It was another good year for Sirius XM Radio
After three consecutive years of market-thumping returns, will 2012 be more of the same?
We'll see. There will be a few important events and developments that will ultimately dictate which way CEO Mel Karmazin's media company heads in the coming months. Let's go over them.
1. Sirius XM's rate hike must be well-received
It's been more than three years since Sirius and XM joined forces, and now it's time to test the platform's pricing elasticity.
We already saw what happened to Netflix
However, at least Netflix can point to escalating streaming costs as the catalyst for its poorly received increase. Programming and content costs have actually declined at Sirius XM over the past year.
These are interesting times. Sirius XM's conversion rate of drivers into paying subscribers once their free trials run out has been shrinking in recent quarters, though churn has been held largely in check. Investors will want to see how conversions and churn hold up once the higher rates kick in. If fans do prove their loyalty and stay close, the positive impact on Sirius XM's bottom line will be huge.
2. Sirius XM 2.0 has to be better
This autumn's rollout of Sirius XM 2.0 didn't live up to the hype. The original Edge receiver wasn't very special beyond its ability to broadcast roughly two dozen extra channels. Things should change when the Android-powered Lynx receiver hits retailers in the coming weeks.
The other big step will be when automakers begin upgrading to the new platform. Karmazin indicated that at least one car manufacturer will be making the switch to Sirius XM 2.0 receivers in 2012, with the rest likely following suit come 2013 and beyond.
If Sirius XM 2.0 finally proves its mettle as a differentiator, it will be big for both Sirius XM and the early-adopter car manufacturers. If it's early Sirius XM investor and partner General Motors
3. Satellite radio will have to keep the streaming phenomenon at bay
After surprising the market with back-to-back profitable quarters, Pandora
As automakers make it easier for smartphone owners to stream audio through their dashboard entertainment systems, Sirius XM is no longer competing against commercial-laden terrestrial radio in the battle for captive drivers.
There are shortcomings to mobile streaming. Sirius XM better be ready to act quickly if subscriber counts begin heading in the wrong direction. Pulling an anti-Netflix -- making its stand-alone mobile streaming an included feature for its receiver-based service -- may actually improve Sirius XM's chances to keep Pandora and iHeartRadio from overtaking the dashboard.
4. Sort out Liberty's intentions
It's been two years since Liberty Capital
Will Liberty Capital increase its stake? Can Malone afford to buy all of Sirius XM? Will Liberty Capital cash out, realizing billions in taxable gains but also freeing up money that Malone can deploy elsewhere?
It's definitely going to be an interesting year.
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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story except for Liberty Capital and Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.