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Once in a Lifetime for Sirius XM

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Is a satellite radio smorgasbord the key to Sirius XM Radio's (Nasdaq: SIRI  ) pressing cash flow needs?

In a targeted marketing campaign, Sirius XM is offering discounted lifetime subscriptions to XM listeners. I heard a radio spot on XM this morning, pitching a $100 discount on the $400 offering. Many XM subscribers have also received a similar offer through email, though my inbox is just shrugging its shoulders.

The key takeaway here is that while Sirius has offered a lifetime subscription product in the past, XM has not.

In fact, this offer is so hush-hush -- targeted only to existing subs -- that even XM's pricing plan page is devoid of any information. Interested XM listeners are simply referred to a toll-free number to hash it out directly with the company.

It's easy to see why the company is quietly pushing the offer. It doesn't want to seem desperate. The stakes are significant. If a million subscribers jump at the offer, Sirius XM will have more than enough money to clear February's debt refinancing hurdle (the first of three that await the company in 2009).

The downside, of course, is that the deal impacts the cash flow levels from the influx of nonpaying subs after that. However, it's the right offer at the right time. The company definitely needs the money now, rather than later. TiVo (Nasdaq: TIVO  ) once weaned itself off lifetime subscription plans, but it is now offering existing owners a $100 price break on the plan when coupled with a new DVR purchase (with a few freebies to boot).

One can always argue that Sirius XM should be shouting this offer from the rooftops, marketing the plan to new retail subscribers in a last-ditch effort to save the holidays, but if existing fans don't take to it, what are the chances of it flying at the consumer electronics superstore?

The deal breaker to some, naturally, is the value proposition of a lifetime sub. If the company files for bankruptcy reorganization next year, as some -- but not me -- expect, will the lifetime contracts still be honored?

One also has to consider the pricing leverage that satellite radio will have in the future. A lifetime plan typically pays for itself in roughly three years, but what will Sirius XM be charging at that point?

A pessimist would point to a growing number of free alternatives. Online radio providers like Slacker, Pandora, Time Warner's (NYSE: TWX  ) AOL Radio, and CBS' (NYSE: CBS  ) offer free ad-supported streams. They are inferior in many ways to Sirius and XM, but it will blur the pricing landscape as connectivity becomes more common.

The optimist can point to television, where companies like Comcast (Nasdaq: CMCSA  ) and DirecTV (NYSE: DTV  ) seem to inch rates higher over time. Now that the merger's completion gives Sirius XM broader access to content, there are opportunities to upsell plans like its "best of" offering that tacks on premium content from both networks for $4 more a month.

To lifetime or not to lifetime? All you need now is a palm-reader to check the company's lifeline.

More news than static on Sirius XM:

Are lifetime subs the way to go for Sirius XM? Weigh in with your thoughts in the comment box below.

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Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies in this story, save for TiVo. 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.

Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 18, 2008, at 2:13 PM, ByrneShill wrote:

    If the plan is good only for the lifetime of the company that desn't make it a very nice offer. Less than 12 months for 400$...

  • Report this Comment On December 18, 2008, at 5:20 PM, joeradio wrote:

    Glad to see they are trying to raise cash this way as I've regularly recommended in these forums.

    Rick do you know if the secret offer is void of the regular fine print, specifically the 3 receiver change maximum over the life and $75 per change?

    Maybe SiriusXM monitor these blogs after all, hmmmm.

  • Report this Comment On December 18, 2008, at 9:37 PM, TMFBreakerRick wrote:

    joe, the radio ad does NOT mention the transfer rights BUT the 3 receiver swaps are promoted in the email:

  • Report this Comment On December 19, 2008, at 1:42 PM, TMFBreakerRick wrote:

    I've gotten a few emails asking me what the toll-free number is in the ad.

    Here it is:

    1-866-9SIRIXM (866-974-7496)

    I called just to confirm, along with the rates for XM subscribers. It is $399 for XM only and $499 for XM with the "best of Sirius" package.

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