XM Strikes Back

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By Brian Gorman
October 20, 2004 | Comments (0)

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Two weeks after its rival Sirius Satellite Radio (Nasdaq: SIRI) grabbed headlines by signing Howard Stern, XM Satellite Radio (Nasdaq: XMSR) disclosed late yesterday that it has inked an 11-year agreement with Major League Baseball to air its games.

The $650 million pact is good news for XM, especially if baseball puts on the type of show that the Yankees and the Red Sox are displaying in the American League Championship Series. The firm plans to set aside up to 16 channels for baseball next season, according to TheWashington Post. With the ability to air every game over a season, XM is sure to become popular among baseball junkies.

While the baseball tie-up will likely provide a boost to XM, the company should keep an eye on Sirius. Much has been written about Stern's deal with that company, including a recent piece by The Motley Fool's own Rick Aristotle Munarriz discussing the merits of Sirius as an investment. For now, Sirius appears to have an edge in an area that could become critical as satellite radio matures.

Sports might be a natural fit with satellite radio, but the fact is, fans can get their fix through other outlets. By contrast, as Rick has pointed out, Sirius has signed Stern to perform his usual antics, as well as to produce programming on two other channels. In so doing, XM's rival seems to be thinking that part of satellite radio's power is its ability to offer new, edgier forms of entertainment not available anywhere else. It's similar to the bet made years ago by TimeWarner's (NYSE: TWX) HBO unit, a strategy that has paid off big-time.

XM continues to command a sizable lead in subscribers over Sirius, but it may have something to learn from its smaller competitor. It could be time for XM to start thinking outside the box.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.

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