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By Mark Ramsey

Pandora and other online radio pure-plays want to be in the car, and that will mean trouble for Sirius XM (NASDAQ:SIRI), right? After all, Pandora et. al. are free, while Sirius XM is not.

Not so fast.

Here are five reasons why that logic could be all wet:

1. Sirius XM is destination programming. For Pandora, the destination is me.

That is, personalized radio services solve one problem really well, but they don’t solve all problems equally well.

Tons of Sirius XM listenership is for professional sports, news and talk, or premium branded content like Howard Stern or Rosie or (now) Dr. Laura.

And just because I can make my own movie at home doesn’t mean I won’t look forward to Green Hornet in the theater, know what I mean?

2. Pandora requires usage, while Sirius XM only requires subscription.

In other words, it doesn’t matter whether or not I use Sirius XM – it only matters whether or not I pay for it. Ironically, Pandora’s utility is a function of my actual usage of it, since there is no price point to factor into my decision-making.

And the beauty of being built into cars is that I don’t have to decide whether or not I want to subscribe to Sirius XM – I only need to decide whether or not I want to drop my subscription. And as anyone who sells subscriptions will tell you, dropping a subscription you have is as hard as adding one you don’t have.

The Sirius XM decision, therefore, weighs the cost of the service against one or two of the premium values that listeners get from it. That’s all it takes, just one or two. That’s why, for example, HBO could air color bars all week long, but as long as it features a new episode of True Blood on Sunday nights (or whatever the hot show of the moment happens to be), I will keep my subscription until the end of time.

3. Sirius/XM has a big head start in cars.

Here are some recent stats on Sirius XM’s penetration into the auto market:

[It] has satellite radio installed in approximately 60% of the vehicles sold, and almost 47% of consumers exposed to the service elect to become self paying subscribers after their promotional period ends.

That’s a big head start, no matter how many folks have Pandora et. al. installed on their mobile devices. Plus, merging the technology in your pocket with the technology in your dash may not be hard, but any pain inspired by any amount of extra effort creates an obstacle to growth. Compare that to …

4. Sirius/XM is as easy to use as radio is (assuming you don’t have to install it yourself).

The fact that almost one out of two OEM subscribers sticks with the service after their trial ends compares to the tiny percentage of folks who walk into a Best Buy (NYSE:BBY) play with a Sirius radio, and walk out with one in a bag. Installation is a pain in the neck. But not saying “no” to your subscription and flipping a switch on the same dash that already contains your radio is easy.

Further, as brainless as the Pandora process is, it’s still more work to create a series of stations and tailor them to your tastes than it is to punch a button or even a series of buttons on your dash, just like we’ve done for generations.

And even if you argue it isn’t harder, it sounds harder to the uninitiated.

5. Sometimes you want someone else’s channels, not yours.

As I have long argued, having a bunch of choices rounds to infinite choices. That is, for most folks it’s not about creating a custom this or that, it’s about putting in a small amount of work to get a “good enough for me” content stream. As with all decisions, consumers will measure the effort against the value of that effort, and customization’s value must be worth its cost in terms of effort.

For some, it just isn’t. Especially when they’re trying to drive from here to there.

Sometimes, good enough really is good enough. And I’d prefer you to do the work so I don’t have to.


Source: Five Reasons Sirius XM Radio Does Not Need to Fear Pandora