Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI ) moved higher this week, closing off by 3% to hit $3.14. The general market also moved higher, but Sirius XM did outpace the major indices on the way up.
There was more going on beyond the share-price gyrations. The week began with General Motors' (NYSE: GM ) announcement of a 4G initiative that could have ramifications for Sirius XM. On the other end of the spectrum, streaming-music leader Pandora (NYSE: P ) moved to cap heavy usage of its service on mobile devices. Short interest data is out for mid-February, and the naysayers are out in full force again, with Sirius XM notching another new high in bearish bets. We also saw automakers come through with robust sales for February, and that bodes well for Sirius XM's chances at strong gross subscriber additions.
Let's take a closer look.
GM hooks up drivers
GM has been slow to match Ford (NYSE: F ) when it comes to dashboard technology. As Ford sets the bar with Sync only to raise it with MyFord Touch, GM's still coasting on its premium suite of telematics through OnStar.
Well, that will change late next year, when the 2015 model year cars start hitting showrooms. Most of GM's cars across its Chevy, Buick, GMC, and Cadillac lines will have the option of 4G LTE connectivity. Naturally, these mobile hotspots will be premium features with monthly data plans, but it's a given that the fast Internet connections will allow GM to serve up Pandora, Sirius XM's streaming service, and other popular digital music apps through a car's audio system.
The in-car enhancement will be more of a threat than an opportunity for GM drivers. Will they still want to pay $14.49 a month when they're already paying for a mobile hotspot with access to limitless online entertainment options?
Naturally, this could also be an opportunity for Sirius XM if it's able to beef up its online offering.
Pandora boxes outside of the think
The days of free usage may be over for Pandora's most active users. The music-discovery pioneer will start capping free ad-supported usage of its service at 40 hours a month through smartphones and tablets. After that, users will need to pay $0.99 to continue listening for the balance of the month.
Pandora argues that just 4% of its users are streaming enough through mobile devices to trigger the tollbooth, but that's still nearly 3 million of Pandora's 65.6 million active users. Will everyone else begin scaling back on usage just to make sure they don't bump up against the cap?
On the other hand, if someone's putting up with ads for more than 40 hours a month, why don't they just pay $36 a year to zap all those ads with a Pandora One membership?
This move is a positive for Sirius XM. Pandora's threat to Sirius XM has come from the fear that a growing number of cars allowing smartphone owners to stream Pandora will eat into satellite-radio accounts. Now satellite radio might become a more compelling option.
If seeing 401.6 million shares of Sirius XM sold short by the end of January was a surprise, seeing that amount balloon to another recent high of 406.3 million as of Feb. 15 is even more of a shock. Sirius XM has feasted on short sellers for most of the past four years. All the media giant needs is a strong catalyst or two to flush some of those pessimists out with another short squeeze.
"Drive," she said
February rocked for automakers. Ford led the way with a 9% increase in stateside sales. You have to go all the way back to 2007 to find the last time Ford had a February this strong.
GM also rolled in with a multiyear high. Its 7% boost was the best February the country's largest automaker has seen since 2008.
This is important. New-auto sales remain the lifeblood of satellite radio, as nearly half of car buyers who take advantage of free trials for Sirius or XM wind up sticking around as paying customers.
Sirius XM is already entering 2013 with strong momentum after nabbing 2 million net additions in 2012. A feverish pace of car buying at the showroom to start the new year should deliver another year of record subscribers for the company.
It's naturally up to Sirius XM to retain the subscribers once the carmakers hand them over, but everything seems to go better when the premium-radio leader has a bigger pool of drivers to work with.
Thank you, Detroit.
Dive deeper into Sirius XM
Even though Sirius XM is one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.