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Is Toyota Driving Sirius XM Off the Road?

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Buy a new Toyota (NYSE: TM  ) , and you'll get three free months to kick the tires of XM's satellite radio service. However, with the Entune multimedia system that Toyota is unveiling during this week's Consumer Electronics Show, drivers with smartphones will now enjoy a whole slew of other options as well.

Entune offers owners of Bluetooth-capable phones some pretty nifty mobile apps that can be executed without fumbling with their phones. Voice recognition and in-vehicle controls power the following dashboard experiences:

  • Microsoft's (Nasdaq: MSFT  ) Bing provides navigation, with more than 16 million points of interest. Somewhere out there, Garmin (Nasdaq: GRMN  ) is shedding a tear for every nuvi GPS box that will never be sold.
  • Making restaurant reservations on the fly is a breeze with OpenTable (Nasdaq: OPEN  ) , offering access to more than 15,000 foodie-friendly eateries. 
  • Dinner and a movie? Drivers can call up to pre-purchase movie tickets before pulling up to the multiplex.

However, the real features of Toyota's new platform that may keep Sirius XM Radio (Nasdaq: SIRI  ) up at night are the musical ones.

The spirit of radio
You can't spell Entune without tune, and music is a major component of Toyota's multimedia system.

Terrestrial radio is no longer limited to nearby signals. Entune leans on Clear Channel's iheartradio app to stream more than 750 hometown stations. Yes, this is still largely the commercial-laden drivel that drove many satellite radio subscribers to pay for premium radio, but with hundreds of regional choices, it won't be long before even the most jaded audio connoisseurs find something worthwhile.

Entune also works with Pandora, the free music-discovery service with a larger established base than even Sirius XM.

Obviously, this isn't the end of Sirius XM. Anyone who has ever streamed Internet audio in their car knows the pitfalls of its tinny aural quality and buffering gaps. This problem will be rectified in the coming year or two, as speedier 4G and broader coverage make connectivity more seamless, but it's currently a drag on performance.

The nail in Sirius XM's tire
There's more to Entune's freebies than turn-by-turn navigation, reservations, and a ton of audio options.

Entune also delivers customizable real-time traffic, fuel prices, local weather, stock quotes, and sport scores. Some of these features are slighter versions of add-on services for which Sirius XM owners currently pay extra, or which are rumored to be included in the Sirius XM 2.0 upgrade later this year.

Expect quite the buzzkill if Sirius XM's ballyhooed features are already available earlier and cheaper elsewhere by the time the 2.0 upgrade arrives. Even General Motors' (NYSE: GM  ) sleepy OnStar service is letting beta testers post audio status updates on Facebook and have their news feeds read to them while they drive.

The silver lining on the radio dial
Between Toyota's Entune and Ford's (NYSE: F  ) MyFord Touch, it would seem that dashboard connectivity will be the death of satellite radio. Not so fast, I say.

For starters, Sirius XM has been inking exclusive content deals that drivers will never access without premium subscriptions. You won't find Howard Stern, Oprah Winfrey, or Martha Stewart on your radio without a satellite receiver.

In addition, the existing wave of in-car consoles hasn't hurt satellite radio thus far. MyFord Touch was also introduced during last year's Consumer Electronics Show, but Sirius XM has gone on to post sequential subscriber growth in each of the four following quarters.

Finally, Toyota, Ford, and the rest of the automakers have plentiful incentives to keep Sirius XM thriving. These companies aren't just installing receiver; Sirius XM pays the carmakers for active subscribers. Clear Channel and Pandora probably can't offer such tantalizing payments. Toyota is just giving drivers what they want, but it will continue to promote conversion rates for drivers after their free XM trials run out.

Technology may challenge Sirius XM's model -- especially as the company ponders rate hikes this summer -- but it won't drive satellite radio off the road.

Can Sirius XM and Entune co-exist? Share your thoughts in the comment box below.

