Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ:SIRI) moved higher this week, closing 1% up to hit $3.15. On Wednesday, the shares even traded as high as $3.23, just a pair of pennies from revisiting their four-year high.
There was more going on beyond the share-price gyrations. Nasdaq issued its bimonthly short interest metrics, and Sirius checked in with a 52-week high in the number of shares sold short. As its Web-based personalized radio works its way through beta, that market is heating up as two long-established players are taking shots at Pandora (NYSE:P). And speaking of Pandora, its CEO spoke at a conference and had some interesting thoughts on Sirius XM.
Let's take a closer look.
There were an amazing 401.6 million shares of Sirius XM sold short as of the end of January. The number of bearish bets on the satellite-radio star never got this high last year. Why are the naysayers coming out of the woodwork? There are a few possible reasons.
- Sirius XM was set to report its fourth-quarter report early in the month, and skeptics may have figured that the good news was already out after Sirius XM revealed its healthy net subscriber additions for 2012 and initiated its outlook for 2013 in January.
- Liberty Media (NASDAQ:FWONA) finally received regulatory clearance to take majority control of the company, and it did exactly that last month, when it moved to pushed its stake above 50%. The cynical stance is that there won't be more buying pressure from Liberty Media now that it got what it wanted.
- The end of the payroll-tax cut that gave employees 2% more in take-home pay came to an end in December, and fears that consumers will scale back in light of the hit to disposable income could sting subscription services, including Sirius XM.
Time will tell if the concerns were warranted, though the stock is currently trading higher for February. In other words, the shorts have been wrong so far. As long as an investor is confident of a stock's fundamentals, it's easy to approach a high level of short interest as a positive. The shorts will have to cover eventually, and that potential for a short squeeze could drive the stock even higher.
Slacker is one of the earliest streaming services, but now it's hoping to gain market share by attacking market leader Pandora.
A new attack ad pokes fun at Pandora's limited library. The Slacker message is that it has 10 times the music of Pandora and that users can create their own playlists.
Sure, the ad doesn't point out that the ability to generate customized playlists is available only in the Slacker Premium Radio option that sets subscribers back $9.99 a month. However, it's clear that Pandora has become fair game as the industry leader.
It will be interesting to see how Sirius XM markets its Pandora-like My SXM platform, especially if Slacker is successful in targeting Pandora.
Another company attacking Pandora, without the attack ads, is eMusic. The dot-com pioneer became one of the first websites to begin selling digital music in 1998. Its premium subscription model has kept its popularity in check, as music fans have been hesitant to shell out monthly fees for access to a library that includes a set number of download credits. Even Pandora has struggled to grow outside its free ad-supported service.
The new model finds eMusic replacing its subscription-based credits with a la carte pricing. This may seem to make eMusic's new strategy a bigger threat to Amazon.com (NASDAQ:AMZN) and iTunes, but the site's seasoned music-discovery platform does make it a threat to Pandora if music fans gravitate to the new approach.
Pandora CEO Joe Kennedy presented at a Goldman Sachs tech conference on Wednesday. He pointed out the opportunity to disrupt radio, something that Sirius XM knows all too well, with 240 million people listening to an average of 50 hours a month of broadcast radio.
Pandora has become a play on mobile popularity. Just 20% of Pandora's usage is taking place on desktop browsers these days. A big push has been integration into automobiles, and that's where Sirius XM needs to pay attention. Some cars even come with thumbs-up and thumbs-down features as listeners stream Pandora in their cars through their smartphones.
However, Kennedy was respectful of Sirius XM. When asked if the platforms were comparable, Kennedy countered that Sirius XM has invested heavily in news, talk, sports, and other live spoken content that doesn't fit with Pandora's value proposition.
Even if Kennedy is merely being nice so he doesn't get Sirius XM to turn against Pandora with its automotive partners -- where satellite radio is far more lucrative -- he's right. Both services have been able to grow in recent years. Broadcast radio is the common enemy.
Well, Pandora may now have to start taking shots at Slacker. The battlefield is always changing.
That's about it, but another interesting week is on the way.
Longtime Fool contributor Rick Aristotle Munarriz owns shares of Liberty Media. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.