need to take advantage of Apple's upcoming service. Sirius has done well enough to reach the 20 million subscriber level, but there is no question that the process of installing a radio and subscribing through Sirius is a hassle. Being able to utilize the seamless App Store model would be a real bonus.
We're buying Sirius XM option LEAPS. This is just one of our 2011 predictions available here. It has become all too common for analysts to release ridiculous lists of absurd predictions that will never make investors any money. Our list is full of relevant strategies designed to take advantage of the current investment climate. I urge caution in straying too far from reality when utilizing prediction lists. Investing in this Sirius play should begin with a relatively small position until we know that Howard Stern is coming back. Once his show has been secured, you can add to the position in anticipation of an App Store Sirius XM subscription.