I don’t generally short stocks but for the longest time I told anyone that would listen that the stocks that I would short, if I did do such a thing, would be the stocks of the satellite radio players. They reminded me of AOL early on. Data wants to be free and tiny walled gardens cannot compete with 6 billions authors. My overall thesis has proven correct but I was wrong on the how, almost. Turns out Apple’s iPhone probably did more to kill Sirius than the Internet. However if there was any doubt of the ultimate demise of satellite radio’s dumb, unprofitable business model, the nail in the coffin has arrived in the form of Slacker and Pandora portable radio. Pandora is available on the iPhone. Slacker is available on the Blackberry (giving non-descript middle managers across the globe new potential for self-perceived coolness). I just loaded Slacker onto my Blackberry, and now there is simply no reason to use Sirius. You can kiss the remaining $0.35 of share price goodby.
Now slacker portable is not the portable music Internet. It’s not the 10,000 college radio stations available online (I guess I’m still going to have to build that app). It’s also not the millions of playlists available on sites like lastfm.com. But it is a great portfolio of radio stations plus any station of your own that you want to create. It’ll probably also go a good way toward finally putting a bullet in FM radio (and therefore part of CBS) as soon as the average consumer figures out how to get their phone playing through their car stereo. iPhone is going a long way in paving the way here as well.
As cool as iPhones may be, they did not kill satellite radio. Your other hypothesis is right. It was a stupid, unprofitable business model from the start.
While I’m at it, contrary to popular belief, cool technology isn’t what’s crushing traditional radio either. They still reach 90+ percent of the population each week. It’s just that the Internet has conditioned advertisers to expect accountable, trackable media. Radio and TV have poor ratings methods and you can’t track performance very well.
1 reason for Sirius-XM to exist.. HOWARD STERN, who’s skills and energy are greatly diminished. With each million banked and mansion built he sounds less and less interested in his show and certainly has given up on programing the rest of his channels. As long as he is on air they will continue to have some number of the origional 6 million fanatics. But with Howard lapsing into sleepy boredom and laziness the end may be in sight.
That’s a good point about Howard Stern. Exclusive content can be a great business. Look at Bloomberg or HBO. Not sure if it’s justifies a global dedicated hardware and communications network though. That was a good move on XM’s part. But not enough to save it.
I agree with your comments here – also I listen to Slacker on my iPhone every day going in to work, so just wanted to let you know you can get Slacker there too!
Sirius not profitable??? They are WELL on their way to profitability with 19 million subs and GROWING. Um…UNLIKE Slacker and Pandora which are losing money in such an overwhelming way that I find your ignorant comment about Sirius not being profitable down right laughable.
The royalty fees alone will kill free services like Pandora and Slacker. Think about it. Sure…alot of people will download FREE apps. But will they LOVE them as much as commercial free uncensored radio with live concerts and TONS of great content? Many people(myself included) have downloaded the Pandora and Slacker apps only to get TIRED of them. The novelty wears off pretty quick.
Its like how people said the ipod would kill Sat Radio. Don’t get me wrong. Ipods are GREAT. I love em. BUT….as far as a music DISCOVERY product….they are TOO WORK INTENSIVE. Sure, if you are a 15 year old kid who doesn’t have a job and lives at home and has 10 hrs a day to CONSTANTLY download music everyday….it ALMOST makes sense.
But for MOST working people that way will NEVER replace the ease of radio. And Sat Radio is the way to go. Once Sirius starts marketing and running ads again…it will become the hip/cool must have tech toy.
Slacker and Pandora get old real quick, because they are poor substitutes and don’t come REMOTELY close to the extensive channels and genres available on Sirius. Sirius CRUSHES them with content. Live concerts. Great DJs and personalities. LIVE SPORTS. ON and ON.
Sirius wins in the car with ease of use hands down.
And for anyone complaining about $13 a month being too expensive….thats pennies a day. Those who complain about that must truly be 15 year old kids who still live at home with Mom and Dad and DON’T work.
$13 a day is TOTALLY worth it for all the reasons I mentioned.
Nuff said.
Two notes:
1) I haven’t really poured through their financials but it looks like Sirius has never made money and losing ~$300 million a year with $380 million in cash not sure of their future. I could be wrong but that’s from just a quick glance at their 10-k: http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6469359-147779-371057&type=sect&TabIndex=2&companyid=1133&ppu=%252fdefault.aspx%253fsym%253dSIRI.
2) I agree that the Slacker/Pandora format alone is probably not as content rich as Sirius XM. That alone is not going to kill them. The thought is that a single dedicated, walled-off, expensive and inefficient communications platform won’t be able compete with the open internet on content long term. Whether it’s Slacker or last.fm or iTunes or online radio. See newspapers.
Interesting how people get kind of offensive when something they like is threatened. Comparing Sirius to Slacker, or vice versa is not really fair since what they offer is different. Clearly the content on Sirius is superior, but you can’t really tailor Sirius the way you can Slacker. I absolutely love Slacker because I can configure it to play the music I want to hear and only the music I want to hear. And I snagged a couple three of their first gen portables for like $69 on Amazon and my boys and I just love them. The article is right about the business model of Sirius, but it will survive in some form no doubt. The world will continue without Howard no problem.