Sirius Threats or Sirius Opportunities?

It doesn't seem like it's an attack on Sirius XM Radio (Nasdaq: SIRI  ) at first.

Later this month, Sirius-installing partner Chrysler will begin selling a $499 car-mounted router that will provide secure online connectivity for everyone in the car. Like most EV-DO subscriptions, access won't be cheap. However, at $29 a month, it's a relative bargain compared to the EV-DO wireless card plans that will set you back roughly twice as much.

In the idyllic scenario for Chrysler's Uconnect Web service, the family road trip will never be the same. The driver will pay attention to the road, of course, but the spouse can use a laptop to check on weather and email, and to fire up the occasional road-mapping website. The kids in the back can check on their Facebook profiles, jam along to free Internet radio, or stream movies.

This should be an "uh-oh" moment for investors in premium auto-related products. If you're Garmin (Nasdaq: GRMN  ) or TomTom, your clunky dashboard gadgets will become less marketable. If you're a satellite radio provider like Sirius XM Radio, you now have to compete for subscribers who have more alternatives than terrestrial radio.

Innovation creates challenges
I have been a Sirius subscriber since 2004, and an XM listener since 2006. I can't imagine going cold turkey on either subscription for the less polished ways of Internet radio exclusively. However, the moment that someone forks over hundreds of dollars to have the equivalent of a Wi-Fi router installed in his car, adding an extra $13 a month for satellite radio to the $29 he is already paying for complete connectivity will be a difficult upgrade.

It will be even harder for Sirius to push its Backseat TV product, offering three family-friendly networks that stream on existing backseat monitors for an extra $7 a month. Why bother, when a Slingbox costs half as much as the Backseat TV installed hardware, yet provides access to a driver's entire home cable programming through a Uconnect connection?

I was wary of Ford (NYSE: F  ) promoting its Focus car line with voice-activated hard drives last year, but that is a bigger threat to CDs and digital media players like Apple's (Nasdaq: AAPL  ) iPod or Microsoft's (Nasdaq: MSFT  ) Zune. Satellite radio competes with terrestrial radio, offering a premium live programming experience. In the end, though, these are all appliances competing for the same set of eardrums. There are only so many premium monthly subscriptions one can amass before realizing that some are redundant.

If Sirius is going to compete, it's going to have to raise the bar yet again.

Innovation brings opportunities
Chrysler's move is spunky. Now that former parent Daimler (NYSE: DAI  ) sold off Chrysler, the orphan is willing to take chances to get noticed. Wi-Fi-enabled cars will be the wave of the future, even if the high prices and empty pockets make this a slow-moving revolution.

This doesn't surprise me. I put my wannabe visionary cap on six months ago, taking a time-traveling trip to see what Sirius would look like come 2010. I did pretty well, predicting both the eventual merger approval and the automotive Wi-Fi trend. I also turned heads in predicting that Sirius will be a market-beating investment between now and then.

Why was I ultimately bullish on the company's prospects despite the competitive threats? The real potential rests in the company improving its receivers to make its service even more indispensable to radio fans. Here's some of what I wrote at the time:

The latest generation of satellite-radio receivers is responsive. If you're hearing a song you would like to own, a simple button push buys you the track in digital form. Advertisers pay more for airtime on the commercial channels because interested listeners can push a button to receive more information.

It may sound crazy to you in the passive 2008, but one of the more popular channels on Sirius XM is a shopping channel. Who would have thought e-commerce could work in an aural format? The key is in the product mix. Folks gravitate to the category-specific broadcasts, especially the monstrous closeout deals that are sometimes available during the Overstock.com (Nasdaq: OSTK  ) -sponsored Overstock Hour. A PIN-verified button push later, and that discounted Bose speaker system or Lost: Complete DVD collection is on its way to you.

See, we're still in the early innings of automotive leisure technology. With stingy gas prices likely to encourage more people to carpool, we're moving beyond the lone commute. More people in the car will require more alternatives. Satellite radio will have to try that much harder to stand out, but the ability to paddle more streams than simply subscription revenue or what has been diminishing ad revenue will inspire innovation.

Yes, innovation is a wick that can be lit at both ends.

