Sirius XM's Main Edge Over Competitors

Sirius XM  (NASDAQ: SIRI  )  has seen its stock price plummet due to rising competition and a decision by its controlling shareholder, Liberty Media, which pulled the plug on a deal to fully own Sirius XM after taking a 53% ownership stake in the company. The competitive threats are a little overblown and Liberty backed away from the deal to pursue other interests in the cable industry. The real edges Sirius XM has over its rivals' offerings are its own content productions and the wide array of exclusive sports content on its platform. 

Sirius is a content creator
Consumers can obtain some of the content that is available on Sirius XM from free terrestrial radio stations or an Internet-enabled service like Pandora  (NYSE: P  )  or Apple's  (NASDAQ: AAPL  )  iTunes Radio for free or through small subscription fees. However, a large portion of the content available on Sirius XM is available exclusively on the satellite service, and the company has a large amount of its own content in its channel line-up.

In addition to being a high-quality content distributor, Sirius XM creates its own content and this gives the company a big competitive advantage over rival offerings, whether through Internet services or free radio. A number of the 150 channels which are available from Sirius XM are exclusive and very different from others. 

Very popular Sirius shows that feature Howard Stern have done very well to keep the subscriber base tuning in to the company's service. The number of subscribers who listen to the uncensored shows on Howard Stern's channels is not crystal clear, but he previously had approximately 12 million listeners on terrestrial radio before joining Sirius XM. His long-term affiliation with Sirius XM is a big plus for the company, as the firm spends a lot of money for his channels.

An estimated 60% of Sirius XM users have been listening to his highly controversial shows. Since Sirius XM has more than 25.8 million subscribers, that is a substantial amount of viewers for the company. However, that's not all. Sirius XM is constantly adding more live events, music shows, and concerts to its programming line-up and keeping its large subscriber base highly engaged.

The company has a massive line-up of sports, talk, and music channels in its offerings that offer users a distinctly different experience from free radio. Such a broad array of differentiated content has enabled Sirius XM to have a very low monthly average churn rate of 1.9% among paying subscribers, and this is a very good churn rate for a subscription business under most scenarios. 

Competitors are distributors
Sirius's major competition includes Internet music streaming platform Pandora and Apple. Pandora has a growing base of music listeners for its services. In April 2014, Pandora's active user base grew 8% year-over-year to 76 million. Also, Pandora now has a 9.3% market share of the U.S. radio audience.

However, Pandora's large content acquisition costs have been consistently weighing down the company, and it has been consistently delivering operating losses for a long time and its stock price is down substantially as well. Pandora recently hiked the price of its paid subscriptions by a dollar to $4.99/month for its paying subscriber base of roughly 3.3 million users as well. However, Pandora is a lot more music focused, and is not delving into other variety and original content like Sirius XM is. 

The same goes for Apple, which provides a free ad-supported music-centric offering that is also not a major offering of the company. iTunes radio has been keeping Apple listeners engaged in its ecosystem and has already racked up an 8% market share in the audio streaming market, according to Edison Research. However, iTunes radio is a bigger threat to Pandora than it is to Sirius XM.

The bottom line
Sirius XM's unique content gives the company a durable moat around its business. Its position as the only major satellite company yields big leverage over the content providers and the company has great long-standing relationships with automakers as well. Sirius's extensive offerings of talk shows, ad-free music, sports, and news channels come at an attractive price point for consumers and create a vastly unique offering relative to free radio.

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Read/Post Comments (5) | Recommend This Article (5)

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 16, 2014, at 2:19 PM, sirifair6 wrote:

    The author is correct to say that siri has a ton of unique content across a huge array of channels that can satisfy most diverse tastes. Another advantage of Sirius XM is the fact that it owns fully its delivery infrastructure both in orbit and on the ground that is very reliable and covers the whole country. We can add convenience of the service that is only comparable with terrestrial radio.

    Now that siri owns 40% of connectivity in the auto it creates great opportunities for bundling radio and connectivity packages.

    Sirius xm is a unique company with unique capabilities from content to its delivery. Its market is so large that it will take at least a decade to take advantage of it.

  • Report this Comment On May 16, 2014, at 3:04 PM, ishfaque wrote:

    Very well put Sirifair6. ---Ishfaque

  • Report this Comment On May 16, 2014, at 4:43 PM, dannysboy wrote:

    You have said, in other words, what I have been saying.

    Pandora, Spotify, et al, are music boutiques. SiriusXM is a broadcasting general store. It's Sears. It's Walmart.

    It's the ubiquitous kaleidoscope of broadcasting.

    Said more simply, if it's worth broadcasting, it's on SiriusXM and it's heard everywhere in the North American continent and around the world on internet.

  • Report this Comment On May 16, 2014, at 6:09 PM, maximax1 wrote:

    Great article - all true. As a shareholder, the fact that management rarely advertises/promotes the content and it's accessibility is worrisome. This stock should be trading much higher based on the exclusive content, subscriber base and delivery platforms.

  • Report this Comment On May 17, 2014, at 6:35 AM, zukerman wrote:

    We here at Sirius appreciate positive articles, but the author has some explaining to do. What data supports your contention that 60% of Sirius' listeners tune in to Howard Stern? There are many that believe that we should change our name to (Howard Stern's Place) and claim when he leaves, we're finished. Howard Stern is good for Sirius and definitely worth the money we pay him, however, Sirius has kept these numbers from investors since he came aboard for obvious reasons.

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