You Can't Bury Sirius XM That Easily

There's a reason Ford (NYSE: F  ) CEO Alan Mulally is one of the keynote speakers today at the Consumer Electronics Show. Cars are becoming more than just modes of transportation: They are entertainment stations on wheels.

As long as drivers aren't distracted into fender benders, the evolution of in-dash possibilities will continue to expand, and this year's CES is shaping up as the perfect exposition for consumer tech companies to rev up expectations.

Pioneer jumped the gun yesterday, announcing several new car receivers and navigation units. The headline grabber is the AVIC-X920BT. It's a mouthful, but it's positioning itself as the Swiss Army knife of in-dash gadgetry. It does a little bit of everything, including its integration with Pandora's popular music-streaming application on Apple's (Nasdaq: AAPL  ) iPhone. Leaning on the iPhone's 3G connectivity, the gadget fires up the free music discovery site, cranking out personalized play lists through the car's speakers.

The media didn't miss a beat, immediately assuming that Pioneer's success would come at the expense of Sirius XM Radio (Nasdaq: SIRI  ) .

  • "Internet radio in cars could hit satellite radio hard too," writes The Wall Street Journal.
  • "The deal could represent a considerable threat to Sirius XM's satellite radio service," opines PaidContent.org.
  • "Pioneer is anxious to expand further into Internet radio with connected devices and to challenge the likes of Sirius XM," goes Mashable's take.

Everyone seems to want Pioneer and Sirius XM in a cage match, but it really isn't much of a fight. I certainly do believe that in-car connectivity is going to be a real challenge for Sirius XM to overcome in the coming years, but there are several reasons why the AVIC-X920BT isn't going to be the one holding the smoking gun over Sirius XM's lifeless body.

Let's go over a few points that seem to be forgotten in the hype.

  • This thing costs $1,200, or more than a pair of Sirius or XM receivers with lifetime subscriptions.
  • It may be convenient to have a device that automatically detects the Pandora app and fleshes it out on a slick 6.1-inch touch screen, but folks have been able to plug their iPhones into input jacks on a growing number of car models for years.
  • The in-dash system is being marketed as Sirius XM ready, so even Pioneer is offering up an olive branch.
  • Did I mention that its list price is $1,200?

There will come a time when Sirius XM's livelihood may be threatened, but it's not happening right now. The stock has risen nearly 15% through the first three trading days of the year, fueled by Ford's stellar auto sales in December.

Yes, automakers love satellite radio. Showrooms are unlikely to ever receive financial incentives for pushing free Internet radio. Heck, I'm not sure how Pandora's ad-supported model will work when people have their eyes on the road. However, just as the iPod and iPhone input jacks became standard in many models to give consumers what they wanted, automakers have to eventually give drivers what they want.

Turn the key in the ignition. The entertainment station on wheels needs to run a few errands.

Do you think easier in-car connectivity to Pandora will hurt Sirius XM? Share your thoughts in the comment box below.

Apple and Ford Motor are Motley Fool Stock Advisor picks. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He owns no shares in any of the stocks in this article and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (31) | Recommend This Article (25)

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  • Report this Comment On January 07, 2010, at 1:28 PM, NonieAriate wrote:

    Either sirius xm adapt to Pandora style of listening or BUY Pandora.. I think this would create the ULTIMATE listening experience!! No commercials is great but just saying NO "thumbs down" to songs that you never want to hear again would be supreme :)

  • Report this Comment On January 07, 2010, at 1:32 PM, vishtr wrote:

    >Heck, I'm not sure how Pandora's ad-supported model will work when people have their eyes on the road.

    The ads are audio ads. They work the same way traditional radio station ads work.

  • Report this Comment On January 07, 2010, at 2:03 PM, ORIGINALMAN2000 wrote:

    Satellite Radio .....the name says it all when your riding from Pittsburgh to Philly the internet radio has to come from a satellite to be consistent..... Sirius-XM is already there.Now they are doing video too....

  • Report this Comment On January 07, 2010, at 2:06 PM, xGreedx wrote:

    Regardless of what apps or devices entire the market into in-dash convenience, the stronger companies will always grow.

    Sure, devices like Pandora can entire into the car market through internet connectivity. All the doors will be open for others to do the same. However, keep in mind the market cap of these companies. It is much easier for companies like Sirius and Apple to throw a cool 100 million to buy out some of these companies after they did all the hard work of getting there. Integration is key.

    All this does it make opportunities for mergers and acquisitions. The war for the dashboard is beginning. This is a huge marketable space where people spend a lot of their time.

