Sirius XM Loves Cheap Content

Sirius XM Radio (Nasdaq: SIRI  ) has found another source of cost-effective content: starving college students.

Promoting its Tiesto's Club Life Radio channel, the satellite radio giant announced a contest that will give one ramen-twirling college student a monthly radio show while getting several more on the air.

Dutch electronic dance music producer Tiesto is kicking off a college tour in October, and each of the 15 shows will feature a contest giving the winner free concert tickets and the chance to host a one-hour show that will air on his commercial-free music channel.

Tiesto will then choose one of the 15 college tour winners to host a Sirius XM show for up to six months.

Yes, Sirius XM is a master of securing top talent at compelling price points. Despite paying top dollar for Howard Stern, Martha Stewart, and other on-air talent, programming and content costs have actually declined by 3% over the past year.

This is a very important distinction between Sirius XM radio and satellite television providers DIRECTV (Nasdaq: DTV  ) and DISH Network (Nasdaq: DISH  ) . DIRECTV and DISH face escalating costs as cable networks and broadcasters demand more money. Outside of the required music royalty fees, Sirius XM controls its own destiny in terms of programming.

The scalable nature of Sirius XM's model given its high fixed costs and low variable expenses make growth a very lucrative proposition. Yes, another big difference between Sirius XM and its kissing cousins using satellites for video is that Sirius XM's subscriber base is growing. DIRECTV and DISH suffered net sequential declines in subscribers in their latest quarter.

The contest is also a Sirius XM streaming promotion
Don't look for Tiesto's Club Life Radio in your car. Your satellite receiver dial probably doesn't go up to 340. The electronica party channel is available only on the Sirius XM 2.0-ready Lynx and Edge portable receivers. It's also available for customers of Sirius XM's streaming service.

Streaming has become a growing part of Sirius XM's objectives, and it's why Thursday's quarterly report out of Pandora (NYSE: P  ) is important. Internet radio isn't eating into satellite radio's market, but taking a page or two out of the Pandora playbook -- ideally the rare profitable pages -- will serve Sirius XM well in the long run.

So, yes, this promotion is ultimately promoting a hard-to-reach satellite radio channel. If it works, Sirius XM stands to push more stand-alone streaming subscriptions and meaty upgrades for existing receiver-based accounts.

Once again, Sirius XM knows exactly what it's doing.

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.

I also just put out a premium report on Sirius XM Radio, detailing the challenges and opportunities that await investors that are both long and short the dynamic media giant. A year of updates is also included with the report. Check it out now.

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. 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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