3 Questions for Sirius XM

There is so much that we will know by tomorrow's opening bell about Sirius XM Radio (Nasdaq: SIRI  ) that we don't know right now.

The satellite radio provider reports its quarterly results on Tuesday morning, and this one should be a good one. A recent price hike and a legal clash with its most magnetic on-air personality will make this a very important report.

Let's take a closer look at some of the burning questions facing Sirius XM.

1. Is the recent price hike scaring away new subscribers?
For the first time since the merger between Sirius and XM was completed nearly four years ago, Sirius XM increased its primary rates.

The move wasn't much. The monthly rate for service inched 12% higher to $14.49.

Some investors will dive right into the monthly churn metric to see how things are playing out, but that's going to be an incomplete measuring stick. Many Sirius XM subscribers are locked into long-term deals, so they are still paying the old rate. The best gauge this time will simply be to check out the subscriber count.

The media giant began the year with 21.9 million subscribers, and it's looking to close out 2012 with 1.3 million more on its rolls. Obviously Sirius XM doesn't get to 23.2 million by year's end if car buyers are scoffing at the $14.49-a-month rate.

Keeping an eye on the net additions during the past three months -- while also hoping for the new trial conversion rate to improve -- will answer this question.

2. Can Sirius XM keep Howard Stern happy?
Sirius XM won a legal battle two weeks ago when a judge dismissed a lawsuit initiated by Howard Stern's camp, alleging that the popular morning show host was due a performance bonus for the subscribers acquired in the merger with XM.

Stern's representatives moved last week to appeal the decision, and here's where things get interesting.

There is now less than four years left on Stern's contract, and even before the legal scuffle it was a safe bet that this would be his last radio deal. Stern's already doing far fewer live shows than he did several years ago during his terrestrial radio tenure.

In two weeks, Stern begins a side gig that promises to give him more exposure than satellite radio has over the past six years and change. He will go on primetime television as the new judge on America's Got Talent. Comcast's (Nasdaq: CMCSK  ) (Nasdaq: CMCSA  ) NBC Universal has been actively promoting his arrival, even springing for a Super Bowl ad earlier this year. Some fans -- including celebrity filmmaker Judd Apatow -- have publicly called out Stern for talking too much about his TV gig during his radio show.

Some may argue that an unhappy Stern makes for better radio, and that was certainly true during his terrestrial radio days. However, between Stern's likely elevated stardom after generating primetime exposure and the need for Sirius XM to appeal to a wider audience to keep drivers paying for premium radio, Sirius XM needs to make sure that Stern's displeasure doesn't hurt the service's reputation.

3. What's Liberty Media up to?
After patiently waiting for ownership restrictions to ease since acquiring a 40% preferred share stake in Sirius XM, Liberty Media (Nasdaq: LMCA  ) moved to potentially take de facto control of the satellite radio giant.

Will Liberty Media grow the 40% stake that it acquired three years ago? Will it grow disenchanted and move on?

Sirius XM obviously isn't going to give a definitive answer. This is Liberty Media's question to answer. Sirius XM is Liberty Media's largest investment. Liberty Media's shares are getting a boost this morning on the huge pop in Barnes & Noble (NYSE: BKS  ) -- another sizable investment that it snapped up last year -- after the seemingly distressed book-seller turned heads by landing a $300 million Nook-related investment.

Liberty Media isn't likely to sell its appreciated Barnes & Noble shares to buy more of Liberty Media -- or vice versa -- but this is another soap opera that Sirius XM has to deal with.

There's never a boring trading day when it comes to the historically volatile Sirius XM, but tomorrow should be more enlightening and entertaining than usual.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by 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 now gone from the scorecard, but if you want to discover the newsletter service's next rule-breaking multibagger, a free report reveals all.

Motley Fool newsletter services have recommended writing puts on Barnes & Noble. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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 Liberty Media. 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 April 30, 2012, at 11:32 AM, southernbeachguy wrote:

    1. I doubt that 1.50 a month is scaring off anyone that is subscribing.

    2. I doubt Howard will find anyone else that will pay him what Sirus does, so even if he isn't happy, will he quit a giant payday just to make a point? Doubt it!

    3. I want to know about Liberty too. Whatever they think that Sirus is worth they need to add $8 Billion to that number to take in coinsideration the NOLs.

  • Report this Comment On April 30, 2012, at 3:59 PM, doubting wrote:

    1. Per Mel's mid-March remarks the answer is virtually "NO". The price increase adverse impact on sub growth is negligible. Those who would want to have the service do not CARE about additional $1.54 per month. Those who do not want the service would not buy at any price.

    2. It does not matter. By the time his contract is up in 2015, his impact will be negligible. Siri brand will be dominating the radio market with or without HS.

    3. You need to ask Liberty Media. The only poor outcome for investors is a prolonged standstill when shares are not bought back.

    Overall, the company will deliver tomorrow. A lot of skeptics will be surprised. Siri will beat analysts' expectation handsomely. Mark my word!!!

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