General Motors and Microsoft are Motley Fool Inside Value selections. OpenTable is a Motley Fool Rule Breakers pick. Ford Motor is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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

Read/Post Comments (13) | Recommend This Article (5)

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 05, 2011, at 11:54 AM, jl3793 wrote:

    I just pop in a CD in the standard dashboard player. Plays what I want with no commercials and I don't have to worry about any of the tech details. And it's free. You couldn't give my Sirius or XM or anything else. And try to charge me. Ha!

  • Report this Comment On January 05, 2011, at 12:01 PM, ehenry99 wrote:

    Really 11:54 poster? Then why exactly did you read the article and take the time to post. Your CD's boring you?

  • Report this Comment On January 05, 2011, at 12:35 PM, djplong wrote:

    I don't get the author. He says that the drivel on terrestrial radio drove people to Sirius and XM. But with Entune, getting 750 channels of that drivel is supposed to spell trouble for satellite radio? Clear Channel's "iheartradio" streaming app should be more appropriately named "IHeartRestaurantAndCarDealerAds". And 4G? This is the 4G that Verizon is setting up so that you can burn through your monthly data cap in FIFTEEN MINUTES? *That* is a threat?

  • Report this Comment On January 05, 2011, at 12:39 PM, Siriusbrit wrote:

    No matter how many companies compete for the Dashboard dollars, no matter what there delivery method is, it still boils down to the same one important thing: CONTENT, CONTENT, CONTENT!

    What poster 11.54 forgot to tell everyone is that he did pay for his content, he bought a $20 CD, then bought a bunch of CD Blanks ($30) then spent time and effort to burn this CD on the CD Burner that he bought for $90!

    All to get 1 Gender of Music on his Car CD player and listen to it over and over again!!

    For the same money or less he could have had a 1 Year subscription to SiriusXm with unlimited content and other useful driving information!

    Sorry '11.49' but nothing in this world is free !!

  • Report this Comment On January 05, 2011, at 1:18 PM, gwertz wrote:

    Siriusbrit, unfortunately, now we all know how jl3793 got his or her music...all he/she bought was the blank cds.

  • Report this Comment On January 05, 2011, at 1:36 PM, mdeamer wrote:

    Siriusbrit, music has genders?

  • Report this Comment On January 05, 2011, at 1:58 PM, JPDemers wrote:

    @djplong got it right -- streaming radio will blow out any wireless account that doesn't have unlimited data downloading. And an unlimited data plan is going to cost a lot more than an XM subscription.

    As for CDs ... I get no NPR, no news, and no MLB on my CDs. Local traffic and radio drivel? it's on the AM and FM channels of my XM receiver.

    Satellite radio is the most efficient way to stream data into millions of mobile receivers, and that's not going to change any time soon. Barriers to entry are huge (the cost nearly killed Sirius and XM in the early days.) There is no competition.

  • Report this Comment On January 05, 2011, at 2:08 PM, Cool700 wrote:

    3G, 4G or 10G..... I know it's not here yet! You will be charged for listening to these so called free services!

    There are too many dropped 911 calls etc....Pandora and others are eating up bandwdth which hurts important calls.

    With the new net neutrality laws you will be charged to use these services. The cell phone companies even have the right to charge the companies who offer the APPS!

    SIRIUS XM does not use WiFi or 3G, 4G to connect. It uses satellites.

  • Report this Comment On January 05, 2011, at 2:50 PM, 702nitro wrote:

    Instead of paying Sirius +$12.00 some dollars a month, you can instead purchase 13 songs from iTunes for the same price.

    That's 3 fresh songs a week or 6 new songs every two weeks. Life doesn't get any better than that. Why people subscribe to Sirius is beyond my comprehension.

  • Report this Comment On January 05, 2011, at 3:36 PM, waterinfo wrote:

    If SiriusXM never signed another subscriber the business would continue to exist. It is a $3 Billion per year business that could manage expenses and stay break even or profitable. My personal projection that it will continue to grow, and there will be 100,000,000 active SiriusXM radios by 2020. But if that number is just 21,000,000 or anything in between SiriusXM will still be up an running very nicely in 2020. Will SIRI stock be a good investment? If growth ends at 21,000,000 the answer is no. If it reaches 50,000,000 or more definitely.

