Sirius XM vs. the World

Sirius XM Radio (Nasdaq: SIRI  ) knows that the dashboard is getting competitive. It's no longer about overcoming the threat of commercial-saddled terrestrial radio or the limitations of what's in a driver's portable media player or CD case.

If there's one theme that became apparent during both the CES and North American International Auto Show events it's that consumers want to use their smartphones to milk more out of the driving experience.

Wall Street Journal's Eyes on the Road column yesterday detailed some of the latest improvements in auto infotainment.

Fueled by a recent Deloitte survey that revealed a whopping 59% of car buyers between the ages of 19 and 31 view in-car connectivity as a car interior's most important feature, automakers and app developers are up to the following these days:

  • Pandora (NYSE: P  ) now has deals with 23 automakers to make it easier for smartphone owners to seamlessly stream custom-tailored music playlists through car speakers.
  • Ford's (NYSE: F  ) AppLink is now available in 4 million cars with SYNC, allowing deeper integration for accessing content. A free NPR streaming app will be available next month. Ford expects 9 million cars equipped with SYNC by 2015.
  • Audi Connect is a $25-a-month truly mobile Wi-Fi hot spot. The service serves up Google Maps navigation, weather, and gas prices. As a hot spot, it also allows anyone in the car to surf the Web. Your Pandora stream or mine?

Pandora's growth, in and of itself, isn't a problem. Both Sirius XM and Pandora have grown in the presence of one another, though Pandora is naturally growing a lot faster. The same can also be said about each and every single dashboard-tickling device that has hit the market. Sirius XM managed to wrap up 2011 with 1.7 million more subscribers.

The one thing that investors need to remember is that there's a financial incentive shelled out to auto showrooms when drivers become paying satellite radio subscribers. Most of the other initiatives being rolled out -- save for the Wi-Fi hot spots -- are simply one-off feats to set one carmaker's automobile off from the rest.

Audi Connect will still bear watching. If someone is already paying $25 a month for unlimited data, paying an extra $15 a month for satellite radio on top of that may be a harder sell when connectivity opens up a plethora of music and live streamed content.

Mobile hot spots haven't really gone mainstream yet. Chrysler was all over this as far back as 2008. However, the desire for in-car connectivity has changed over the years.

There is room for all of the key players to grow for now, but sooner or later there's going to be a shakeout.

In the spirit of the CAPScall initiative for accountability, I'm reiterating my bullish call on Sirius XM for Motley Fool CAPS. XM Satellite Radio was a Rule Breakers recommendation before the Sirius XM merger. It's gone from the scorecard, but if you want to discover the newsletter service's next rule-breaking multibagger, a free report tells all.  

The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. 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. The Motley Fool has a disclosure policy.

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


Read/Post Comments (6) | Recommend This Article (3)

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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 26, 2012, at 11:03 AM, doubting wrote:

    Rick,

    Your points about competition are valid on the surface. However, when you dig deeper, Pandora's competition in particular, does not hold water. One of the main reasons is certainly demographics. Sirius' customer base, to a very large degree, are "serious” people who are able to appreciate things for their value rather run after free and easy.

    In spite of its very reasonable down to Earth fees under $20 per month vs. free of pandoras, Sirius remains the best choice on the market. The variety of its programming catering to most imaginable tastes is UNRIVALED. And now that they are making money they can afford things that their competition may only dream about.

  • Report this Comment On January 26, 2012, at 11:11 AM, Austin77478 wrote:

    I am reiterating that sometimes, Rick is “Fools” of it. How can one compare Sirius’ contents with Pandora’s? I guess he has to do this, may be, to generate interest in the article.

  • Report this Comment On January 26, 2012, at 11:14 AM, CaribouPaku wrote:

    Audio connect, can't see driving down the highway on my laptop and sure do not want drivers playing around on their iphones while driving. Besides streaming data is becoming more expensive. Second $14 dollars a month for clear unliimited content, sports, music, news, etc. is a bit cheaper than the $25. Satillite already offers weather, gas, etc. I can buy a garmin for under $125 and get maps for free. So, I'll keep my siriusXm and save the streaming of content, etc. until I am safe sitting at home. Maybe people should live in reality instead of living in virtual reality. There is so much to appreciate out their..Get out and smell the roses!!! Instead of all the techno B.S. give me a device that will get me 100 miles to the gallon!! Now that would be progress the rest is nothing more than window dressings!!!

