77 Reasons to Believe in Satellite Radio

"Let's save Sirius," I suggested last week, and you certainly responded.

Opening up the comment box to reader suggestions, 77 posts have piled in as of last night. I promised to go over some of the more compelling ideas to get Sirius XM Radio (Nasdaq: SIRI  ) on track, so let's dive right in.

The gateway drug approach
The most popular suggestion, by far, is one that CEO Mel Karmazin himself has brought up recently: offering a few channels for free.

godmuscle2000 writes:

XM/SIRIUS could create 10 FREE CHANNELS with all the extra bandwidth. We would still pay for the extra channels. It's kind of like having regular advertiser television and then having HBO & Cinemax. The 10 channels would be all advertiser supported and bring in a HUGE amount of income of those wanting to advertise nationwide on those channels. We would also have more buying receivers to receive the free channels and more upselling to subscription services.

The move to activate dormant receivers is a great one. XM is finding that 53% of car owners with XM receivers are paying up after their brief free trials run out. It's a great conversion metric, but what about the other 47%? No one wins if costly dashboard gadgetry goes unused. General Motors (NYSE: GM  ) may cut off drivers who don't want to pay for OnStar, but Sirius XM doesn't need to cut off quitters completely.

Offering up a few ad-subsidized channels would be a smart move, though it may not be enough to sway fence-sitters to pay for a subscription. Why buy the cow when you can get the ad-splattered carton of milk for free? A good move may be the company offering its premium content for a limited run, as siriuslift suggests. For instance, make the next Fourth of July "Terrestrial Independence Day" and open up all of the non-explicit programming. Devote certain free weekends to rotating music genres. Unless substantial ad revenue can be generated with free ad-supported channels, the best approach may be to give the public a taste of what it's truly missing.

Selling the invisible
SnooperPooper offers up six great suggestions, including beefing up the ad variety and renegotiating the deal terms with regulators (who got Sirius XM into this mess, by delaying its approval until it's bumping up against huge debt repayments next year). However, one nugget really hit home.

SnooperPooper writes:

Create an aura of "unknown" upside for the stock and the company. Right now, subs for cars, homes, dumb mobile is totally predictable. The recurring revenue is nice, but bores analysts to death. Acquire a video / rich media play, think about other ways that you can leverage from pervasive networks. Create infinite upside in your service mix!

Premium radio will never be premium television. There is only so much that consumers are willing to pay for radio. It's no coincidence that Sirius and XM are priced within the ballpark of "all you can stream" monthly music subscription services like RealNetworks (Nasdaq: RNWK  ) Rhapsody and Best Buy's (NYSE: BBY  ) recently acquired Napster.

XM and Sirius have been thinking outside of the box, but how many people know that Sirius also offers up backseat video cartoons or that XM offers a customized traffic navigation service? Subscribers do pay extra for these offerings, but you don't see GPS champ Garmin (Nasdaq: GRMN  ) sweating XM's presence in this space or DirecTV (NYSE: DTV  ) complaining that toddlers can watch Nickelodeon in their cars.

Sirius needs to make a bigger splash, and SnooperPooper is right in suggesting that it doesn't have to be organic. Acquiring a company that has a sound non-satellite radio model but serious satrad implications would be a great way to dream up new growth catalysts that aren't all in the same basket.

So many choices
You're welcome to pick out your favorite suggestions. Some other ideas that I like but won't flesh out here include:

  • Soryinvestor believes that Sirius XM should smoke out a music label or distributor willing to pay for a channel to showcase its artists.
  • Petesgalaxy suggests hooking up with Microsoft (Nasdaq: MSFT  ) to create a Zune-based portable receiver.
  • Splintar thinks that a little guerilla marketing at the grassroots level would be much cheaper and ultimately more effective than costly advertising campaigns.

Clearly, the passion is there to save Sirius. The real challenge at this point is if Sirius XM can adapt its cost structure to succeed in the present as it carves out ways to grow in the future.

It's not an easy challenge to tackle, but Sirius XM Radio better hurry. It's on the clock.