    What about Pandora. It will be a distant memory by 2020. Internet businesses need a revenue source. If Pandora is "free" it needs advertising. Radio advertising means commercials. Commercials means Pandora is no better than AM/FM broadcast. If there are no commercials, then they have to charge subscripton fees. If they charge subscription fees, then they are a weak, complex competitor to SiriusXM, starting a decade behind in talent, programming, and user base.

    Without net neutrality, there will have to be volume based usage fees for internet wireless usage. Net neutrality cannot exist, any more than AT&T could afford to carry Sprint's and MCI's traffic for free when they started competing with AT&T in the 1980's. Current pricing models for wireless internet traffic yield usage costs anywhere from 75 cents to $6 dollars per hour for a streaming application like internet radio. And that just covers the transport of the data bits, not the programming. Hardly competitive to $14/month to listen as much as you want to on SiriusXM.

    There are many more people with cars than there are people with smartphones. To a great extent smartphones are a "fad", laden with complexity and applications that go way beyond their basic utility. A lot of people carry a swiss army knife, but it does not mean that the world no longer needs stand alone knives, screwdrivers, and pliers. Smartphones, like many "toys" are the rage for a while, and then usage becomes based ONLY on the things they do best. Making phone calls, messaging in many forms, implementing work specific applications (like the UPS driver that tracks packages with a smartphone-like device), yes. But replacing everyones phone, computer, radio, television, camera, and finger nail clipper means that users will have at best just a bunch of very mediocre tools.

    The blogers who rant about all the "high tech" competitors that will wipe out SiriusXM probably were in grade school in 1997 to 2000 when Internet startups were raising hundred of millions of dollars at the drop of a hat to develop internet businesses built on fluff and promise. All but a few evaporated. A few like barely survived before they got profitable enough to grow on their own. Buinesses today, built on a concept of "free applications" or "free services" are doomed to walk the path of the worst failures of 2000-2001.

    Many localities have legislated against using a phone while driving. Many more are moving in that direction, as research shows that texting or phoning while driving is as bad or worse than driving drunk. (My wife is still recovering from injuries suffered in January 2010 when a woman on the phone plowed into her.) What might the laws look like when people start having accidents because they were searching for restaurant reservation while they are driving. Some automakers have programmed the GPS unit so you can't change the settings or destinations while the car is in motion. Gadgets and gizmos layered into new cars will go unused by many drivers, and will provide little advantage in driving auto sales or profit margins.

    I don't think Toyota's new concept will keep the SiriusXM executive up nights. I think that they are much too busy finding ways to add additional value to a subscription service that is already a great bargain.

  • Report this Comment On January 05, 2011, at 8:41 PM, BlackestPope wrote:

    I look forward to getting up and listening to Sirius in the mornings. No matter how many comedy albums or how much music I pack in my ipod it is still great to get up and laugh to a live morning show.

    Content is King! Im actually thinking of getting an iphone specifically to listen to the Stern show.

    I also enjoy being able to listen NPR or the BBC without having to station hunt no matter how far I drive. Everyone has their own preferences, but as a fan of music, theatre of the mind and radio in general, I am for the most part happy with Sirius radio where I can get Garrison Keillor, Hip Hop, Punk Rock, Book Radio, Radio Classics and also, original content everyday. Maybe this isn't for everyone but I will be with Sirius at least another five years. I tend to disagree with the article... Im not even sure what the issue is... if I bought a new Toyota tomorrow Im sure I would drive it home listening to Sirius one way or another.

  • Report this Comment On January 05, 2011, at 11:17 PM, Austin77478 wrote:

    Rick, the article is innocuous at best!

  • Report this Comment On May 15, 2012, at 7:09 AM, whof wrote:

    Here's another way. With Rhapsody and a good data plan on your smartphone you can stream any piece of music you can think of through Entune (or any BT capable player)

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