Is Sirius XM the Next Netflix?

Sirius XM (NASDAQ: SIRI  ) and Netflix (NASDAQ: NFLX  ) have a few things in common. They are both profitable broadcasters of third-party entertainment. They each lead their respective niches, with tens of millions of paying subscribers apiece.

However, they may also be alike in another way if Sirius XM expands its platform overseas in a few years.

Sirius XM's satellite radio business and Netflix's original disc-based rental service have their geographical limitations. Sirius XM's satellite fleet only goes as far as North America, just as Netflix would've had to build out a network of distribution centers across the world if it wanted to duplicate its model overseas. The Internet made Netflix's overseas push possible, allowing it to merely strike the content licensing deals and stream away. Could Sirius XM be about to do the same thing?

Sirius XM is no stranger to cyberspace. It's been streaming its channels online since shortly after the introduction of satellite radio. Sirius XM has been beefing up its Web-based offerings in recent years, improving on the receiver-beamed channels by offering a broader array of digital channels and introducing on-demand and music-discovery options.

This has naturally opened the door to a potential rollout of its platform in overseas markets that are outside of its satellite range, but there's been little to give investors a reason to believe that an international launch is coming anytime soon.

Well, that may change on Friday. Howard Stern's birthday bash -- the star-studded affair that will honor satellite radio's biggest star -- will be made available for free to non-subscribers as a stream through SiriusXM.com. 

Yes, it will be available to all non-subscribers, including anyone outside of North America. Netflix will "invite the world," according to last week's press release, making this an interesting way to try to introduce its brand to geographical markets where it has not been previously accessible.

Obviously, this doesn't mean that Sirius XM is about to introduce its platform or a culturally tweaked variation internationally. However, it would seem strange if Sirius XM and Stern are emphasizing the global availability of this prolific event only to shut the world off after it's done. 

It won't be easy to compete in a competitive market for streaming overseas with a premium platform. Sirius XM's own Web-based platform is not nearly as popular as its satellite-based service. However, Netflix also faced some long odds when it expanded from Canada to Latin America to parts of Europe. It was the right call for Netflix, and it will be the right call for Sirius XM.

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  • Report this Comment On January 28, 2014, at 4:39 PM, duzer5 wrote:

    LMCA will be the owner by then!

  • Report this Comment On January 29, 2014, at 1:52 AM, ara1029 wrote:

    LMCA deal CANNOT go through at any price WITHOUT THE APPROVAL of minority shareholders (the majority of the minority must approve for any deal to be made). PERIOD. All minority shareholders need to be very aware of this and stand strong!

  • Report this Comment On January 29, 2014, at 9:28 AM, EEasyMoney wrote:

    "They are both profitable broadcasters of third-party entertainment."

    If you're referring to just the music, then this statement would be correct, which would make SIRI no different than Pandora, except with satellites. But as your article discusses Howard Stern mostly, you're obviously aware that SIRI owns a ton of proprietary content, which is what differentiates it from the online jukeboxes, broadcasting "third-party entertainment." SIRI's main value is that 25 million plus people are willing to pay for its content... it's not the third-party content, it's the proprietary content.

  • Report this Comment On January 29, 2014, at 9:16 PM, sirifair6 wrote:

    Rick,

    Sirius Xm is not, in my view, the next Netflix. I see here a few reasons.

    First, Netflix is a very inexpensive alternative to very expensive cable/sat tv providers. The difference is in folds. This is why from the price point Sirius XM is on the contrary an "expensive" (competing mostly with free) alternative although with the quality of content by orders of magnitude better than all of the so called radio/juke box outlets put together.

    Second, Sirius XM, unlike Netflix, is cash machine with the economy of scale and relatively fixed and easily predictable costs. Plus Sirius XM is a monopoly of sorts.

    To conclude, while Sirius XM is by far not as appealing to the public as Netflix for obvious reasons of being a paid radio rather than a video outfit it is a monopoly in its niche with an amazingly robust free cash flow that is over 20% of revenue as guided for 2014. This is why Sirius XM is not going to be the next Netflix. It will be ten times more profitable.

  • Report this Comment On January 30, 2014, at 10:34 PM, johndowe wrote:

    No way, no how. Netflix is an outstanding service loved by all, is of great value with loyal customers. People seek it out, buy it and keep it. Sirius on the other hand gives you a long free trial, less then half want to pay for it after and of those that do only do it for a limited time. For every 10 new subscribers added about 7 old subscribers cancel. But because they add so many, numbers look good and few pay attention to cancellation. Once their growth rate slows due to competition from other technologies and their high cancel rates remain, it will be devastating. Do the math 16 million cars with 70% having Sirius at 45% conversion. That 5 million new customers but they report 1.6 million net additions. What happened to the other 3.5 million????? Their potential customer pool decreases every quarter as more and more new customers are actually presently paying customers (if they have Sirius in old car they are trading in) and will not be counted as new. At present cancellation rates it will be mathematically impossible for them to grow beyond 35 million paying customers at best. With 20 million paying customers already and only 8 cents EPS and PE of 50, $3.60 to $5 is about as much as this is going to be worth in the long run. It may pop in the short term then settle back down once they achieve 0 growth. Unless they innovate and do more than what they are presently doing!

  • Report this Comment On January 31, 2014, at 8:13 AM, sirifair6 wrote:

    Johndowe,

    I am amazed at such innocent fascination about growth. Yes, Netflix does grow by huge numbers. However, how much money is it making? By an order of magnitude less than siri. Sirius does not need to grow that fast because each new customer brings 70% to the bottom line. Sirius is in hard control of its programming costs. Do you know why? Because in paid radio it is a MONOPOLY. How dumb one has to be not to realize that monopolies fair uniquely well!!! Just imagine Coke without Pepsi or only one Exxon.

    Netflix is a great company in terms of greatly price service with limited content (no sports) but it will never be a company making serious money because it will not be able to afford the breadth of content you can get on cable/sat tv. COMPETITION driven by a very low barrier of entry, huge costs and limited resources will keep Netflix in check. Netflix reminds me of Amazon but with much smaller volume of sales. Sirius XM will be doubling its fcf every five years or faster. Agero technology married with satellite capabilities will create a second equally weighted security and services business. This is a business model based on the economy of scale. After the merger 4.5 years ago it became clear that someone missed a formation of the MONOPOLY for years to come. The only way to compete with Sirius is to buy it.

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