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With 4G Coming to Cars, Is Sirius XM in Trouble?

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 on!

Read/Post Comments (26) | Recommend This Article (2)

Comments from our Foolish Readers

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 19, 2014, at 5:39 PM, plange01 wrote:

    sirius should have failed back in 2008...its nine lives are about up!

  • Report this Comment On January 20, 2014, at 8:12 AM, jojopuppyfish wrote:

    No....Because its about content.

    Most people listen to talk and music....not just music.

    Internet radio doesn't have NFL, NBA, NHL, NBA, English League Soccer, Nascar, CNN, FOX, MSNBC, Bloomberg radio, and, oh yeah, BTW, they also have great music channels.

    And it all costs around $20/month.....way cheaper than anything cellular has to offer.

  • Report this Comment On January 20, 2014, at 8:30 AM, cainiac wrote:

    You can find the answer quite quickly.

    Take a drive listening to music via 4G and tell me how many times it buffers, pauses or outright does not work because of no 4G signal.

    Then listen to Sirius and you will see why 4G is not, has not and will not be a challenge when compared to satellite.

  • Report this Comment On January 20, 2014, at 9:25 AM, wholesalecd wrote:

    I call and threaten to cancel my Siri every six months and they give me the service almost free for another six months. oh my my

  • Report this Comment On January 20, 2014, at 10:16 AM, SiriusXMheat wrote:

    The first question any interviewer should ask is if the person that is being interviewed or whether the interviewer themselves, is a subscriber to Sirius. If they aren't, then they don't have the proper knowledge to be able to talk intelligently about whether or not 4G is going to be successful or not in competing with SIRI.

    When Austin said this - "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".....he immediately lost me, cause it became obvious to me that he really doesn't know what Sirius is or offers........nor does he understand the differences between Pandora and Sirius.

  • Report this Comment On January 20, 2014, at 10:20 AM, Austin77478 wrote:


    You are still around with your Sirius' diatribe after so many years? wholesalecd, you may not even be a subscriber.

  • Report this Comment On January 20, 2014, at 10:26 AM, bjames wrote:

    I can see it now the Mojave desert covered with cell towers just so that one can listen to their wireless internet radio. And my tethered smart phone will already play internet music through the car's audio


  • Report this Comment On January 20, 2014, at 10:48 AM, nofoolingforme wrote:

    But, don't the authors know that Sirius is available over the internet, so it is going to be competing with itself. Because of its exceptional content, it will win the battle between itself and itself.

    Can't the Moltley Fool find some writers who are Foolish, but, not completely ignorant?!!

  • Report this Comment On January 20, 2014, at 11:37 AM, FM5 wrote:

    you still have to pay for data, do you think there going to give you 4 g for free, I don't think so,

    and why do you think we just pick up a telematics company, think about if before you become the fool..

  • Report this Comment On January 20, 2014, at 12:14 PM, Guggerpaul wrote:

    Some contend that the writer does not know what he is talking about, I believe he knows exactly what he is doing and believe this article is timed to help JM acquire Siri, Do not be fooled! Its all part of the billionaires boys club This is the reason I am no longer a member of the Motely Fool

  • Report this Comment On January 20, 2014, at 12:49 PM, Nohjnogias wrote:

    I'll give up Sirius XM when they pry my cold, dead hands from around the neck of Mojo Nixon, that booger eatin' moron! Love that O U T L A W country!

  • Report this Comment On January 20, 2014, at 1:14 PM, millewk wrote:

    Oh please....the 4G network is not mature enough to get signal strength across the country. I live just 30 miles west of Chicago and I'm relegated to 4G broadband. I have to actually move around in my home to find enough bars to use my PC or I-phone. Driving down to our second home on the gulf coast I get a signal about half the time. With Sirius the only time I have ever lost signal is in a car wash. 4g has a long, long way to go before they can surpass Sirius for connectivity!

  • Report this Comment On January 20, 2014, at 2:05 PM, indycolt17 wrote:

    My grandmother passed Sirius XM in trouble?

