Fellow contributor Stock Croc recently submitted an article that poses the following question :
Can Sirius XM (SIRI) Compete with Apple (AAPL) and Google (GOOG)?
In reading the hypothesis, I couldn't help but scratch my head and wonder if this question would not be better posted in the following fashion :
"Can Pandora (P) Compete with Apple and Google?"
In the article Stock Croc makes the following questionable and arguable statements :
- That Sirius XM's biggest competitor in the music industry is Apple
- That because people carry iPods and iPhones this places Apple in direct competition with Sirius XM
- That the thought of Apple making direct deals with musicians and content providers is a scary possibility for Sirius XM
- That Google is an even scarier and more aggressive competitor to Sirius XM through Google Play
- That Google's Android can be placed on almost any advice and thus "How is Sirius supposed to compete against that?"
- That a major advantage of Apple (through iTunes) and Google (through Play) is because you can 'go there' for free and that you "only pay" if you actually want it.
- People are stealing music online using scams and programs and this is a problem for the music industry (and thus, it is assumed, Sirius XM)
The author concludes with:
Does Sirius actually have a future? John Malone seems to think so, but I have hard time seeing how he is going to be able to compete with Apple and Google.
Sirius XM derives the vast majority of its revenue from subscriptions to its service which is almost exclusively satellite delivery of audio programming ranging from music to talk to sports, to weather and traffic. They also provide backseat television service for vehicles.
It seems the entire article focuses on what would be purchased, downloaded, and stored music, as it uses iTunes and Play as the comparisons of competition. I feel this is entirely off base, and if these two services provide considerable competition it is to Pandora, not Sirius XM. Pandora provides an advertisement supported customized music stream through the same smart phones within the mobile environment, and has the most to lose from iTunes and Play. One could even argue that iTunes and Play offer very little comparison even to Pandora, as the services are dissimilar.
With all due respect to Stock Croc, I must counter each bullet point above.
Sirius XM's biggest competitor in the music industry is not Apple
Sirius XM's biggest competitor in the music industry most certainly is not Apple. Sirius XM's biggest competitor in the music industry is terrestrial radio. This is a well known and accepted fact. Since Sirius XM is built almost entirely around satellite delivery of audio entertainment within the automobile at present, it receives relatively little competition from Apple or Google relative to free, over the air, terrestrial radio.
Simply because people carry iPods and iPhones this does not place Apple in direct competition with Sirius XM
Again, the issue here is that Sirius XM is focused at present on delivery of audio entertainment through a subscription service with delivery through satellite. Does "stored music" compete? Yes, to some extent. Stored music has been around since Sirius XM's inception, and there is no reason to believe that downloaded music will suddenly become the fire breathing monster that defeats Sirius XM.
The thought of Apple making direct deals with musicians and content providers is not a scary possibility for Sirius XM
Consider if Sirius XM and Apple are both able to make direct deals with musicians and content providers, then each receives benefit. Since Apple and Sirius XM actually do not compete to any great degree, this benefit is not a scary possibility for Sirius XM at all. It is a great benefit to Sirius XM, period.
Google is not an even scarier and more aggressive competitor to Sirius XM through Google Play
For exactly the same reason that Apple is hardly a competitor to Sirius XM, Google is hardly a competitor to Sirius XM. Again the author focuses on downloaded content, which has very little to do with Sirius XM.
Google's Android can be placed on almost any advice and is what powers Sirius XM's newest add on radio, Lynx.
It is very hard to argue than an operating system creates competition for Sirius XM, especially when the operating system is used in its devices. Would it make sense for Sirius XM to use the Android operating system on their devices if they perceived Google as a threat, especially one to the degree Stock Croc hypothesizes them to be? No.
Apple (through iTunes) and Google (through Play) holds absolutely no advantage over Sirius XM even though you can 'go there' to their respective services for free.
The argument here is extremely weak. You still have to pay if you wish to purchase anything and walk away with content. These services are online stores. How does one argue that being able to browse them for free presents dooming competition? I just don't see this as a reasonable argument.
People stealing music online using scams and programs is a problem for the music industry but has little 'new' impact to Sirius XM.
I would argue here that stealing music online presents far more detriment to Apple and Google's music service. If one steals a song online, they do not download that song and pay for it. Thus, the impact is a detriment to the services that are set up as pay for download type services, such as iTunes and Play. There is little to no new impact to Sirius XM, since Sirius XM is a subscription based streaming service providing far more than just music as illustrated above.
Sirius XM investors are often exposed to arguments about why Sirius XM is doomed to failure. Some arguments have teeth, others do not. Stock Croc's picture has plenty of teeth within the crocodile's mouth, but the argument posed within the article is all gums.
