Sirius Gains

Faster than you can say "Bababooey," Sirius Satellite Radio (NASDAQ:SIRI) has hit the 4-million-subscriber mark. After closing out 2005 with 3.3 million accounts, the fast-growing satellite radio provider is now ahead of the pace to land more than 6 million subscribers by the end of the year.

Naturally, one can't just assume that Sirius will land 700,000 new subscribers over every 11-week period. The company had a bit of ammo in its tank this time around, with Howard Stern moving his popular morning talk show to Sirius in early January. However, the first quarter is usually a seasonally soft one in the industry. A year earlier, Sirius signed up just 305,437 new subscribers. Sirius went on to sign 365,931 in the following quarter, with a sequential dip to 359,234 new net subscribers in the third quarter of 2005. Then came its blowout holiday quarter, where it scored more than 1.1 million new members.

With Stern's highly publicized arrival, it's likely that Sirius signed up more new subscribers than rival XM Satellite Radio (NASDAQ:XMSR) for the quarter. XM is still the largest player in this booming field, though, with more than 6 million members.

It will be interesting to see how this plays out over the course of the year. Sirius will be challenged to keep Stern fans trickling in now that he doesn't have the same kind of national stage to promote his on-air antics to non-Sirius subscribers. CBS (NYSE:CBS) may have helped its former terrestrial-radio star this month by thrusting Stern's name back into the limelight with a lawsuit. Then again, the stakes could change, depending on whether CBS loses the legal tussle.

The one thing is clear: With 700,000 new subscribers for Sirius so far in 2006, it's good news for satellite radio and more bad news for conventional broadcasters such as Clear Channel (NYSE:CCU), Citadel (NYSE:CDL), and Cumulus (NASDAQ:CMLS). Satellite radio now claims more than 10 million subscribers, and they're the 10 million avid radio listeners that terrestrial radio operators must be missing the most.

That's why satellite radio is a promising investing area for aggressive growth-stock investors. On that thesis, XM was recommended last year to Motley Fool Rule Breakers newsletter subscribers. The industry's goal to hit 15 million subscribers by the end of 2006 feels even more attainable today.

Longtime Fool contributor Rick Munarriz is a fan of satellite radio and has been a Sirius subscriber since 2004. He does not own shares in any of the companies in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.