Some other tales of low-priced stocks on the move:

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Longtime Fool contributor Rick Munarriz is such a fan of satellite radio that he subscribes to both Sirius and XM. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Read/Post Comments (13) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On October 28, 2008, at 3:44 PM, savesiri wrote:

    NO matter how unorthodox will seem my suggestion, hear it out..

    Here it is. There are millions of retail longs in SIRI. If we organize, we can save SIRI single handedly.

    Here is how.

    The debt to be refinanced on Feb, 2009 is $300M

    Let's refinance ourselves. Open a trust, with single purpose of lending money to SIRI with interest. Many of longs are down at least thousands. So assume everyone of us puts just $100 in the trust, and we lend the money to SIRI with 3% rate (Return on your savings acount in your bank is much less). If every long puts 100, we need just 3 million guys. Next, we refinance the other two installments of debt that are due in 2009 in same manner. So overall, $300 for 2009 per person. SIRI solves its debt issue until 2010 and gets breathing room to concenrate on business.

    Sounds unrealistic so say? Probably yes, but why should only likes of Icahn be an activist shareholders. WE CAN DO also.

    This idea got pretty good traction on SIRI board on Yahoo. The thread is called "Let's do something historic, unprecedented"

  • Report this Comment On October 28, 2008, at 5:46 PM, YY2435 wrote:

    After reading the recent news wire on Sirius from Goldman Sachs analyst Mark Wienkes, I would like to reiterate what I believe is the biggest set back to Sirius at this point in time and that is advertising and the lack there of. I fail to see how someone like Mel Karmazin who is supposedly really serious about this company can have such a lack of visiblility about his product. Mr. Wienkes wrote “Our lowered estimates and price target reflect further erosion of satellite radio industry demand,”.... He says subscriber acquisition costs, average revenue per user and churn are all moving in the wrong direction.

    This company will not fly without subscribers of which there will be none if there is no advertising to go along with good content and promo packages and services. No advertising at this time of year, the season for gift giving! Mel and company need to get on this big time unless they just don't care and want the company to fade away.

  • Report this Comment On October 28, 2008, at 7:50 PM, splintar wrote:

    malinator doesn't understand that content will not come free in the future. If you are accessing royalty related music (which is what's on all these radio stations and the internet), then that provider has to pay to "broadcast", podcast or otherwise stream that copywrited media.

    They pay for this by selling ads or placing them on the site or by charging you a subscription.

    It's a joke that people think they can get the same content as Sat Rad, or even comparable inferior content, for free. Not in America - even with Obama.

    Sat rad has actually figured this out and has the best subscription model, the widest content and is accessible ANYWHERE - even through the internet.

    The refi will be solved, the cash flow will become break even and everybody who thinks they'll have enough time to then buy the stock will be chasing it higher.

    It's a monopoly and it's about to open its own music library to boot.

  • Report this Comment On October 28, 2008, at 9:07 PM, jclphoto wrote:

    I've been told iPods, Zunes, mp3 services, Internet radio, etc etc all pose a threat to Sirius. I personally disagree.

    One of the big disadvantages to portable music players is the content is all pre-recorded. The big draw to listening to a radio station is it can broadcast "live" events.

    I don't know how well Sirius currently does with live events, but it should stress its ability to deal with live events as one of its primary reasons to subscribe. Concerts, talk radio, news, news conferences, political party conventions, election results, speeches, etc all should be on Sirius' radar. Sirius needs to put itself into a position that it can be the leader in broadcasting such events to a national audience (although it would be kinda cool to broadcast to a global audience) as much as CNN is a leader in news or ESPN is a leader in sports broadcasting.

    I've read Sirius should cut a deal with MS or labels. I agree only in that the labels should promote artists through the broadcasting of the artists' concerts. Can't see your favorite band for the big reunion show that is only occurring in NYC? Listen to it on the radio.

    I'm not a fan of one portable music device manufacturer teaming up with Sirius, although providing Sirius radio on a wide spectrum of devices sounds like a great idea.

    The only reason I want to listen to the radio is for live content. Besides the TV, where else do you go for live content?

