Couldn't make it to the 2014 International Consumer Electronics Show? Never fear: The Fool was there to check out the tech and report back on who was there and what was new. With thousands of products in more than 15 categories, the next big thing was surely making its debut at the CES in Las Vegas.
It's going to take a few years, but many automakers are talking about building wireless connectivity into their vehicles. This could spell trouble for Sirius XM (NASDAQ:SIRI), as 4G-enabled vehicles can provide a whole host of services -- including Internet radio.
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A full transcript follows the video.
Eric Bleeker: Hey, Fools. I'm Eric Bleeker, joined here by Austin Smith. We are in the car section of CES. It is absolutely enormous; so much is happening on this front. One area that I've seen a kind of sea change in this year is car companies actually building in wireless connectivity, whether 3G or 4G.
In the past we haven't seen this as much, and you have to wonder how this could affect the coming Sirius XM, if you've got the data built in to stream something like Pandora (NYSE:P). What are your thoughts on this?
Austin Smith: Yeah, I look at this and I actually think this could be a major blow to Sirius XM. Of course, not instantly, because there's a refresh cycle and a build cycle that's going to be involved in this, but maybe in four to five years you could really start to see the Sirius XM business model under pressure.
What they do is they come preinstalled in vehicles. They give you a trial, and then they try and upsell you to a subscription. But when the car companies are faced with a decision to install Sirius XM or install 4G connectivity, which obviously has much greater options and value add for a customer, they're going to go with the latter, because with that 4G connectivity you can not only get a product like Pandora radio. You can also get better mapping service; it can become an entire technology suite, as opposed to just getting that satellite radio.
I think this is something that Sirius XM's shareholders need to very seriously think about. There is an auto refresh cycle here; it's going to take a while for these 4G-connected vehicles to get out into the wild, but we're seeing Audi, we're seeing General Motors (NYSE:GM) -- we're seeing basically all of the companies here -- talk about 4G connectivity in some major way, and I think you have to be very aware of this as a Sirius XM shareholder.
The car companies are going to have to start deciding. It's not going to be both are coming installed with the vehicle. They're going to start making a cut one way or the other, and I think 4G connectivity is a much more compelling offer -- and that's actually kind of a benefit for companies like AT&T, which are really getting involved in this 4G install push into vehicles, and then they can pick up an entirely new subscription from these vehicles, much the same way Sirius has, but on data as opposed to just satellite radio.
Eric: Yeah, and even if consumers aren't really adopting the car-based stuff ... I know Sirius XM investors have seen this threat for years, but one of the other areas we're seeing -- such as Google's (NASDAQ:GOOGL) new Automotive Alliance, Apple (NASDAQ:AAPL) pushing further into cars -- is that you can also tether with a smartphone.
The pace at which the car industry has really embraced technology is a sea change from previous years, and I think people extrapolating that this didn't happen in 2009 or 2010 need to realize the pace is quickening right now.
Anyway, that's it for our take on Sirius XM, Pandora, and everything cars. For all your CES news, check back to Fool.com. Fool on!
Austin Smith owns shares of Apple, General Motors, and Google. Eric Bleeker, CFA, has no position in any stocks mentioned. The Motley Fool recommends Apple, General Motors, Google, and Pandora Media and owns shares of Apple, Google, and Sirius XM Radio. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.