Sirius XM Partnership Potential

May.24.12 | About: Sirius XM (SIRI)

I believe many companies have several unused opportunities to grow their revenue. I truly believe companies' possibilities for success are only limited to the ability of those companies to come up with new ways to push revenue growth forward. I wanted to share some of my ideas for Sirius XM's (NASDAQ:SIRI) future revenue growth. The two main avenues of revenue growth I will cover in this article will be based off of potential partnerships and advertising.

Here is my list of possible partnerships and possible advertising revenue. I give examples of how the partnership would work to help readers get a better understanding of these potential partnerships. Please note that these are just suggestions and the end result of how any partnership will work out should be decided by Sirius XM and that partner.

  1. The first partnership I will write about would be with an online video/movie content provider such as Netflix (NASDAQ:NFLX), Hulu or Amazon (NASDAQ:AMZN). Through this partnership Sirius XM could sell subscriptions to its online service along with subscriptions to Netflix and Hulu respective services. This would allow users of these services to have access to Sirius XM at home or on their smart phones without having to get it in the car. The only catch here is they would have to reduce the price to make it more comparable to the price to add internet listening to satellite radio subscription currently set at $3.50. This idea has been floated before on a Yahoo message board.
  2. The next partnership I will mention is with record companies. I believe it is time for Sirius XM to try and use some of its incoming cash flows to get exclusive music content before it comes out on the radio or for sale. This would give Sirius XM access to music no one else has yet and start bringing in royalties and publicity for songs before they are released on the radio or for sale. We have already seen them do this on a small scale with their specialized channel selection. To give you an example of this they are previewing Willie Nelson's latest album Heroes on Willie's Roadhouse channel. Most likely we will have to wait for the lawsuit with SoundExchange to end before this could ever be implemented or even considered on a serious level.
  3. To help with this partnership I would recommend another partnership with a payroll provider such as Automation Data Processing (NASDAQ:ADP) or Paychex (NASDAQ:PAYX). To pay royalties to record companies Sirius XM currently uses SoundExchange. SoundExchange takes a portion of the royalty to pay for its cost. Partnering with a payroll processor would give Sirius XM the ability to offer record companies the ability to direct deposit payments into their accounts with the payroll provider taking profits from interest earned on the money deposited before it gets paid to record companies. This would completely eliminate the need for SoundExchange and give Sirius XM the ability to argue that the revenue they take out of royalties for cost isn't needed anymore, increasing the amount record companies make.
  4. The next partnership that I think has merit would be with Facebook (NASDAQ:FB). Facebook has a growing number of advertising dollars and needs more innovative ways to bring in more advertising. Allowing Sirius XM to run 5-10 radio stations to stream when Facebook opens, Facebook and Sirius XM could pay the royalty costs from the ad revenue and then split any profits 50/50. This would help open the door for Sirius XM to compete with Spotify which has a rapidly growing position in the world of music entertainment.
  5. Terrestrial radio stations have typically been considered the main competitor to Satellite radio over its short history. I believe a partnership with traditional radio could be beneficial to both Satellite and terrestrial radio. A potential partner for this would be Cumulus Media (NASDAQ:CMLS). Radio stations could have a comedy hour on their stations in each market they have using Sirius XM Laugh USA channel with ads inserted by the radio stations. Sirius XM could put in a couple ads to try to gain subscribers to their traditional satellite radio.
  6. The last partnership I would recommend is with Google (NASDAQ:GOOG). Sirius XM could upload a huge portion of their music archives to Youtube and let users play them at their leisure with Google finding the Ads to play on them and then splitting the revenue between them. Google could also use Gmail to allow users to send some of their favorite songs to friends. They could also do this partnership with Yahoo (NASDAQ:YHOO) but with a smaller user base it might not be as successful.
  7. My last idea has to do with the televisions many family vehicles are being equipped with. Sirius XM could buy the rights to kids and family movies and air their own station with commercials added. If kids liked the programming enough they could possibly get the station put on cable TV. It may take several years for this idea to become feasible as there are not that many vehicles equipped with TVs on the road today.

Those are my ideas for potential ways Sirius XM could increase its revenue. Feel free to post a response to this article below to share your opinions and thoughts on my ideas. If you are a Sirius XM shareholder and like these ideas or have ideas of your own. Take some time to talk about them here or send a letter or email to Sirius XM to tell them about it. Here is a link to their contact information. As partial owners we have a vested interest in the success of companies we invest in and sometimes an innovative idea is the most valuable asset a company can get.

Disclosure: I am long SIRI.