At last week’s annual Consumer Electronics Show in Las Vegas, the web-search giant and developer of mobile operating system Android unveiled — alongside Audi — a vehicle-centric version of the software that not only does everything the Apple iOS can do for a car (like offering maps and driving directions), but offers a built-in wi-fi connection for up to eight passengers’ mobile devices.
And thus begins the wireless-internet wars within your car. Apple may have fired the first shot using a device that’s constantly connected to wi-fi or mobile internet. Google has now fired back with a car that is the connected device. Never mind the fact that Pandora (P) has already generated more than a couple million in-car-radio account activations, via eight stereo manufacturers, with the service available in cars from 23 different manufacturers.
To give credit where it’s due, Apple is miles ahead of Google (and Pandora) when it comes to in-car mobile operating systems. Honda has already committed to adding the feature in some cars this year, with more carmakers rumored to be ready to do the same. Still, given that Google is now where Apple was a couple of years ago on the vehicle front, one can only help but wonder how many on-board wi-fi automaker partners Google will have in its corner by this time in 2016.
And the Point Is?
So what’s any of this got to do with Sirius XM? Nothing … and that’s the point. While Sirius XM has been cultivating its business based on a technology that’s now more than a decade old, the advent of a new and more powerful technology has reframed the question from “How could anyone ever unseat Sirius?” to “Will consumers prefer Apple or Android once wi-fi-connected cars become the norm?”
Just so there’s no misunderstanding, none of this is to say Sirius XM is on the cusp of bankruptcy. The company has millions of loyal fans, and could coast for years even if it never added another new subscriber from here. Indeed, Sirius XM has enough of a marketable product that Liberty Media is interested in acquiring the satellite radio outfit.
It’s also worth adding that Sirius XM satellite is a cheaper option than mobile broadband, if a consumer’s only interest is in audio entertainment. Sirius provides 24/7 unlimited access to a variety of radio station genres for about $15 per month, while mobile internet service costs roughly $10 per gigabyte of data. That’s enough bandwidth for about 200 songs, or ten hours’ worth of streaming audio.
Is that all the average Sirius XM subscriber needs were that subscriber forced to make a switch? That’s the question. The answer for at least some — perhaps too many — Sirius subscribers, however, is “yes”, which leads to the next obvious question … why would a Sirius XM customer continue to pay money for a service that can be provided at a similar price by a device that he/she is likely already carrying around anyway?
See, as of the middle of last year, more than half of all mobile phones in use in the United States were smartphones. Most of those smartphones are sold with mandated data plans in tow, whether those owners want them or not. Why not use what’s being paid for anyway? The proliferation of these data plans — especially now that data plans will make driving a car a more convenient experience — is making satellite radio more and more obsolete.
Liberty Media may be able to do something interesting with Sirius, but Liberty can’t change the underlying facts of the technologies in play here.
Fans and followers of Sirius XM will be quick to point out that the dedicated satellite radio service brings something to subscribers that simply isn’t available through any other venue. The quality of programming is one of those attributes that will keep some Sirius subscribers forever.
Fair enough. But that’s not likely to be enough for many Sirius subscribers, even if it will take a few years for that to become evident. And, no, the availability of Sirius XM’s broadcasts via the internet isn’t a game-changer. The stock’s bound to start struggling now, in the face of Sirius XM’s eventual displacement.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.