  • Report this Comment On October 29, 2008, at 9:06 AM, draland wrote:

    Mine is a perversly simple, yet potent idea, that is if SiriusXM have the bandwidth available.

    How many people out there with mobile phones would like to be able to call anywhere from anyplace at anytime ?

    Why not offer Satillite-Phone capability to the public ?

    This was formerly the best if not ONLY way to communicate from 'dead-zones' like mountainous terrain and the such,(just ask Osama who exclusively used one until the US military trained their missles on his signal).

    The upside potential here, I think, is almost LIMITLESS!!

  • Report this Comment On October 29, 2008, at 1:34 PM, Kappy54 wrote:

    I agree, I feel in time much like the change over from regular television waves to all television being digital, radio will do the same and convert from radio waves to everything being satellite radio. This may not happen tomorow, but I do feel could happen in the future for the same reason that television has changed over.

  • Report this Comment On October 29, 2008, at 2:37 PM, Matt8265 wrote:

    A technology that was once priced at 24 Billion based on BS / Hype and hope is now worth 750 million yet TMF still uses it to eek out a few more pennies on an old story line. TMF loved it at 35 and 9, they must be creaming themselves at .33.

    It's over folks.... keep moving ... keep moving.

    Chapt 11 or a sale. Wouldn't shock me if Mel now that he has flown her into the ground won't buy it himslef.

    Never deal with the NYC types.

  • Report this Comment On October 29, 2008, at 2:39 PM, Matt8265 wrote:

    PS... where's the Q3 sub numbers Mel... did you go negative?

  • Report this Comment On October 29, 2008, at 6:02 PM, siriusupporter wrote:

    I agree with savesiri. It would be nice to get the idea to all subscribers somehow to see what we could all do together.

  • Report this Comment On October 30, 2008, at 12:47 PM, sirius55 wrote:

    here's my suggestions:

    w/ all ads, give away free radios by having people sign up at sirius.com

    offer current subscribers a few free months or other discount if they give away their current radios to a friend or even sell it then once it is activated by the friend or buyer, the current subscriber will instantly receive a dscount on their new radio or subscription.

    I have 2 radios just sitting here. I see many more on ebay so if 3 million current subscribers wanted a new radio, they could give their current radios away giving Sirius an additional 3million+ subscribers instantly.

    I'd do it. what do you think

  • Report this Comment On October 30, 2008, at 1:09 PM, TheHarm wrote:

    What they need to do is a reverse split in the short-term. Then, as profits come in, keep buying back stock to make up for the massive dilution.

    Or, since Sirius is selling so low, why not put a Sirius "stock machine" next to gumball machines. Put in a quarter, out pops 1 share of Sirius satellite radio....

    Seriously though, this stock is WAY too diluted.

  • Report this Comment On November 04, 2008, at 4:01 PM, BABABOOE wrote:

    Karmizen is getting set to launch an entire new set of channels... FREE!! He has extra bandwidth from the Sirius-XM merger and he's going to offer 10 free channels and sell advertising. Just like FM.

  • Report this Comment On November 07, 2008, at 3:14 PM, alwaysvegas wrote:

    As a former subscriber of Sirius, I simply found the start-up cost to make it portable a turn off. I had to pay for a radio (about $100), a home kit ($30), an outdoor antenna ($50), a plug-n-play car kit ($30) and in less then two years the radio stopped working. There's no way I'm paying for another radio and more car and home kits at this point. I had already invested over $200 just so I could pay Sirius another $13/month to listen. And really the only channels I care about are the uncensored, limited-commercial talk channels as that's something that isn't on my iPod. They need to supply the radios and kits at MUCH lower prices or free altogether. DirecTV doesn't let me keep the equipment but I do get it all for a small rental fee and surely the satellite TV equipment costs alot more.

    When I called to cancel they offered me a free lesser-quality radio if I changed to a yearly subscription and I told them I'd already invested enough and didn't owe them anything more.

    SiriusXM simply demands too much of the consumer to get their product up and running. Sure, if you're car is prewired, that's great. If not, it's a real chore and start-up cost that Sirius should be eating to get the consumers subscribed.

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