The Sirius XM Merger Finally Matters

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Shareholders had to wait a long time for the urge to merge at Sirius XM Radio (Nasdaq: SIRI  ) to be fulfilled. Is there now an urge to MiRGE?

Sirius XM is introducing MiRGE this morning, the first interoperable satellite radio receiver. When it officially rolls out in a few months, owners will be able to easily switch between XM and Sirius services.

Don't be fooled by existing subscription plans that offer select content from both services for $4 more than the regular $12.99 monthly offering. The old receivers will never get all of Sirius and XM, as the tightened compression would degrade the audio quality.

If consumers want all of Sirius and all of XM, this is the $250 receiver they will need to get. $19.99 is what they will have to pay a month. Do the math and you can see how important the MiRGE will be for Sirius XM, especially given its model of high fixed overhead costs but low variable expenses.

One can always argue that Sirius should have unleashed MiRGE before axing over a dozen music channels in November. Since so many of the music channels are now redundant on both services, the $20 monthly price point may be a bit steep. However, that's about the only drawback to the MiRGE.

Ideally, the new receiver will get satellite radio selling again at the retail level. Sirius XM is a staple at consumer electronics and discount department stores. Its own press release points out that the receivers are sold through Best Buy (NYSE: BBY  ) , RadioShack (NYSE: RSH  ) , Target (NYSE: TGT  ) , and Wal-Mart (NYSE: WMT  ) . However, it's been a couple of years since they were actively promoted in the aftermarket realm. When is the last time you picked up a Sunday circular and saw any of these chains pitching a Sirius or XM receiver on the front page? MiRGE can change things, because the retailer no longer needs to educate the consumer on the thinning differences between Sirius and XM. Shoppers can pick up MiRGE receivers and come to their own conclusions about keeping one or both services active.

Interoperable radios will also be a refreshing option down the line for car manufacturers. Sirius XM has deals in place with all of the major car manufacturers, but only about half of new car buyers keep paying for Sirius or XM after their free trials run out. Most automakers are tethered to just one brand. Ford (NYSE: F  ) is Sirius, for instance. General Motors (NYSE: GM  ) is XM. Presented with a choice of two services from the same receiver, I can definitely see conversion rates improving.

Satellite radio needs this, now more than ever with its shares trading for Chiclets.

More news than static on Sirius XM:

Wal-Mart Stores and Best Buy are Motley Fool Inside Value selections. Best Buy is a Motley Fool Stock Advisor pick. The Fool owns shares of Best Buy. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies 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.

Read/Post Comments (10) | Recommend This Article (50)

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 January 08, 2009, at 3:29 PM, ByrneShill wrote:

    <i>...When it officially rolls out in a few months...</i>

    If they don't go bankrupt first...

  • Report this Comment On January 08, 2009, at 4:11 PM, MiRGED2LaTE wrote:

    I would'nt give a nickel for this peice of garbage let alone 250.00 + 20/month. The way it's going, next year you''ll be MiRGING it with your garage sale.

  • Report this Comment On January 08, 2009, at 5:35 PM, 77LongLouie77 wrote:

    At $0.13 per share, Sirius is a great long term hold that will payoff handsomely. Be patient. You will prosper.

  • Report this Comment On January 09, 2009, at 2:32 AM, DaretothREdux wrote:
  • Report this Comment On January 09, 2009, at 3:09 PM, RHaganC wrote:

    I can't believe the talk over a 14 cent stock. Hell, if I were a lottery player, I'd by 14 shares of SIRI jsut for the fun of it.

    But, alas, I am not. The financials don't shake out and never have. It blows my mind they hae been able to plug along this far.

  • Report this Comment On January 09, 2009, at 4:27 PM, rbnlaw1 wrote:

    I've got an XM receiver and love every minute of it. If you have cable or satellite, you should look into it. Tightly programmed terrestrial radio is crap. With this push, SIRI should gain some steam.

    And for less than 30 bucks, I picked up 200 shares. I spend more on video poker and usually get less. This seems like a decent bet.

  • Report this Comment On January 12, 2009, at 12:15 AM, wweaver66 wrote:

    I knowingly paid extra for an XM receiver in my new car (purchased 12/08) so that is a sunken cost.

    Knowing: (a) the merger had gone through, (b) I had read there was a "unified" tuner coming, (c) I had also read that the merged company was not on a solid financial footing.

    I'm still on the "free" subscription trial (3 months), but I am LOVING what I hear for the music and sports, and the fact that I can listen to one of my fave International stations in the car AND at work via their media player (said Int'l station normally uses Real Player which our corp. IT std does not allow) is a plus.

    But the fact that I may have paid an extra $ amount for the receiver for what could be the Betamax of the late 2000's concerns me.

    I've got until Mid-March to subscribe, so I'll be watching developments closely. Based on content, I want this to suceed, but I'm not throwing money at it.

  • Report this Comment On January 12, 2009, at 3:24 PM, JamesAnderson1 wrote:

    OK, so they put out a dual-service player, but right now out of a possible 510 channels, they only have what? 69 unique music channels and maybe 140 total unique talk/sports and other special interest programming channels?

    Both had unique music programming until the merger, now without real competition (don't count the AT&T service, it's way too expensive and won't deliver hardly anything). Ethnic music other than the misnamed 'world music' channels they have, relgious programming like gospel house music and religions other than the typical evangelical network feeds would fit the service nicely.

    Sure there are bandwidth issues, or is there a problem really? Neither is using more than about a third of its alloted bandwidth right now.

    So I'm throwing down the gauntlet, and I hope Mel hears it drop just outside his office door, to ramp up the number of music channels and other diversity in programming matters that he seems to not want to do. Only with that can you bring the customer back. 'The customer is always right' according to the two rules of customer service. What is the second rule? If you don't believe the customer is right, see rule number 1.

    Stores are guilty as well. Many of the people hired to man the car stereo area put on the hard rock or hip-hop stations, often the vulgar explicit language ones too, which drives away many customers. Try formats that are not available in your market when having a display in your store or demonstrating a model. Try classical or jazz or folk, or even bluegrass, make the experience inviting to the customer. Don't blow their brains out with hard, over the shark channels that they can hear already from local stations that they just heard in their cars coming in.

    So much for all that. None of this will ever happen, so much for Sirius/XM.

  • Report this Comment On January 30, 2009, at 11:35 AM, temp2290 wrote:

    I'd like one of the following to happen:

    1.) Sirius/XM teeters on the edge for a while until they figure out that they are failing in large part due to the crappy merger channels or lack thereof (give me back Fungus!!).

    2.) They go out of business as some other sat radio company rises up with good channels.

    I'm a huge music lover, so I'm not amazed that people dont "get" why anyone would want satellite radio. They say "Why the hell would you want to pay for radio when it is free?". This question may lead to your demise, SiriusXM, even though any diehard music fan knows why sat radio has great potential (1. ever tried thumbing through an iPod/iPhone in the car while driving? 2. terrestrial radio sucks, especially in the midwest/south). The other options just don't cut it and I hope the concept of sat radio stays around despite Sirius/XM's failures.

  • Report this Comment On February 16, 2009, at 6:27 PM, jgleento wrote:

    I have been a Sirius subscriber and shareholder for a few years. I would hate to lose my favorite show, Jay Thomas. I love Howard Stern, too, and Jay Thomas ranks right up there with Howard. I hope they all survive.

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