Are Sirius XM Radio (NASDAQ:SIRI) investors putting too much faith in the upcoming Web-streaming application for Apple's (NASDAQ:AAPL) iPhone and Wi-Fi-backed iPod touch?

A recent thread on our Sirius XM discussion board began when an investor suggested that Sirius XM's foray into the iTunes App Store could fuel a rally that would propel the stock roughly eightfold.

I think an official Sirius XM app will be a good thing for the company. I just believe that investors need to be realistic when it comes to their enthusiasm over a program on a platform that has not been kind to premium subscriptions. In truth, any benefit to Sirius XM will be incremental, but it probably won't be enough to reverse the subscriber defections that plagued the company this past quarter.

iPhone 3G owners are already paying AT&T (NYSE:T) at least $70 a month for an entry-level voice plan, including $30 for unlimited data. The bullish assumption is that they have the means to pay $13 more a month for Internet streaming -- or $3 more a month for current receiver-based subscribers. The bearish reality, though, isn't as kind. Apple recently surpassed a billion App Store downloads. Quick -- look down at your iPhone screen and tell me how many of your Apps aren't free. Now tell me how many of them require monthly premium subscriptions.

In short, Sirius XM is going to face a hard sell. iPhone owners -- and Sirius XM subscribers -- are stingier than you think. Sirius XM rolled out "best of" packages last fall, giving XM and Sirius subscribers the option to pay $4 more a month to receive top channels from the rival service, and Sirius XM jacked up monthly rates on secondary receivers by $2 in March. Yet despite the upsell carrots that the company dangled in front of subscribers, average revenue per user has actually dipped over the past year.

This won't be the first time Sirius XM tries to ride on the wireless industry's coattails. Current XM Radio Mobile offerings include the following:

  • Alltel wireless customers can pay $8.99 a month for 25 XM channels.
  • AT&T also offers 25 channels for $8.99 a month.
  • Research In Motion (NASDAQ:RIMM) offers BlackBerry owners 20 channels for $7.99 a month.

XM has been offering these services for years. But I have never met a subscriber to any of them, and Sirius XM doesn't talk them up in its quarterly conference calls. An iPhone Web-based version would be superior -- offering far more programming at a higher monthly tab -- but the past few years of wireless apathy for premium radio don't bode well. It also doesn't help that the iPhone is already chock-full of free Web-streaming apps from the likes of Pandora, Time Warner's (NYSE:TWX) AOL Music, and CBS' (NYSE:CBS) Last.fm.

None of this means that Sirius XM can't take advantage of the iPhone and iPod touch skinflints. It can eventually roll out watered-down ad-based channels for free as a promotional platform, the way it is entertaining the notion of pushing content through dormant car receivers. However, anyone banking on the App Store as the elixir for Sirius XM's shrinking subscriber base is probably better served by cheering on the automotive sector's recovery instead.

That may not be the sexy catalyst, but it's the real one.

More news than static on Sirius XM:

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Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.