Other Sirius XM Radio programming notes:

Garmin Ltd. is a Motley Fool Global Gains recommendation. Microsoft is a Motley Fool Inside Value selection. Garmin Ltd. and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is such a big satellite radio fan that he subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (7)

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 August 13, 2008, at 4:07 PM, sickofsiribasher wrote:

    Rick, it seems that you use every chance you get to find an angle to slam SIRI to either sell some kind of advice or promote some unsubstantiated opinion. If you think that Internet in a car is any kind of immediate threat to SIRI you must be smoking dope. At best it would be on the order of 5+ years before content licensing and devices would be even an option, if and when someone ponied up the kind of cash SIRI has. Get real, I would even have taken the time to respond to this BS if your asinine site didn't keep floating into what Yahoo considers headlines for some reason, as if your posts have any merit whatsoever.

  • Report this Comment On August 13, 2008, at 4:32 PM, RasTrader wrote:

    So people having WiFi in their car is bad for Sirius XM? Wrong.

    Sirius XM is about CONTENT. Where can you stream Sirius XM content from? From Sirius XM's website with a paid subscibtion. This means that WiFi in automobiles IS BETTER for Sirius XM. People won't have to buy radios, just a paid subscirbtion.

    A free online music stream does not offer what Sirius XM offers.

  • Report this Comment On August 13, 2008, at 5:29 PM, Skysclear wrote:

    So it seems...It's not just me that thinks there is more that meets the Eye with your Out of the Park Title on your blog with Siri.. but the content is not appreciated.

    Had you had anything of REAL Value to say, you would not have to Title it the way you did.

    It just makes you seem like a 'Character',

    in search of a comic strip.

    Good Luck with those 'over the top' Blogs fella, as they might land you in the Mail room where you belong.

  • Report this Comment On August 13, 2008, at 6:24 PM, dwatson102 wrote:

    And just where is the bi directional interface to this router coming from. That old reliable cell phone network that drops my calls when I drive down any road other than an interstate highway. Or maybe I can put a Hughes satellite dish on the roof of my Prius. That ought to work well. This may work and be useful in 5 to 10 years but lots can change in that amount of time.

  • Report this Comment On August 13, 2008, at 7:39 PM, jamesp717 wrote:

    Did I read the same article as everyone else ? It actually seemed SIRI positive to me.

  • Report this Comment On August 13, 2008, at 8:00 PM, redgen5 wrote:

    Bunch of Sirius (serious) whiners. Sirius and XM have struggled to make a profitable business out of sat radio. The younger crowd doesn't care much for it and newer innovation is coming into play. Sat radio investors are just a little cranky considering their double digit stocks are now trading for pennies. I'm tired about hearing about all of the BS of sat radio. You got an old much less noticeable dude that talks about farting and young women and wow, I can listen to 70's music. Nascar and Football...much more worthwhile on TV. I'll take the freedom and offerings of the internet. Throw in an mp3 player and ability to stream to ahard drive and it's game over.

  • Report this Comment On August 14, 2008, at 10:45 AM, HippWord wrote:

    Here's where Rick drops the ball.

    The target audience for "radio" is - the driver -. NOT the passengers.

    If you look at the cars going to and from work everyday, most cars will only have one person inside - the driver. Truck drivers and sales people are no exception either.

    Internet, and other video systems in the automobile are reserved for passengers on long family trips and maybe the occasional trip to the soccer field. Video in a car is not going to be that big (as a paid service) Either is internet.

    People who need internet access regularly - will have an air card for their laptop, not WiFi in their car.

    So really - the best product (by far) being delivered into your car is Sirius XM.

    It's a listening experience, and it's all about the driver.

    Stock analyst' like Rick are having fun making ridiculous comments about satellite radio, because they really don't know whats going to happen next.

    Ask the 18 million subscribers what they think, then decide whether you should invest in Sirius XM.

  • Report this Comment On August 14, 2008, at 1:40 PM, redgen5 wrote:

    Relmor....more whining and conspiracy theories.. ha! exactly.

  • Report this Comment On August 14, 2008, at 2:48 PM, PlusDargent wrote:

    relmor - I think you did a very good job breaking down the recent history of the stock.