    So in answer, no. It will not hurt at all. All it does is push competition. In the end the stronger companies with the most cash will prevail. And right now it is #1 Apple and #2 Sirius. Sirius however, has is already ahead in the in-dash sector. So I see them prevailing in a buyout or integration.

  • Report this Comment On January 07, 2010, at 2:09 PM, stan8331 wrote:

    The real threat to Sirius is not some $1200 radio - it's Internet radio played through a 3G/4G smart phone connected to a car's audio system. The availability of Internet radio doesn't necessarily doom Sirius, but it does represent a serious challenge to their business model.

    To compete effectively, Sirius will have to find ways to provide more high-value content not readily available elsewhere without raising prices, and they will ABSOLUTELY have to eliminate additional charges for alternate methods of connectivity.

    Sirius has a lot of positive things going for it, but there is a significant danger that their debt problem could hamstring the company in ways that could eventually lead to its demise.

    Disclosure: I currently have a (very) small long position in Sirius.

  • Report this Comment On January 07, 2010, at 2:17 PM, foolonthehill48 wrote:

    I have Sirius/XM AND Pandora's premier PAY service. I stream them both at home only. No satellite access.

    I love them both and will keep them both!

    Sirius has premium content and the music is presented selected and mixed for maximum impact.

    Pandora is great for music that Sirius does not provide a channel for, and for being able to never hear again, a song you don't like, but it dosn't have the musical energy of Sirius. Also the artists are sometimes cutting off half their song on Pandora to stop piracy.

    I love Pandora, but Sirius is SAFE from Pandora as it exists today... If you have them both and compare them, you will see.

    Another revenue stream that is being ignored is the gradual replacement of Musak systems with Sirius/XM.

    I'm hearing Sirius at businesses everywhere, even in Mexico!

    The future is briiiight for Sirius/XM.

    Disclosure:

    I've already made a fortune on Sirus stock... woohoo!

  • Report this Comment On January 07, 2010, at 2:30 PM, TimelessInvestor wrote:

    So basically I have to shuck out $1,200 in upfront fees to purchase this behemoth radio, perhaps pay an installer to tuck away the trunk of wires hanging out the back (if of course it will even fit in my dash), just to hook it to an iPhone with a smartphone plan that I don't even have? What does an iPhone and smartphone plan with unlimited data cost through AT&T these days, like $99 for the equip plus $99 per month with a 2 year contract. So now I'm up to at least $1,400 plus tax to get started? Then I would have to share my iphone limited 3G connection while driving down the road trying to receive phone calls, txt messages and listen to pandora at the same time? Not to mention getting charging cables wrapped around my neck because the bluetooth is draining my iPhone's battery. I dont think so!....... I will stick to my Awesome Sirius equipment for which takes up very little space, is very portable, and turns on partically instantly with the turn of the key - Nice, Simple and Quick! Satellite Radio is here to stay!

  • Report this Comment On January 07, 2010, at 2:54 PM, cocostar wrote:

    I like to turn it on and go. My ipod will copy my sirius for a good walk in the wilderness. Other than that I''ll turn my sirius on and go!!!

  • Report this Comment On January 07, 2010, at 2:56 PM, Challo911 wrote:

    A $1200 price tag is out of my budget but if I purchased one of the Pioneer systems I would worry about replacing it when the vehicle was resold or the theft of the electronic system. I don't think that Siri needs to worry unless the cost of this new system comes down. Another concern for me would be young drivers that can not seem to keep their attention on the road now would really be in for a test of self control if this system ever became popular and affordable.

  • Report this Comment On January 07, 2010, at 3:18 PM, wordcarr wrote:

    Sirius/XM is doomed.That's not to say audio content delivered by sat will go away.Sirius/XM present biz mod won't sustain the company. foolonthehill48 should be a Sirius/XM exec.There are other ways to make money with sat audio rather that try to mash teeth with radio.Sat audio will survive Sirius/XM won't.The reader must keep in mind that Mr Munarriz is a paid blogger not a fact finding news reporter.One should keep this in mind when reading his blogs.I, like many of you, have a interest in Sirius/XM. The publishers of the Fool are aware of this, the more articles that they provide the more people return for views the more ad revenue.Mr Munarriz does a good job blogging.You can find investagative reporting better eles where. I don't think Mr Munarriz every tried to put himself off as a reported, I'm not flamimg him.

