The steady growth of Sirius XM Radio (SIRI)continues to prove that consumers will pay for better radio service — the question now is will satellite radio continue to flourish if customers embrace a similar free service in another form. Namely, Internet radio.
The draws of Sirius continue to be its comparatively limited commercials, an unlimited supply of music variety, no geographic limitations and programming with no breaks and annoying DJs — unlike terrestrial radio’s repetitive playlists and music-free blocks. Advocates not only tout Sirius’s quality as unmistakably superior, but herald SIRI as the future of radio. But already, chinks in Sirius’s armor have begun to appear as the satellite service’s mobile apps are now being blocked by some mobile devices and internet radio cotinues to gain popularity..
In a reversal of what it previously had stated, AT&T (T) is locking the Sirius Satellite Radio XM app out of its smartphones that use the Google (GOOG) Android operating system. Specifically, AT&T’s Motorola (MOT) Backflip has already been locked to prevent the download. While this is likely just the result of the company’s move to prevent the download of all non-Android Market apps, other online streaming apps such as Pandora, Slacker and Last.fm are readily available Android apps.
It’s a brief glance at what could be a serious issue or a Sirius opportunity. After all, whether consumers continue paying the $13 a month or so for a Sirius subscription or make use of their mobile card or smartphone — streaming Internet radio while they drive — will determine the the financial viability of SIRI stock.
If there is any threat, it’s likely a long way off. Pay for ‘free’ Internet radio through mobile service providers isn’t exactly free — you’re still paying an Internet service provider. Additionally, Sirius already offers Internet radio channel for a few dollars more a month, a deal considering the value the channel offers listeners. Sirius’s real strength — and key to its long-term success — is through exclusive content deals with the likes of Howard Stern, Martha Stewart and Oprah Winfrey — and sports content providers NFL and Major League Baseball. Maintaining those deals will keep Sirius with content you won’t find on Internet stations.
Still, that hasn’t quelled investor speculation. While such talk and Internet chatter could be bad news for the stock, its performance has never been in a stronger position. Sirius is up more than 70% year-to-date and has skyrocketed 200% from last year, proving that the stock has buying pressure. And while the stock hasn’t turned a profit in the last fiscal year, its quarterly loss has continued to shrink for the last three consecutive earnings reports. The consensus estimate on Wall Street right now is for SIRI stock to break even in its next earnings report or perhaps even post a small profit.
Another good sign? Vehicle are sales are up, with one analyst at Standard & Poor’s predicting new U.S. vehicle sales to rise 12.7% to 11.7 million units by the end of 2010, then up to 13.5 million in 2011. With auto growth crucially tied to satellite radio’s growth, the news means a new pool of subscribers, something of which the company is seeing more and more. Sirius headed into 2010 with 18.8 million subscribers, and now estimates are at nearly 20 million subscribers by 2011.
This, of course, translates to more installation opportunities, with potential competition. Automakers like Ford (F), with its Sync communication system, are pushing out dashboard technology that allows drivers to tap the Internet from smart phones or broadband modems.
But while Internet radio is shooting for the stars, satellite radio is already there — the unknown is whether Sirius must make room for smartphones and internet radio or if it can knock its fledgling competition back down to earth.
As of this writing, Burke Speaker did not own a position in any of the stocks named here.