    That said, I agree with your thesis - that is, the price movement of this stock really has nothing to do with the fundamentals of the company or the market. It's quite obvious that both inside and outside vested interests are heavily manipulating the price performance of this stock. Moreover, the overall quality and timing of available information is sketchy at best.

    Rick recently wrote a piece about the probability of SIRI doing a reverse stock split, which immediately reminded me of an article I read on MSNBC's site from 2002 about reverse stock splits. The author's analysis found that about 75% of stocks involved in a reverse stock-splits fell disproportionately immediately after the split took place and few if any ever recovered the loses. I know from experience as I owned a stock involved in a reverse split and five years later it still hasn't recovered it pre-split value.

    Personally, I don't want to get stuck with just a fraction of my original shares valued now valued at $8 to $20 that fall back to $1 almost over night.

    Bottom line: As Jim Cramer said recently (when the price was a little higher), "With Sirius, you basically have a $2 lottery ticket." At least with a lottery ticket, you know the odds. SIRIUS seems more like Russian Roulette.

  • Report this Comment On August 15, 2008, at 1:00 PM, sreil08 wrote:

    The problem is single driver commuters would never pay for wi-fi in there car because they would never get to use it. Satellite radio is much more appealing to this demographic. Wi-fi would appeal more to family's. These are pretty different target groups, I don't know how much competition there really is here. A $29 subscription is also a huge leap from a $12.99 one. For some reason wi-fi in the car just doesnt seem that necessary to me. Unless your going on a huge road trip (how often does this even happen) I dont see why you would need. Besides, everyone has internet on there phones now. I didnt really think this article was bashing SIRI, but you don't seem hopeful for the company at all..looks like a lot of investors disagree with you on that one.. (http://predictwallstreet.com/forecast.aspx?symbol=siri).

  • Report this Comment On September 15, 2008, at 12:14 PM, LondonStock wrote:

    Are you SIRI(ous)?!?

    In the trading world, negative publicity in the form of blogs is usually indicative of one of two things.. 1. Investors are well and truly “pissed off” because of their seriously underperforming stock or 2. Hype, to drive down a stock price.. Unfortunately, number 1 is the case here.. This stock is ruining alot of investor's portfolios and has proved to be a complete waste of money... In fact, whoever bought SIRI in the first place, was either talked into it, didn't research the co very well, or perhaps "threw a dart at choices pinned to the wall." And I can remember a few months back such as S&P and other misguided analysts who've advised buying.. Another reason NOT to listen to their rhetoric (crap) and to investigate a company yourself

    To be fair, I understand that everyones wants this project to be successful.. And I understand about the auto-wireless,etc.. however, demographics show people don't really want it.. In fact, it's already out there and cheaper, if you didn't know.. Additionally, people develop headaches while being in a moving object such as a car, and trying to concentrate on a screen.. And even if they did get a few hundred thousand subscribers, that will NOT put alot in the bucket.. Do not forget, a substantial portion of that profit goes towards electricity, etc for transmitting... Naah, sorry... Nothing SIRIUS has done has worked for the investor thus far and they're just racking up debt...

    To the CEO, and subs...

    I partially put the blame on you.. And you knew that the investors of your worthless paper would be funding your new Merc or BMW… How can you sleep at night? You’ve caused many people to lose their savings when they trusted in you..

    To the investors.. come on. !! this company:

    1. is trading many times over its; value in the first place… No fancy equations are necessary..

    2. pays NO dividend..

    3. THEY HAVE ISSUED MORE THAN A BILLION SHARES !!

    I repeat

    THEY HAVE ISSUED MORE THAN A BILLION SHARES..

    This is enough a4 paper to give every American 4 sheets each...

    haven't you ever read "ADMIRING THE BEAUTY OF NOTHINGNESS" ? Read the chapter on investments, and you will NEVER be shafted from a stock like this again. It's incredible that there are that many gullible people out there.. Correction.. I'll be more diplomatic and say "hopeful..".

    Do the maths.. even if siri had their subscriptions to projected levels, your shares would still be greatly overvalued... in other words... don't get conned next time..

    SIRI comfortably rests at below under one dollar per share, and it’s reminiscent of Freddy Mac in disguise.. Or like an Airline stock.. They always deliver "an uncomfortable landing" in the end…

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