Is Clear Channel Laughing at Sirius XM?

It's all about timing when it comes to comedy, so what can one say about Clear Channel (OTC: CCMO) beefing up its iHeartRadio streaming app with 24/7 Comedy Radio?

Clear Channel has been promoting the commercial-free comedy channel, and with good reason. Consumers tend to think of iHeartRadio, Pandora (NYSE: P), and CBS' (NYSE: CBS) last.fm as streaming music sites. Clear Channel wants to make sure that it stands out.

On the premium end, Sirius XM Radio (Nasdaq: SIRI) offers more than just music through its streaming plan. Most of the talk, sports, and celebrity content that's available through its satellite receivers can also be accessed online. Both Sirius and XM offer dedicated comedy stations, so Clear Channel is aiming well with its free offering.

This isn't the first time that the terrestrial leader sneaks a peek at the satellite radio giant's playbook. Latin music will be a major part of the upcoming Sirius XM 2.0 launch, and Clear Channel recently teamed up with Spanish-language radio giant Univision to add dozens of Latin American music and talk channels to the roughly 800 streaming broadcast stations that are currently available on iHeartRadio.

The playing field is clearly heating up, even though the limitations of streaming -- compared to Sirius XM's flagship satellite feeds -- can't be ignored.

  • Connectivity on the open road isn't perfect.
  • Sprint Nextel (NYSE: S) is the only major carrier selling unlimited data plans to new accounts, so hardcore streaming isn't exactly free through most devices.
  • Dashboard technology is making smartphone integration easier, but it's still not as seamless as pushing the satellite radio button.

The real test for Sirius XM will come when it raises its rates in January. If it can keep churn in check despite the improving competition, Sirius XM will be the one getting the last laugh.

If you want to see how Sirius XM stands up to the stream teams, add Sirius XM Radio to My Watchlist.

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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On October 07, 2011, at 10:21 AM, NealBarkett wrote:

    Rick, I think the time has come for Sirius Xm to strongly consider channel sponsorship's. These would not be standard commercials heard on terrestrial radio. These would be a brief flowing mentions of who is sponsoring the program peppered in thru out the hour, day or whatever. The revenue of this sponsorship program would help to keep the cost down to the subscribers. This is going to be needed as in the long term their will be a saturation point of subs. who will pay the cost of this service. I strongly feel that with all the competition coming from so many different sources that they need to sooner than later address this upcoming problem. The big picture is w/ lower costs you bring more people to Sirius. If you do the math I think it speaks for itself. Do I want 20 million subs @ an average cost of say $12.00 or would Sirius be better off w/ 75 million subs @ an average cost of $9.95? But keep 2 things in mind. One is that the number of idle radios is out growing the 21 million active radios and those idle radios did not come free. The other point is as you raise your subscriber-ship your sponsorship program commands more money due to of course more listeners. You mention the price increase that is coming and how will that affect the churn numbers. So it is a concern on the table. Sirius needs to open their market place to more demographics that can afford the content instead of making it a high end product for those who have the extra discretionary money. Last but not least, is that as you raise your subscribers you 1st put a hurt on your competition but also your added subs expose your content to more people who may not be subs but will be once they get a taste of the great content. This would be a major change of format but it should be considered. Maybe even have a channel like "Hits 1" turned on so all idle radios are not idle (keep in mind they would have a sponsor)! No more idle radios.

  • Report this Comment On October 07, 2011, at 11:42 AM, lehmo7 wrote:

    There is another huge difference between Sirius and Clear Channel that your article fails to address.

    It's called "Censorship". How can anyone listen to comedy when every other word is bleeped. It doesn't work!!!

  • Report this Comment On October 11, 2011, at 1:00 AM, kmacattack wrote:

    Neal, I agree with part of your theory. I think it would be great to be able to tap into the 20 plus million idle receivers out there, but I disagree with your assumption that by lowering the price to $9.95, SIRI would nearly quadruple subscribers. I'm in favor of the announced price increase, and I think the price point, an increase of $1.50 (roughly) rather than the $2.00 everyone was expecting is a masterful marketing play.. It's only a difference of $0.50 per month, but it SOUNDS like it's a reasonable and measured price increase, and from what I understand, SIRI is going to add more premium content, or "bang for the buck" to sweeten the deal for subscribers who might otherwise feel like they were being "gouged". With zero growth in Subs, the price increase should add over $300 million to the annual bottom line, and I think SIRI will continue to grow steadily, if not dramatically. The play for the Hispanic market is very smart marketing as well.

    As to the subject of sponsorship, or limited commercials, I don't think it's a bad idea as far as turning those 20 million idle receivers into a "sales force", but my idea, which I posted about 6 months ago, was to introduce a TIER which would have LIMITED SHORT COMMERCIALS, and a lesser variety and number of channels, similar to what some of the cable TV companies have. I would promote a "free access" period of maybe a week's listening time, and a "new customer special" rate of $4.95 to $5.95 per month. This would be $2.00 to $3.00 above Pandora's "commercial free" rate, but with SIRI quality programming rather than the lesser quality Pandora music. Since a ton of these receivers are sitting in used car inventories on dealer lots, it would be very easy to work with car dealers to include the programming cost into the financing of the car. The dealers are always looking for a method to increase their bottom line, and since they usually get rebates from the lenders, this "value added" feature would be well received. I sold cars years ago for a Ford Corporate owned group called "Auto Collection" which was a great concept, but it was hard to make a living as a sales consultant because the dealership operated in such an honest manner, selling cars at a very low "non negotiable price" that there wasn't enough profit margin. Most car dealers used to be extremely profitable because they operated by stealing every penny they could from customers, but this way of doing business is going away and you will see more of the "one price" no negotiation dealers in the future. The one department which made a ton of money, though, was the "F and I" or finance and insurance department. The finance managers were highly paid, received rebates from finance lenders, and made commissions on "value added" products such as power train and maintenance warranties. We were told as sales people to figure in "premium care" bumper to bumper factory backed warranties into the payment quote before we sent the customer to the finance department. When we showed the customer the payment amount, say $350 per month, for example, and asked the customer if they were comfortable with the payment amount, and they usually were, then told them, "AND Mr. Jones, that $350 payment includes a 5 year 100,000 mile warranty bumper to bumper, backed by Ford" they ALWAYS SMILED as if it was Christmas day. When I told them, now, premium care is not required, and you could save $20 per month without it, They almost always would say, "No, I want the warranty. That sounds great". The same technique could be used to adding a 5, 6 or 7 year Sirius subscription to the price of the car, building it in the payment and when the dealer advertises a car for sale with a payment and mentions" INCLUDES A 7 YEAR SUBSCRIPTION TO SIRIUS XM SATELLITE RADIO" do you not think this would "turn on" lots of idle radios in used car inventory, and assure that every new car sold would be sold with the SIRI unit "turned on." If the customer wants the "premium version" of SIRI, if they are contracting along with the car purchase, it would just add $7 or $8 to the monthly payment. What would really make the program go is to pay a sales "spiff" to the salesmen or finance manager of, for example, $25 for the "Sirius light" package" and $50 for the "premium Sirius" package. A salesman or finance manager could easily make an extra $500 to $1,000 per month by just including SIRI in the finance contract, and those customers aren't going to be lost to "churn" they will be subscribers for the life of the loan. An easy way to market the "light" package would be to break down the cost- it's $0.20 per day, less than the cost of 2 gallons of gas for an entire month of listening to the best listening experience available.

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