In the words of the man who has an entire Sirius XM (NASDAQ:SIRI) channel dedicated to him: The time has come to let the past be history. And I feel like that's just what I've done with many of the SIRI bulls I sparred with during 2011.
Throughout the entire process, I learned a lot about myself. In my book, an experience ends well if I've not only learned something along the way, but grown and matured as well. That includes not simply admitting when you might have gotten something wrong, but critically rethinking your opinions or, at the very least, allowing alternative perspectives to influence them.
This article details one area where that last sentence applies.
If you did not catch it, you might want to spend a few minutes on the CNBC interview with Pandora (NYSE:P) CEO Joe Kennedy from Wednesday. In it, Kennedy repeats himself quite a bit. In fact, he echoed ghosts of Mel Karmazin.
Repeatedly, Kennedy answered the often-bad questions from people like Jim Cramer with some form of the same answer: "We're laser focused" on growing not only our dominant share of Internet radio listening, but leveraging the great opportunity we have to increase our share of overall radio listening. Kennedy made it clear that what other companies are doing in the broad space makes no difference to Pandora. His company's sole focus is on the personalized radio experience it continues to pioneer.
Over the last week, Pandora's stock has been on a tear, thanks largely to the following points:
That data, coupled with the company's "laser" focus, makes me even more bullish about my long position in the stock. It also brings up conflicting thoughts with regard to Sirius XM.
Pandora's Laser Focus
Fellow Seeking Alpha contributor Spencer Osborne wrote a strong Seeking Alpha article earlier in the week where he suggested Pandora needs to "watch out" for Slacker on account of the latter's aggressive efforts to broaden its slate of programming:
Slacker is certainly not acting out its namesake. Over the past two days the company has made leaps in its programming offering. The company has added live sports to the line-up in a deal with ESPN, talk and financial programming in a deal announced with American Public Media, and customizable weather in yet another deal with The Weather Channel. This is in addition to the ABC news, comedy and customizable content via ESPN that was already offered. Essentially Slacker has effectively made the shift from a company focused on music to a company focused on delivering top notch content to the consumer no matter what it is.
As those who have followed the radio industry for any length of time already know, content is king. It was an expensive lesson learned by satellite radio in the early years. Satellite radio had a need to differentiate itself from AM and FM radio. They initially did it by offering commercial free programming and quickly learned that commercial free music was not the total solution. In order to survive Sirius and XM needed to offer more. Much more. Expensive deals with the NFL, NBA, MLB and the NHL quickly came into being. Deals with the likes of Fox News, MSNBC, CNN and CNBC were soon added to the mix. Then mega-deals were struck with the likes of Howard Stern, Oprah and others. The combination ultimately worked, and today, Sirius XM is a thriving company setting subscriber and revenue records many could not have imagined just a few years ago.
But maybe this analysis actually provides one of the primary reasons to be bullish Pandora. It's not all over the map. The company appears hyper-focused on its music offering (with a little comedy thrown in for good measure). And that's where the strength of Pandora's brand lies; in the music genome that drives personalization (the feature everybody else tries to copy). Is the genome compatible with many other forms of programming? Should Pandora even care? Why try to be a jack of all trades, master of none? And, maybe more importantly, how prudent is it for Pandora to jack up its costs to acquire expensive content?
As a shareholder, I appreciate and advocate the continuation of the focused approach.
Sirius XM's Laser Focus (Or Lack Thereof?)
In one respect, Pandora and Sirius XM are quite alike in their "laser" focus. It dawned on me that part of my bear case for Sirius XM has actually become a cornerstone of my bull case for Pandora - laser focus.
I've always argued that Sirius XM neglects platforms such as mobile and Internet to focus on in-car penetration. Clearly, that's worked well for the company, driving subscriber and revenue growth, while shoring up the balance sheet. While I have urged the company to work on strengthening other revenue streams, I fully recognize that, as Kennedy seemed to imply with respect to Pandora, such an approach could make Sirius XM take its eye off of the ball.
On the other hand, I would love to see Sirius XM model the impact of backing out the money it pays to carry professional sports against any anticipated subscriber defections. While the company markets itself as "radio" with a wide range of content, I can't help but think that it (A) falls into the jack of all trades category and (B) might be too all-encompassing for its own good. A lean and mean, more focused on two primary types of content (music and talk) Sirius XM sounds good, but it's likely too late to turn back now.
I think aloud on this because, at day's end, it's all about driving the bottom line and finding the best ways to do that. When I worked in sports radio, many stations came to the conclusion that they could own the image as the top sports station in town without the expense of rights to sports broadcasts. It costs a lot less money to brand yourself as the place to go for scores and to sound off about the big game than it does to do that and dish out hefty licensing fees.
As investors, we always need to be not only thinking, but challenging our assumptions about what works and doesn't work for a company. Lots of thoughts and ideas will hit the cutting room floor, but others will produce shifts in mindset that could, even if indirectly, lead to profits.
Disclosure: I am long P.