This Week in Sirius XM Radio

Satellite radio is always on the move with Sirius XM.

May 10, 2014 at 8:00AM

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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Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple and Google (C shares) and owns shares of Amazon.com, Apple, Google (C shares), Liberty Media, 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.

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