  • Report this Comment On January 20, 2014, at 2:57 PM, 67vair wrote:

    Why write, when you don't know the subject about which you are writing?

  • Report this Comment On January 20, 2014, at 4:20 PM, ddeleo wrote:

    At first I was worried when I read this article because there is not doubt 4G will sometime before 2016 reach its full potential. However...

    If management has any sense they jump all over this as the true future and capitalise on it for the next phase of Sirius XM. Global. 4G, true 4G, the kind that does 50-100 Mbs (its called TDD LTE) is what countries such as Japan (already has), China, SPRINT in the U.S. (being currently rolled out - called Spark) have. The 2014 smartphones including Apple will have the chip for it. Anyways, Sirius can expand globally with no need for new Satellites. They can keep the power of the satellites here until all car companies switch 100% to 4G enabled. Thus maintaining the support for their 25 million+ customers. Then switch when the time comes, never losing their customers.

    I think though their system needs a smaller root print though. Because where as I can play Pandora on my smartphone almost anywhere on Sprints current sucky network, I do have trouble playing Sirius on my Smartphone. So somehow they are sending way to much data for my week network compared to Pandora, or they are doing a poorer job at maintaining the connection. Either way they got to figure it out before they take Sirius internet globally or expect it to be successful here.

  • Report this Comment On January 20, 2014, at 4:44 PM, Guggerpaul wrote:

    If the Russians shoot down the satellites will Siriousxm survive?

  • Report this Comment On January 20, 2014, at 8:21 PM, sirifair6 wrote:


    Then they will shoot you:)... and you will shoot them and it will be the end of the world:). Ignorance is a bliss!

  • Report this Comment On January 20, 2014, at 8:53 PM, sirifair6 wrote:

    I am amazed at the unanimity and the impressive level of informed opinion expressed here and gladly share the points made.

    Concerning the 4G and its ubiquity it may take decades before, if ever, they catch up with the quality and dependability of satellites that broadcast virtually unimpeded. Satellite radio works even when hurricanes hit the country. I have experienced it many times and believe that even the government can rely on this service to relay messages during these disastrous times.

    Concerning the content and commercials, or complete absence on siri channels, siri is so far ahead of all others put together that I it would take billions, yes billions for anyone to catch up. And, of course, as one of the commenters mentioned, siri is also accessible as easily as anyone on the internet/wi-fi.

    Concerning the timing, again I agree 100% with one of the readers that the timing is not accidental and serves the objectives of certain individuals.

    To conclude, siri is light years ahead of all, I repeat all radios put together in terms of the quality and dependability of delivery, content and, as importantly, fundamental convenience of its service. Do not forget that the baby boomers are coming in tens of millions with most of them in a sound financial situation and lack of desire to tinker in the car. All they want is to push a button and get what they want. And they can get on Sirius radio really ALL they want from music to sports; to talk radio; to comedy; to religion; to cultural programs; to health talk; to wine talk; to anything you can dream about!

  • Report this Comment On January 21, 2014, at 12:34 AM, BillFromNY wrote:

    As a fellow Siriusian, most of what you say is sound as we enter 2014. I think that we just have to remember that, looking out four or five years, new technology can develop very quickly.

    Let's just keep open our minds and our eyes and our ears for possible threats and, if the worst happens, take a profit and don't go down with the ship.

  • Report this Comment On January 21, 2014, at 8:26 AM, AGKLEIN001 wrote:

    4G....what a joke. I live near major metro DC.....tell me where I get a 4G signal for longer than 10 minutes with a major service provider...? by the time that happens there will be another technology level and back to poor results. these service "upgrades" are just setting the hook teasers for more devices to be sold and extension of contracts. guess what ...satellite works and has worked 100% of the time for me....give me a break!!

  • Report this Comment On January 21, 2014, at 8:57 AM, bottomfisherman wrote:

    Sighs deeply. Want hits? Post an article on SIRI with little to no research done questioning their continued existence and continued profitablity. Malone wants SIRI cheap because of its huge free cash flow now and in the long term future.

