In this third part of our four-part series, I ask Sirius Buzz writer Spencer Osborne. Sirius Buzz covers satellite radio news but is not affiliated with Sirius XM. Spencer owns shares of Sirius XM.

Mac Greer: We recently interviewed Washington Post technology columnist Rob Pegoraro, and he shared a story about being able to listen to web radio on a Verizon (NYSE: VZ) wireless BlackBerry Storm. He said he was able to listen to web radio as he drove from Washington, D.C., to this cabin in the Shenandoah Valley. He used that story to illustrate what he thought were the problems for satellite radio going forward. To what extent do you think web radio, like Pandora and Slacker, is a serious threat to satellite radio?

Spencer Osborne: I think it is a threat that is going to exist and will continue to exist. Pandora has 58 million subscribers. They have been around less time than satellite radio, and granted, while it is considered a free service -- so it is obviously going to have a lot of followers -- Pandora and Slacker and these services really adopted the cell phone networks, the cell phone medium.

If someone’s only interest is music, then those are very viable options. As Pandora and Slacker begin to expand into other things and comedy and talk, that is a real threat for satellite radio.

In order to thrive in the next three to five years, satellite radio is going to have to look at changing its business model. They are going to have to look at what they do on the Internet to really complement what happens on satellite radio -- almost as if they could make the Internet kind of the proving ground for certain genres and channels on music or talk -- and make it available at a less-expensive price, turning satellite into the premium service. Or they might have to go the other way around, but they can’t sit back and rest on their laurels because there are a lot of players in the marketplace, and consumers are running to those players.

When you can get Pandora for free or for a very nominal fee and satellite radio is costing you $15 a month, you start to say, well, how much is CNBC or Howard Stern really worth to me? And if it’s $15 a month, then that’s great. Satellite radio had better focus on signing Howard Stern then, but if it’s not $15 a month, they are in trouble.

Greer: I want to have you rank some potential competitors. We’ve got web radio, we’ve got terrestrial radio, and we’ve got iTunes. How do you rank those as competitive threats to Sirius XM (Nasdaq: SIRI)?

Osborne: In terrestrial radio, I assume you are including HD?

Greer: Correct.

Osborne: The No. 1 threat for Sirius XM is terrestrial radio. Its penetration is everywhere, in clock radios. It is in every dashboard in every car, no matter what year it was. You can be driving around in a 1960s car, and it has got a radio in it.

So that is the No. 1 threat. It is free, it is available, and it is everywhere. People can turn it on without having to jump through two or three hoops. To me, that is still the No. 1 threat, and it is going to exist forever.

By example, I am from Boston, and the Celtics just did their run to the championship and fell a little bit short, but when I wanted to hear what is going on with that, I wasn’t tuning in to satellite radio. Satellite radio is a national perspective. I was tuning in to my local sports station and hearing Bostonians talk about what Kevin Garnett did or what Paul Pierce did. So even as passionate of a satellite radio fan as I am, I still listen to some terrestrial radio. That is the No. 1 threat, in my opinion.

The second is probably web-based radio because even though it is kind of a jukebox, so to speak, if you go to Slacker and Pandora, you build a station. You are not telling them what songs to put on. It’s getting an understanding of you by your listening habits and feeding you stuff you think you’d like.

I will use Slacker as an example. I like the band Rush. I put in there, “Rush radio,” and when I listen to Slacker, every fourth or fifth song is a Rush song. How great is that? The other four songs are songs that if you like Rush, you will probably like these.

I walk into my house, the channels refresh, and when I go back in my car, I have another 10 or 15 hours’ worth of music that plays in a different order than it did before. I can skip, and I have album art and all that fun stuff. So I think web radio, because of the discovery factor, is No. 2.

Apple’s (Nasdaq: AAPL) iTunes is No. 3, and to me, iTunes is where I build my library from. I listen to satellite radio or web radio and tag the song, and then I go home, go into iTunes and buy it so it’s in my library.

I have an iPod Touch, and that’s how I get satellite radio in my car, instead of an OEM receiver. If I am driving around in my car listening to satellite radio, and there’s a song that I am not such a fan of, I will just hit a button and I’m over on iTunes. I look for what I want to hear, play the song, put it on shuffle, whatever it might be.

So iTunes will be there, but it is a different format than the radio business, so I would look at that as third, just because of the discovery feature. You are going to discover music on the other services. You are not going to discover, necessarily, on iTunes.

Greer: And who did I leave out in terms of serious competitors?

Osborne: I think that down the road it is all going to be driven by Google (Nasdaq: GOOG) --- in about five years anyway. They seem to be running everything on the planet, so in five years, I think the odds are - what’s better, satellite radio or Google radio? Who knows? At that point, Google may even own satellite [radio].

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