  • Report this Comment On January 07, 2010, at 3:22 PM, Jashuh wrote:

    As on now SiriusXm radio is safe even if their stocks are toilet bowl value, and will never get back to it's $1.00+ value. It was much better for the satelite radio business when we had choice of XM or Sirius, price wise and music selection (twice as much music options) with both services. Overnight everything changed and many people ditched Sirius because they were use to XM programming and yes with ads - ad free radio really isn't that big of deal. Who actually can hear the radio every minute all day long anyway, an out of work bum or someone who could not pay for radio service anyway - ad free whatever! With the Internet music service the main issue is signal, it keeps coming and going - look at your cell phone coverage, because there is your signal. Can you image anyone paying 1200.00 for a part time radio, can anyone be that stupid? There is somewhere! The best bet now is your smartphone and the pandora app for a few bucks, enjoy free radio without paying monthly charges - music is music. Forget giving up 1200.00 for a outdated radio device that works once in a while - you have the sane signal through your cell and add on a FM modulator to listen through your car stereo. As for SiriusXm if you want sports or talk radio keep it coming, but paying overcharged prices for this pay service seems like everyday customers are getting more aware that they don't need this and the stocks are showing this.

  • Report this Comment On January 07, 2010, at 3:57 PM, Fool wrote:

    Has anyone been following the Las Vegas C.E.S. which started today. If I'm not mistaken, Sirius Xm unveiled a portable one this morning.

  • Report this Comment On January 07, 2010, at 4:29 PM, dgodissart wrote:

    The quality of the music programming on Sirius did go down the tubes with the XM merger........it's just not as good as what it used to be once the two separate programming modules for XM and Sirius merged. However, as a sports junkie, it's probably the best thing that ever happened for me..........Every NFL Game, Every NHL Game, most all major college football games and NBA games are all available via Sirius XM. There is no other market for this type of sports programming and sports talk shows. (I also have a very small long position in Sirius XM, which has taken a nose dive over the years).

  • Report this Comment On January 07, 2010, at 4:33 PM, Fool wrote:

    Rock on Mel,Sirius xm is the best new entertainment venue to come out ever! Because it's commercial free and without the anoying yacking of DJ's. Shut-up and play "new music"!!

  • Report this Comment On January 07, 2010, at 4:34 PM, dgodissart wrote:

    Sorry, I negelcted to finish my point on my last post. It seems to me with the a signifigant increase in the popularity of professional sports and fantasy football etc. the market for more sports talk radio type of coverage also keeps growing. Nothing covers every aspect of the NFL any better than Sirius and I think that's a signifigant reason why they are maintaining subscribers... Pandora doesn't offer anything like it and it's this specialized sports programming that leads me to believe that Sirius is hear to stay.

  • Report this Comment On January 07, 2010, at 4:59 PM, doingjustfine wrote:

    With all the analysts upgrades, a rapidly increasing subscriber base, debt reduction, expanding market, revived institutional interest, and all the other positive news out there, doesn"t SiriusXM deserve a few more stars in your CAPS rating?

  • Report this Comment On January 07, 2010, at 5:42 PM, Lamley2 wrote:

    I bought an internet radio device about a year ago thinking that it would be great to have worldwide access to stations. I am disillusioned. What it's like is having nothing but the upper channels available on your cable TV...there's plenty on but not much of it is any good. I since have returned to my Sirius XM and am very happy with it. They seem to have improved some of the programming since I last listened.

  • Report this Comment On January 07, 2010, at 7:22 PM, warrenrial wrote:

    Sell SIRIS, it's never going to make it to $1.00.

  • Report this Comment On January 07, 2010, at 7:24 PM, warrenrial wrote:

    Sell SIRIS it will never reach a $1.00. Need a new board.

  • Report this Comment On January 07, 2010, at 9:15 PM, Fool wrote:

    Why is it when anyone from MF post about Sirius they never mention CONTENT!!!!!

    This is what makes Sirius better than Pandora. Pandora is no more of a treat then the iPod.

    Wake up will you.

  • Report this Comment On January 07, 2010, at 9:39 PM, cauchy2k wrote:

    I don't think internet radio could take down millions of dollars used to pay a great programming from sirius/xm,besides with this high price Pioneer is suggesting for this new device,no way it's a big competition to sirius.I doubt you could get Martha Stewart,Howard Stern,MLB,NFL,NBA,all that through internet radio.Sirius provides a great service for a low or competitive price.I have big hopes on Sirius XM

  • Report this Comment On January 07, 2010, at 11:42 PM, FM5 wrote:

    TimelessInvestor You Nailed it, and if they don't even want you texting when driving, think about trying to pick your next song from Pandora & slamming on your brakes for the next guy cutting in front of you, as everyone is locking up there brakes for the next stop light, as the cell phone is Ringing in your ear, & your girl friend is talking crap to you, asking, when are you comeing home! SiRi is here to stay.

