Things are going so well for Sirius XM Radio (NASDAQ:SIRI) these days that it doesn't even have to say a word for positive things to happen. All it has to do is sit tight as those around it generate headlines favorable to the satellite-radio operator.
This week alone, we've seen a few nuggets that don't mention Sirius XM directly but have an indirect impact on the company and its fundamentals.
- Last.fm is scrapping its ad-based free model in all but three countries.
- DirecTV (NYSE:DTV) renewed its contract with the NFL at a much higher rate.
- Cox Radio's (NYSE:CXR) parent launched a tender offer to take the terrestrial radio operator private.
The implications may not seem obvious in all of these events, so let's break it down.
Last in line
Web radio specialist Last.fm announced that it will begin charging listeners the Euro equivalent of roughly $4 a month in countries outside the United States, the United Kingdom, and Germany. Since the CBS (NYSE:CBS) music hub has found it tricky to ramp up ad sales outside those three regions -- and the music industry continues to bump royalty rates higher -- are the days of free Internet radio numbered?
Sirius XM and online radio appeared to have little in common a year or two ago. Satellite radio is mostly consumed in the car, on the road. Online radio is typically enjoyed in a Web-tethered home.
That's changing: 3G smartphones that hit the market last year have the ability to stream Internet radio on the go, and Chrysler began offering car-mounted Internet routers this past summer.
Convergence cuts both ways, though. Earlier this month, Sirius XM ramped up the bit-rate quality of its Internet streams and began charging monthly plan subscribers $2.99 a month for Web access. That seemed like a dicey value proposition, given the plethora of free ad-supported Web radio options, but if other companies begin to drift into subscriber-based models, as Last.fm is doing in many markets, it would clearly help Sirius XM.
More importantly, since Last.fm apparently believes there is a market for premium radio outside the United States, that may open the door for Sirius XM in cyberspace, where it's not limited to the reach of its North American satellites.
"Hike" means many things in the NFL
Poor DirecTV. The satellite-television leader was able to lock up several more years of NFL Sunday Ticket exclusivity, but at a steep ransom of $1 billion a year. It's currently paying just $700 million a year for the complete suite of NFL games, which have proved to be a big seller for DirecTV.
Maybe DirecTV can pass the cost on to its subscribers. Maybe it will be able to land more football fans to offset the higher fees. However, what's clear is that DirecTV probably had bidding competition for an extension from desperate rival DISH Network (NASDAQ:DISH) and perhaps even cable giant Comcast (NASDAQ:CMCSA), despite the geographical limitations.
How can this be good news for Sirius XM when a money-hungry NFL steps up to renew its audio deal with Sirius? Well, whom is Sirius going to bid against? It isn't going to compete with its own XM for satellite-radio exclusivity. Don't even begin to pit Sirius XM against the fragmented terrestrial-radio market or the nascent Web market. DirecTV was probably competing against a hungry competitor in DISH Network, which shed net subscribers last year. Sirius XM will have much greater flexibility in dictating its content renewal terms across all deals.
Cox follows Clear Channel's lead
Wall Street hasn't been kind to terrestrial-radio operators, so it's no surprise to see Cox Enterprises looking to take Cox Radio private. Entercom's (NYSE:ETM) founder and his son have also been buying back stock, quite possibly to take that company private, too.
Going private doesn't mean a company goes away, of course. Clear Channel is still a juggernaut. However, being private does dry up the potential for raising funds through equity offerings or acquiring rival broadcasters in stock deals.
Satellite radio gets stronger, by default, as terrestrial radio gets weaker.
Along the way, Sirius XM shares have grown sevenfold since bottoming out at last month. Sure, we're just talking about nickels here, but as the wide array of headlines show, being nickeled-and-dimed by small pieces of welcome news is not a bad way to get rich.
Some other Sirius stories:
