Sirius and Netflix Should Partner

Now that the merger is behind Sirius (SIRI), the task at hand is to increase subscriber growth and revenue quickly. But with the automobile industry on the decline, the company must look to other marketing channels to drive sales. Netflix (NFLX) would be the perfect business partner for Sirius.

There are several similarities and differences between the two companies that would offer significant marketing synergies:

• Both offer a subscription-based media entertainment service, with subscription fees ranging between $5 and $25 per month.
• Both desperately need to grow their subscriber base of 18.5M for Sirius and 8.4M for Netflix. Netflix subscriber growth seems to be much more erratic on a quarterly basis than Sirius's.
• Both are the largest companies in their respective media industry niches. Netflix's largest competitor is Blockbuster (BBI), with less than half as many subscribers.
• Sirius attracts older subscribers, whereas Netflix subscribers tend to be the younger internet crowd. Both need more age penetration.
• Subscriber churn is under 4%, indicating very satisfied and loyal customers
• Both have a very large validated and qualified targeted marketing list for monthly subscription-based entertainment

By teaming together with a direct targeted marketing campaign for the Christmas season, Sirius and Netflix could rapidly accelerate the subscriber base of both companies while offering a more complete audio/video media entertainment package to their customers. Using the 80/20 rule and allowing for 20% overlap in subscriber base, and assuming only a 20% closure rate, the net new subscribers for each company would be 1.3M for Sirius and 2.9M for Netflix.

The nature of the partnership and marketing tactics would need to be carefully worked out between the two media companies since there may be some current or planned overlap in offerings. The marketing campaign could include targeted mailings or e-mails to each other’s subscriber base with separate or joint package subscription offerings. Each company’s web site could provide pointers to the other’s subscription plans.

A marketing partnership between Sirius and Netflix would be an enormous boost to both companies. If successful, Sirius could quickly become profitable and Netflix, with an already strong balance sheet, would become much more profitable. Finally, the partnership could grow into much more than just marketing, with Sirius delivering audio content to Netflix's planned internet video streaming hardware offerings like the MS Xbox and LG Blu-ray, while Netflix might stream video to Sirius’s Backseat TV.

Disclosure: Stan Muse is LONG on Sirius.

Comments

[experienced...:]

You have got to be kidding...

2008 Aug 03 09:10 AM

[Freep:]

This makes no sense at all. Who has 2 hours to watch a movie on the commute to work? No kidding, this is a really dumb idea.

2008 Aug 03 09:43 AM

[siriusinvestor:]

Stan, Put down the crack pipe, and stop smoking, it is making you delusional. Sirius/XM are doing just fine with 18.5 million up from 15 million last year subscribers. OEM penetration rates going to 100% install or satellite standard in every car in next 24 months should take care of any slack in car sales until the turn around eventually happens. Your idea is flat out dumb.

2008 Aug 03 10:03 AM

[valuestocks...:]

Stan you are thinking out of the box! The ideas you are promoting are great. Even though the previous 3 NAB posters did not think so.

2008 Aug 03 10:35 AM

[Bababooie:]

Luckily your idea doesn't include both companies contreolled by FCC regulations. The merging of NetFlix and Sirius-XM would only be hampered by the DOJ (um..... 12 months maybe). The combined ad campaign blitz by both companies would indeed reduce ad cost. But, it would be aimed at a demographic that doesn't fit into each others profile. Expanding a demographic bases is extermely difficult. Just try sitting in a car for fifteen munites with a teenager. Either you complain about the music or they do. Tastes are subjective. Reputations are hard to change. And the "FEEL" of a movie is not the same without surround sound in a darkend room (without road noise!).

2008 Aug 03 10:39 AM

[valuestocks...:]

The merging of NetFlix and Sirius-XM would only be hampered by....Baba he is not talking merger, just a partnership. This is the kind of thinking, I have been wanting to see. Something different.

2008 Aug 03 10:42 AM

[esymoni:]

Actually BBi would be a better fit, it would give them not only a growing online presence but also a great retail out let.

2008 Aug 03 02:21 PM

[sparky:]

I hope to see Sirius work on strengthening its financial situation before jumping in bed with another company.

2008 Aug 03 09:13 PM

[mgv11:]

The blockbuster comment has merit, I've always felt the retail channel as a sales tool sucked because the retailers have an easier sale with IPOD's and dont' actually man the siri xm sites very well. That might change if they could control the retail sale. Lets not pin ALL or hopes on cars just yet.

2008 Aug 03 10:03 PM

[Mr. Stupid:]

Woooo Hooooo, I can see this partnership forming in the very near future....I can feel something is happening behind the scenes right as we blog.......Sirius will be above 2/share before end of week......

2008 Aug 03 10:10 PM

[ace22:]

I think a partnership with apple and sirius would be great. imagine getting sat. radio on your ipod!

2008 Aug 04 08:32 AM

[sirius guy:]

Listen up!!! with the stock price falling, any news of potential idea with growth and especially with big tech companys will boost the share price of siri/xm. $1.30 as of today, that's ridiculous.....

2008 Aug 04 10:22 AM