Sirius and Netflix Should Partner

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Includes: NFLX, SIRI
by: Stan Muse

Now that the merger is behind Sirius (NASDAQ: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 (NASDAQ: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.

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