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This Week in Sirius XM Radio

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Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  )  moved lower on the week, falling 2.5% to close at $3.16. The move was worse than the Nasdaq's 1.3% decline.

There was more going on beyond the share-price gyrations, though. Majority stakeholder Liberty Media (NASDAQ: LMCA  )  made some interesting moves after delivering quarterly results, and reports surfaced claiming that Apple (NASDAQ: AAPL  ) is in late-stage talks to acquire Dr. Dre's Beats for $3.2 billion.

Let's take a closer look.

Liberty isn't free
Liberty Media acquired a majority stake in Sirius XM last year after receiving regulatory clearance to go from a 40% preferred share stake to a controlling stake above 50%. After dismissing plans to acquire all of the Sirius XM shares that it didn't own, we now see the eclectic media empire doing some spring cleaning. 

Liberty Media plans to spin off its Liberty Broadband Group into its own publicly traded company by the end of the year. Liberty Media will also be distributing two shares of a non-voting Series C stock for every share of Liberty Media currently owned. This is essentially a 3-for-1 stock split, along the lines to the 2-for-1 transaction Google completed in April, where the new shares are part of a non-voting class of stock. 

Apple's 50 shades of Dre
There may be a shake-up in the music industry. A Financial Times report broke late on Thursday claiming that Apple was about to buy Beats Electronics in a $3.2 billion deal. The company, helmed by hip-hop legend Dr. Dre and iconic producer Jimmy Iovine, is best known for its high-end headphones, but January's rollout of an on-demand music streaming service probably attracted Apple's attention.

Beats would help Apple on both fronts. Apple fans have often turned to third-party audio accessories to improve on in-house solutions, and now Apple would own the class act in premium headphones. However, we can't ignore Beats Music, the Spotify-like service that rolled out in January. By some accounts, it isn't doing so well. Despite a flashy celebrity-studded Super Bowl ad and a bundling deal with a telco giant, label execs tell Billboard that paid subscribers number in the low six figures. That's not bad for a platform's first 100 days, but it is in streaming music where the major players can have tens of millions of active users. 

The deal with Beats Music would help Apple score the industry streaming licenses it has struggled to get outside of its own iTunes Radio, and the platform would gain from Apple's marketing muscle. We'll have to see how this all plays out, of course, but it seems like a win-win partnership if it materializes. 

The streaming market continues to evolve. Sirius XM has been able to grow its satellite radio tally throughout most of the revolution, but if rivals consolidate to grow stronger, it could be problematic.

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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 May 10, 2014, at 8:26 AM, sirifair6 wrote:


    What is going on in the music market is too shallow to threaten sirius. There is close to a dozen streamers that speaks volumes about ease and simplicity of entering the streaming market. Unlike you, I do not see any meaningful consolidation there.

    If apple bought Pandora, I would say "yes, it is consolidating”, but I doubt apple will ever do that although some others may. Few people see that siri's path and the paths of all others what I call juke boxes hardly intersect. The similarity between siri and all others reminds me of closeness between mom and pop burger outlet and McDonald's. Both make burgers, and this is it. Moreover, in siri's case, in spite of being a giant its burgers are much more delicious than all other burgers put together, and the gap keeps growing.

    Some have already noticed the recent trend of siri becoming a music power house where new talent is promoted to fame. For many musicians it is an honor to perform on siri platform. This means that if you want to discover new talented musicians you will be going to sirius xm.

    To conclude, siri's competition remains terrestrial radio rather than mushrooming juke boxes. Today about 62M cars are siri enabled with half of the owners paying for siri. In five years there will be 120M sat enabled cars with probably 1/3 or more paying listeners. To a degree, it is good for siri that few realize its power. They will have more freedom to get where they want - virtually dominate the radio market like coke and pepsi rule the soda market, with the difference being that there is only ONE siri. .

  • Report this Comment On May 12, 2014, at 8:59 AM, dannysboy wrote:

    I used to sell business systems. Once in awhile, someone would ask for my opinion about changing to a new system.

    My response was always be sure and weigh the advantages of what you may get against the value of familiarity with your present system and the speed and efficiency that familiarity gives you.

    SiriusXM gives that familiarity to the user. It is a traditional technology amplified by the use of satellites. There are no usernames, or passwords to remember and no necessity for the user to perform upgrades.

    Furthermore, Pandora, Spotify, et al, are music boutiques. SiriusXM is the world's largest broadcasting general store. It's Sears. It's Walmart.

    Lastly, there are three kinds of people when it come to consumer technology-----those afraid of it;

    those who compulsively can't get enough of it, and those, like me, who have had enough of playing tech. leap frog. Whatever is the rage in tech today will be old hat in 18 months.

    SiriusXM will still be that omnipotent user friendly service with it's kaleidoscope of broadcast products.

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

8/28/2015 4:00 PM
AAPL $113.29 Up +0.37 +0.33%
Apple CAPS Rating: ****
LMCA $37.38 Up +0.26 +0.70%
Liberty Media CAPS Rating: ****
SIRI $3.83 Up +0.04 +1.06%
Sirius XM Radio CAPS Rating: ***