  • Report this Comment On January 08, 2010, at 12:29 AM, 55000 wrote:

    what a joke!! lololo....it alr

  • Report this Comment On January 08, 2010, at 8:17 AM, Matt8265 wrote:

    He Rick... isn't this the stock you recommend at 30 and 9 bucks a share. Your (lost) opinions have cost TMF readers millions. Why don't you start writing about can openers or something you know about?

  • Report this Comment On January 08, 2010, at 10:14 AM, amusedbyfools wrote:

    Another "fool" article that is poorly researched.

    Did anyone look at the technology around exactly how this new device from Panasonic will "Lean on the iphone 3Gs connnectivity"? Last time I checked the only way to "share" the iphone network connection with AT&T is to jailbreak the device. AT&T has not yet committed to allowing tethering and even when they do it will cost an extra $30/month based off of their existing tethering plans. Do you really think that someone is going to pay $1200 for a radio AND an extra $30/month to connect it? Maybe just maybe in a perfect world AT&T would allow tethering at no extra charge above the current data plan but if they are going to hit those +40% margins they are promising investors next year thats not gonna happen.

    At this point I see SIRI as safe in their business model serving up premium audio content that can be listened to nationwide. They have millions of vehicles being churned out with receivers in them and their initial fixed costs of putting the "birds in the air" is being paid down more and more each year. It is only a matter of time before their margins go through the roof. People are willing to pay for premium content and right now I don't see this being competition. Those that look at SIRI as a short term play should just get out and stay out. The real payoff will be in 3-5 years. With my $0.11 basis I will sit tight and watch the money roll in.

  • Report this Comment On January 08, 2010, at 10:27 AM, Roncool wrote:

    I don't believe what I'am am hearing. Pushing 20 million subs approching 4 Qt numbers (Christmas) 1st time the company making money.Most of the people I talk to love the service and will never cut it loose, yet some guy post here I am nuts to have this service, and his reason is he just uses his car to leave I guess his trailer park to pay bills in town, or get his groceries and thats why this company will fail. Then there is this comment this stock will never get to a buck. What the hell. This is one of the most under valued well known stock ever traded. I am thinking when this turns soon it will shoot past a $$ and there will be a feeding frenzy to buy in. I just recived my copy of Stock Shock from More productions. If this docmentary gets main stream there will not be a house hold in America that have not herd of SIRI. Whts that worth to a company. This to me looks like a $5 to $8 stock in the next 5 years. I said 5 years not 5 minutes . It's a long stock with HUGE potential

  • Report this Comment On January 08, 2010, at 10:40 AM, SiriSera wrote:

    I had recently had the opportunity of listening to Sirius Radio in a rental car. The experiance on it was amazing to say the least. Specially since, I have a blackberry and Ipod and listen to radio thru it and Sirius is light years ahead of internet radio in content and quality. I'm in the IT field and handle different types of internet networks. At this time (probably no time in the next couple of years) there is wireless connectivity that can handle the transmission as good as what Sirius has. If they ever decide to put video, they will grow at an icredible rate and probably become the biggest company in the enterinment media out there. Currently I'm in the process of buying a device to listen to Sirius in my own car. FM/AM is a thing of the past, I listen to it from time to time but mainly CDs now, Once I get my Sirius device I'm going back to listening to Radio.

  • Report this Comment On January 08, 2010, at 11:42 AM, Fool wrote:

    No I don't think that internet radio in cars is going to hurt sirius xm too much right now, but it sure will help the auto body repair industry.

  • Report this Comment On January 08, 2010, at 5:06 PM, beerman53 wrote:

    all of these comments assumes that satellites are single task function. anyone looking beyond the horizon can see the growth and huge potential for added uses from that little bump on the top of the car. All I have to do is crank up the tunes without having to hear from screaming sales pitches that are ever increasing 3 songs ,20 minutes of Crap.

  • Report this Comment On January 11, 2010, at 1:36 PM, TMFVelvetHammer wrote:

    PREMIUM and LIVE content folks. Sirius/XM owns all of the major sports content, as well as a ton of talk programs, like NPR, ESPN, CNN, and dozens of their own premium talk channels.

    SIRI has made a significant investment in content that you cannot get from any other audio source, and plenty of consumers will pay to get it. I have had XM for years, and I listen to music about 20% of the time, and there are plenty of other subscribers like me.

    It's really not about the music. Just remember that the cassette, CD, and MP3 didn't kill the radio stations, and don't think that the internet will kill Sirius/XM.

  • Report this Comment On January 13, 2010, at 5:23 PM, langco1 wrote:

    sirius is long dead and buried...

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