Sirius Goes to the Dogs

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Since Sirius XM Radio (Nasdaq: SIRI  ) has a starry-eyed dog as its mascot and is named after the bright Dog Star, it's only fitting that Chris "Mad Dog" Russo should make the satellite-radio provider his new home.

The star of sports-talk radio signed a five-year deal with Sirius yesterday. Sure, this isn't as big as inking Howard Stern or Oprah Winfrey, but it's significant as the first major programming acquisition since the completion of the merger between XM and Sirius. When Russo's show hits the airwaves next month, it will be broadcast on both services.

The potential to reach as many as 18.6 million combined XM and Sirius subscribers is something even Stern and Winfrey don't have -- yet. And it shows how Sirius XM will be able to save on programming costs by duplicating content.

That obviously won't happen across all of the satellite-radio channels, nor should it. It's in the company's best interest to differentiate XM from Sirius. Most of the medium's new subscribers are coming from new-car sales, and dealers are typically loyal to one brand over the other. The last thing that Sirius XM wants is for the retail market to see both providers as no different from each other.

Still, some overlap in programming will help, especially if what overlaps will help with retention. Sirius and XM have done well keeping churn in check so far, but this is still an industry in its infancy. If XM and Sirius simply mirror one another in a few years, it will be that much easier for the competition to pick it apart.

Yes, there is competition. This is not a true monopoly. Terrestrial radio competes with satellite radio, for one. Why else would mainstream FM and AM stations have been among the more vocal critics against the merger? Now that in-car Wi-Fi routers are hitting the market, free Internet radio and music-discovery sites such as Pandora, Time Warner's (NYSE: TWX  ) AOL, and CBS' (NYSE: CBS  ) will be easier to stream.  

The key for Sirius XM is to keep attracting radio stars if the contracts make economical sense. Taking someone away from terrestrial radio -- like Russo -- is a win. The more content Sirius XM controls, the easier time it will have winning over new subs on the basis of exclusive programming.

There's always room for a few more big dogs in the Sirius XM family.

Some other Sirius XM Radio programming notes:

Longtime Fool contributor Rick Munarriz is such a big satellite-radio fan that he subscribes to both XM and Sirius. He owns no shares in any of the companies in this story. He is also 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 (2) | Recommend This Article (1)

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 20, 2008, at 11:18 PM, jefkreger wrote:

    No pun intended, but are you serious? The value in Sirius XM is in merging all the programming assets into one unified platform. Having MLB, College Sports and NFL on one platform is big, so is having Howard Stern and Opie and Anthony on one platform.

    Making customers decide between XM or Sirius makes no sense whatsoever.

    Lastly, the reason most new subs are coming from new car sales, is both companies were not going to introduce aftermarket units until after the merger. Consumers were not going to invest in a technology which may be outdated post-merger.

    Give Sirius XM some time, with the addition of video, GPS and data to the new units, the product becomes much more compelling.

  • Report this Comment On August 21, 2008, at 10:27 AM, MikeRehling wrote:

    REALLY! This is the dumbest article on Sirius XM, and that is saying something! Merging the two services is the ONLY way to leverage the merger, and having TWO companies misses the whole reason for merging!

    I know this is a 'fool' site, but this article should have been stopped dead by one of the two 'head fools'. Wow!

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