Sirius XM's Berry Good News (SIRI)

Sirius XM's Berry Good News

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Owners of compatible BlackBerry Tour, Bold, Curve, and Storm smartphones can now stream Sirius XM Radio (Nasdaq: SIRI).

It's been several months since the launch of its official application through Apple's (Nasdaq: AAPL) App Store, so it was really just a matter of time before Sirius XM reached out to Research In Motion's (Nasdaq: RIMM) larger smartphone audience.

Investors should temper their enthusiasm over the news -- and the reason why has nothing to do with premium audio streaming likely being a harder sell to the corporate crowd of BlackBerry enthusiasts.

This morning's press release liberally sprinkles the word "free" in its release -- it appears four times before you've even finished the second paragraph -- but the app's not exactly a freebie. Even existing Sirius and XM subscribers have to pay a premium to receive online streaming, a demand that has kept the popularity of the satellite radio purveyor's iPhone and iPod touch app in check.

Despite quickly topping 1 million downloads through Apple's virtual storefront, the app's number of actual paying customers was initially uninspiring. CEO Mel Karmazin kept euphoria in check this past summer, when he warned that App Store subscribers "should not be a significant number" at the time. Until we get hard numbers or a public sentiment shift -- or see average revenue per user spike -- it's hard to consider these pay-for-streaming apps as serious pieces in the Sirius XM mosaic.

The satellite-radio giant is still at the mercy of automaker installations, which is actually a good thing these days. Ford (NYSE: F) sales have been spiking in recent months. Even this week's Toyota (NYSE: TM) scare could be good for Sirius XM, if it prompts Toyota owners to trade in their cars for new rides.

There may come a time when factory receiver installations in new cars will need an assist from premium streaming applications to boost Sirius XM's subscriber count, but it's clearly not necessary now.

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They will be substantial drivers for the company.
They will never account for a "significant number" of subscribers.
'm not sure how I feel.

What do you think of Sirius XM streaming apps?

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Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He 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.

Comments from our Foolish Readers

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Report this Comment On February 04, 2010, at 5:15 PM, ItAintCool wrote:

Rick: both apps right now will not have a significant effect on increasing subscribers or revenue (although it certainly won't hurt). The Sky Dock will do significantly better as it provides much more channels of service. IMHO, when Howard Stern renews his contrract for 3 years, for somewhat less pay per year, he will agree to his show being broadcast on the streaming apps for a percentage of each streaming app subscription added from that point on. It will be a win-win for both SIRI & Howard, since they will gain significant more subscriptions (even those with lifetime subscriptions) and Howard's share of the profits will more than compensate for his pay-cut.
Report this Comment On February 04, 2010, at 5:22 PM, ItAintCool wrote:

Rick: I also want to thank you again for actually reporting current news regarding SIRI and not just regurgitating opinion polls and user comments, like Andrea Tse on TSC. Yes, I know you do have an opinion box in your article, but there is an actual story here to read with relevant information. The Street seems to have a news blackout for relevant news regarding SIRI (unless it's bad news) and is simply publishing fluff opinion pieces (or worse).
Report this Comment On February 04, 2010, at 10:30 PM, ikkyu2 wrote:

SIRI is vertically integrated right now, the way that Comcast/NBC Universal is tryng to vertically integrate by their merger.
Each has two completely separate but complementary divisions. One generates content. The other is a modality for delivering content.
Comcast would like to own a major content producer. They already own a large network of fibre optic, routers, and home coaxial cable; and their customers purchase or rent dedicated hardware made by other manufacturers (Motorola, mainly) so they can get signal. If Comcast can generate and monetize content, they own the entire chain from content generation to content consumption.
SIRI already owns or licenses quite a bit of compelling content. They don't own any content generation wholesale, but they partner with a lot of compelling partners - CNBC, Bloomberg, NFL Radio, NBA and MLB, Martha, Howard, the RIAA, etc. (Where's their celebrity chef?) They've got partnering-for-content-generation down to a science - NFL Radio is the best content I consume on a week in week out basis.
Sirius also owns this giant albatross/millstone, a huge network of spacefaring satellites that cost millions to put up and maintain. Once, they delivered fairly broad band to anyone standing on the continental US with a specialized hardware device. But depreciating these is getting near the end of its useful life, and anywhere that has 3G, which is getting to be everywhere, has better two-way broadband than what the satellite can deliver one-way.
Pretty soon SIRI is going to be a company that partners to generate content and deliver it by a variety of other modalities. Why should the average SIRI user pay to have weird hardware to receive satellite transmissions when they already have cable internet, or 3G on their phone bill, or some other way of receiving broadband content?
Report this Comment On February 07, 2010, at 11:35 AM, MusicStock wrote:

Sirius does not add any value in the mobile device market as there are real "free" alternatives with Internet Radio (ie. Pandora). Sirius made a mistake in trying to generate additional revenue through a service that was once free to existing subscribers. I hope this changes in the future since I like service - it is not worth paying another fee just for a different access point. This is like paying another cable fee just because I have more than one TV.