News about a new Verizon (NYSE:VZ) cell plan structure was released Wednesday and the shift in plan prices could be welcomed news for audio entertainment companies like Pandora (NYSE:P), Sirius XM (NASDAQ:SIRI) and others. The new pricing concept called "Share Everything" has many attributes that could actually have consumers saving money.
For Sirius XM and Pandora, access to and good pricing on data plans will be an integral part of the respective businesses. While Sirius XM does have the advantage of satellite delivery, many of the upcoming Satellite Radio 2.0 features will actually be delivered over the Internet, making affordable data an essential tool in growing the IP side of its business.
One classic argument against the concept of Internet radio has been data costs. That argument has been fraught with flawed logic for quite some time, and now finally perhaps those that are calling for the death of IP-delivered audio entertainment due to data costs will simply fade away. The facts are that despite data costs of cell phones, IP radio has grown by leaps and bounds. Now, with data costs being further mitigated, people can feel free to stream to their hearts content.
What Verizon has done is to shift its model into that of a shared one. A smartphone will now feature unlimited voice and texting as well as 1GB of data for $90 per month ($40 base + $50 for !GB data). Each additional smartphone will be $40 per month, feature the same unlimited text and talk while sharing data. Users can turn their smartphone into a hotspot for free. If you want to add a tablet you can do that for $10, and a USB jetpack to liven up computers is $20 per month.
For many users, 1GB of data may not be enough. In particular if you have multiple phones on the account. The solution is simple. Verizon has several tiers of data plans available:
Yes, the unlimited data plan is phasing out, but most people never even touch 2GB. Thus, for about the same amount of money you can share 6GB of data with your family.
So how exactly does this help Pandora and Sirius XM. The answer is simple. Consumers are becoming more and more connected. People have now come to accept that a cell phone bill will be over $100 per month. Now, with shared plans families are less likely to sqwalk about the costs. Consider what a family of four was paying before the concept of share everything arose:
With the existing Verizon Family plan, four phones with unlimited talk and text would run $200 per month. If each phone had 2GB of data, you would have to add another $120 per month, bringing your total to a whopping $320 per month. With the new "Share Everything" plan, that same family would pay $250, a savings of $70 per month and the family has a massive 8GB of data to share! With a savings of $70 per month there will be newfound money that can pay for things like Sirius XM, a service like Spotify, or even something like Pandora One.
Verizon has found a way to desensitize consumers to data costs. It is now simply part of the package, and an expected charge. Now that iPad that was going to cost $30 per month to liven up can be live with a free mobile hotspot.
It is no longer a question of whether or not to have data, it is a question of what type of content do you want to get on your devices. This will certainly be a hot topic in the next few weeks as Verizon competitors formulate new pricing structures as well. Rest assured that executives at Sirius XM, Pandora, Spotify, Slacker, and MOG are celebrating this move by Verizon.
Disclosure: I am long SIRI.
Additional disclosure: I have no position in Pandora or Verizon