  • Report this Comment On January 21, 2014, at 10:11 AM, Editman999 wrote:

    Wow, this was one of the weakest articles I have ever seen. It would appear these guys don't know the market well. I have SIRI in all 4 of my vehicles. I have also tried internet radio with SIRI and Pandora... ugly, ugly. Pandora advertises and both have 4G buffering issues (even with Verizon). I would buy SIRI because it has NO Advertising by itself (I even have it in my house). While Satellite is NOT perfect, but it is way better than 4G. Also my GPS works great without the need of a 4G. I would rather put up a HOT spot with my cell phone than pay $40/moth for something I can only use in my car. I am sure John Mailone would agree, this was an article with very little foresight.

  • Report this Comment On January 21, 2014, at 11:11 AM, mbl1234 wrote:

    Content shmontent, I got Sirius in my new car and it was ok for about a year. Yes, they have music stations for lots of different genres but then those stations repeat the same songs over and over. Sports? Who cares about a game on the radio? If I'm a fan I'll get myself in front of a tv to watch. Talk? There's lots of people blathering on AM radio for free. I also got tired of being in my slow commute and having the signal dropping under every overpass and next to any hillside.

    I'll stick with my ipod on shuffle and AM for news until the 4G technology becomes more widespread.

  • Report this Comment On January 21, 2014, at 11:14 AM, bigrommel wrote:

    2 words...Howard Stern

    Like him or not, when he goes Sirius is dead. I love the NFL channel and the music channels are great too. But I can read NFL news on the internet and I can listen to free radio.

    Howard shows up in 1 place...on my Sirius.

    If you are a fan you know what I mean.

    When he goes I will have no viable reason to pay $55 a quarter.

    Sorry Sirius but you know its true.

  • Report this Comment On January 22, 2014, at 11:49 AM, Wmas1960 wrote:

    Something that I don't get. I keep reading people smashing Sirius/XM because you pay and Pandora is FREE. That you can get Pandora in your car so XM should be dead. Now they bring up the 4g. Ok. Pandora is free but you need Internet to get it. That means the 4G is an important link to this. However, is the 4G going to be FREE? Or are you going to have to setup with Verizon, ATT etc for service that might cost you a monthly charge. I have Sirius in one of my cars for about $300/yr. Thats $25/mo. Actually, I pay a little more. Will Pandora and the 4G connections come in for less? What if I have an older car and have to buy the hotspot to put into the car and have it installed. What will the cost of all that be compared to Sirius/XM. So, as I said, is Pandora really FREE when you consider this. Also, will Pandora and other FREE.options have the same talk, news and other programming options that Sirius/XM provides? Sometimes, I don't just want music.

  • Report this Comment On January 22, 2014, at 12:23 PM, Wmas1960 wrote:

    The only real competition that I see to Sirius, right now, is broadcast radio. I signed up for Sirius/XM last year when the intro period ran out on my new car. To try it out more. I find it great when I am driving between radio markets, like Chicago to DesMoines. Etc. with broadcast, I loose channels and then have to start searching for new ones. I can stay on satellite and not have to bother. But, I have found that driving near home, I stay on broadcast 99% of the time. Either listening to local talk or music. Weather and traffic reports, and local advertising doesn't bother me much and, in fact, I find most of the news, traffic etc. valuable. You don't get that kind of targeted programming on Sirius. I can see that there might be subscribers, especially in this economy, that faced with their budgets might ask themselves if they really need it or use it. Faced with a financial crunch, I might decide that $300/yr can be better spent elsewhere. On the other hand, The care is, basically, my wife's car and I don't drive it as much. I leave it on what she listens to. If it were my daily car, I might listen to the Sirius more. I am more tech savvy and know there is stuff on Sirius that I would listen to more. I think for the wife, as, maybe, with others, there is just too much stuff on satellite. Overwhelming and confusing to some, perhaps.

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