This Week in Sirius XM Radio

Things never get dull for the country's lone satellite radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) moved lower on the week, sliding 2.6% to close at $3.35. The media darling's slide was a sharp contrast to the Nasdaq's 0.7% ascent on the week.

There was more going on beyond the share price gyrations, though. Another analyst reinitiated coverage this week after Liberty Media (NASDAQ: LMCA  ) set aside plans to swallow all of Sirius XM. And Pandora (NYSE: P  ) increased the price of its premium streaming offering to the point where it now costs more than Sirius XM's add-on streaming option.

Let's take a closer look.

A bull returns
A few analysts suspended their coverage of Sirius XM when Liberty Media was looking to acquire all of the satellite-radio star, but now that Liberty Media has suspended that master plan, we're seeing Wall Street pros returning to their typically bullish stances.

Merrill Lynch reinstated its positive rating with a $5 price target late last week, and Evercore kicked off this week by following suit with a more modest $4.50 price target.

The move didn't help. Sirius XM's close of $3.35 was its lowest since last summer.

Pandora breaks out of the box
It's not just Amazon.com's Prime getting more expensive this month. Pandora is pushing up the price of its premium Pandora One platform by 25% to $4.99 a month. The move prices Pandora's ad-free service at a higher price point than the $4 a month that receiver-based Sirius XM subscribers can pay to add streaming to their plans.

Pandora argues that the bump is overdue. The company hasn't increased its Pandora One rate in five years, yet as Sirius XM investors know all too well, the royalties that these two companies pay out to musical artists has increased sharply over the years. Sirius XM has been able to push through two increases over the past three years, so it isn't a surprise that Pandora is passing on its escalating content costs to its premium listeners. 

Now, it's important to remember that there aren't too many people paying Pandora these days. Only 3.3 million of its 75.3 million active listeners are currently paying for Pandora One. However, increasing its rate in May -- and grandfathering in music buffs who were on board before then to the current $3.99-a-month price -- could help convert a few more of its freeloaders. 

A Sirius future
It was an interesting week for Sirius XM. The new week isn't likely to be dull -- and the Oracle of Omaha almost never is. Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.


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  • Report this Comment On March 23, 2014, at 7:56 AM, zukerman wrote:

    3.3 million loyal listeners wont care that they will have to pony up a little more than 3c a day, however, this will hardly make up for the 70+ million freeloaders that drains their bottom line. Oh well, you add revenue where you can. It must be an embarrassment to have to make their loyal users pay for those that never will. Is this another admission that they have yet to hit that long sought after sweet spot where they can swing enough ad revenue to make a go of it? Can you say saturation? This increase wont add talent or allow Pandora to justify charging more for one widget. Even Sirius is looking for more revenue where it can, whether it's insulting the Hispanic crowd like they cant afford what others can with the $5.95 plan, or adding receivers to lower cost models, but Pandora has hit an inflection point here. With the exception of bathroom stalls and elevators, Pandora can be heard anywhere and they still can't seem to gain traction on the revenue front with so many straws in the ad money brew. I'll invest in Pandora when they have 70+ million paying $4.99 and 3.3 million freeloaders.

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