  • Report this Comment On January 26, 2012, at 12:09 PM, ctsolomonmd wrote:

    do you think apple might be interested in acquiring Sirius. It would give them overnight content and easy entry into the car market increase at a low price point. Apple certainly has the money.

    cts

  • Report this Comment On January 26, 2012, at 2:20 PM, kmacattack wrote:

    Rick, a pretty good article,but I have to agree with the 4 posts ahead of mine. I wouldn't listen to Pandora if you PAID ME. IT's horrible, and like the first post mentioned, the demographics are totally different. Pandora, I'm pretty sure is dominant with the 10 to 16 year old listeners, but these kids can't even drive yet, and if you are wanting to listen to hip hop or rap, maybe they are happy with the "music". I know Sirius offers hip hop and rap, too, but I'll bet that if SIRI subscribers were polled, they aren't the top rated channels. Unless Pandora has changed since I "subscribed" about a year ago, they have the same rotation of commercials which run about every 3rd or 4th song,and those get pretty irritating, too.

    And, of course, there is the bandwidth issue. I just read today that ATT lost billions in the last quarter, and from what I understand, they no longer offer an unlimited data plan. Verizon is also losing money. I own Sprint, and they are barely hanging on and if they survive it will be because of the I phone which they now have. Maybe they can make money with their $79 unlimited everything plan, but I'll bet before too long they will pull the plug on it if they are able to gain 15 or 20 million new customers ( they are obligated to purchase, I believe, about 25 million I phones alone and of course they still sell Androids and other versions of "smart phones". Sprint finally got smart and realized that people hated their customer service. They've made an all out effort to improve their service attitude, Sprint's Boost division, which is a no contract prepaid phone, has the best deal I've seen at $55 for everything unlimited. (I'll never become a slave by signing a cell contract again) I have a friend who has a US cellular phone and was very happy with their service until he got his new Android phone, started using the streaming data, and had his bill go from $49 to over $800 in a month, because he ran over his alloted data usage. When people start getting some of these huge bills for data usage, they aren't going to think that their "free streaming" is such a good deal. I think most of these cars will also have Sirius receivers, and I think most people will find Sirius far more enjoyable. Sirius just announced another brilliant move -they just signed a national agreement with Chrysler dealers to give free 90 day subs away with used cars equipped with SIRI. This plan has been working well with Car Max, and they just added Auto Nation. There are probably at least 25 million idle receivers in used cars on the road, and probably at least 10 million in dealer inventory. This will be a very low cost program for SIRI even if they are not receiving a penny from the car dealers, but I'll bet the dealers are splitting at least half the cost. With the profit margins that SIRI is making, which grow with every new sub, they may in fact have no out of pocket cost at all per sub. The dealers would certainly be smart to pay half price for 90 days, adding only about $20 to the cost of the car and adding a feature which gives them a competitive edge. When A customer takes a test drive, I guarantee you that if the salesman has half a brain, the first thing he will do is to turn on the Sirius radio before he leaves the lot with the customer. If the cars aren't programmed where the SIRI receiver is active, a smart dealer will have a receiver in the showroom which is playing full time, and available for every customer to see and hear when they walk in. The SIRI radio will close a lot of car sales by itself. I think that the conversion rate on the used cars sold through dealers will actually be higher than the roughly 50 percent figure on new cars, because of the demographics of the buyers. The buyers of the 2 to 5 year old cars are likely to be mostly in the 20 to 40 old bracket who have an I phone or an Android, and are paying $70 to $150 per month for service and view the phone as a "necessity" . This demographic group is more "in tune" with full time music listening, Howard Stern, NFL/NBA and college sports programming. They are in their cars more than people like me (I'm 61) and you won't see them driving down the road without the radio playing. Once they experience SIRI, most of them are going to be "hooked". We rented a new Ford Fusion a couple of months ago for 10 days, and drove to Panama City Beach., which is about a 900 mile drive. The entire 10 days we had the car, I never once turned off the SIRI radio. Once I found a station I liked, I listened for hours at a time, something I haven't done for about 30 years on a terresteral staition, unless it was to listen to a football game when I was traveling. The SIRI radio made a 10 hour day driving seem much shorter and much more enjoyable. I've taken this same trip about 10 times, and I've never felt so relaxed for so many hours of driving. My next car will have a Sirius radio, and I'll gladly pay for a year's subscription at a time, even though I'm driving far less than I used to. When I'm in the car I WANT MY SIRIUS!

  • Report this Comment On January 26, 2012, at 6:02 PM, doubting wrote:

    I penned a post earlier that, in my view, one company that would benefit the most from acquiring siri and has the means to do so is google. Their prime competition in the music market is appl, and it is hard to compete with the latter because they are set up so well and have a huge leg up on goog in this area.

    Siri would add enormous value to goog with its infrastructure, content and contracts, let alone between $15B and $20B of fcf that I expect siri to generate this decade.

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