SiriusXM (NASDAQ:SIRI) reported quarterly earnings July 27, and all eyes were on a few numbers. The company beat expectations on revenue, at $1.12 billion for the quarter, up more than 8% year over year, and it matched the 3 cents per share analysts were looking for in earnings. Meanwhile, it grew paying subscribers by more than 8% over the prior year -- well above what the company had forecast.


As investors, we often get caught up in these key metrics. They're important, but it's also important for long-term investors to take a step back and look at the bigger picture, because while those numbers drive stock prices in the short term, things such as a company's competitive advantages and its ability to adapt to meet customers' needs help drive the value over the long haul.

At first glance, Sirius appears to be in a hyper-competitive market always ripe for major disruption. Music streaming has exploded -- in the past four years, the IFPI estimated paying users of music streaming services like Spotify have gone from 8 million in 2010 to 41 million in 2014.

On the other end of the spectrum is good old terrestrial radio, the free stuff you can still find by skipping around your FM or AM dial. No longer a growth industry, terrestrial radio still dominates radio listening in the car, where it accounted for four out of every five hours of listening in the U.S. last year.

Yet SiriusXM continues to post subscriber growth to the tune of 8% per year, and see its customer base willing to stick around after price increases.

With all these options, investors should be asking why SiriusXM is able to grow at that rate -- or to grow at all, really.

It has a niche
One of the big reasons SiriusXM has endured is it seems to have settled into a comfortable middle ground between the old technology and the new. It doesn't capture the best of both worlds. But it does offer enough of the better qualities of old and new to make it an attractive product.

Sirius offers its customers not only content, but also simplicity. It's a theme that company executives come back around to again and again during conference calls and media presentations. But it's also one that gets lost among the headline numbers and the din of new developments in streaming media.

SiriusXM offers what's basically the equivalent of a cable bundle, but primarily for your car. And home-vs.-car is an important distinction to make here. When we're home sitting on our couch, we don't mind fumbling with different devices and a collection of remote controls to find the entertainment we want on the TV or laptop screen. When we're in the car, there are already enough distractions.

A full 60% of all radio listening is done in the car, according to Parks Associates. And Sirius, with just over 28.4 million subscribers, still owns only about one-tenth of that market. That means it still has room to run -- some expect it to get out to a gallop, but a trot is bit more realistic.

Sirius has also built a business model that it can scale with its continued success. As its subscriber base has grown, Sirius has continued to add new channels. It added NBC Sports Radio in April, and the conservative staple Fox News will launch a news channel designed specifically for SiriusXM this coming fall.

Connected cars are a threat, but how big?
A big question moving forward is whether the connected car can truly create an experience that offers the simplicity and ease of use that SiriusXM offers its subscribers. Or, perhaps, how soon it can do so.

As Sirius CFO David Frear noted recently, the Internet has made truly "original content" a thing of the past. No matter where it originates, everything is available someplace else.

"The question is, 'Can you get to it easily?'," Frear said. "That's a big deal. People can't type in sort-of URLs as they're driving -- or shouldn't be typing URLs -- and you can't create enough tiles to make it usable in there." 

What Frear was saying is that sports fans can subscribe to MLB At Bat and NFL GameDay to access their teams' live broadcasts. But accessing those broadcasts through SiriusXM is easier.

"If we make it easier -- just a little bit easier -- we'll get enough [new subscribers] for a really robust business plan," Frear said. As voice controlled systems continue to improve, Frear's point might lose footing, but for now it remains valid.

Change is constant
So far, this is a strategy that has worked for Sirius. And until the connected car has advanced to the point that it's easy to access all the things you want to access, Sirius should be able to keep winning over subscribers. As it does, it can keep putting its $1.37 billion in trailing twelve month operating cash flow to use by expanding its offerings.

Still, the industry remains ripe for disruption, so investors want to be sure to keep their eye on how well the satellite-radio provider is maintaining that competitive advantage.