If you had to score the soundtrack to XM Satellite Radio (NASDAQ:XMSR) over the past two years, I'm guessing that it might include a few songs like:

  • "A Whiter Shade of Pale," by Procol Harum
  • "Sugar, We're Goin' Down" by Fall Out Boy
  • "I Write Sins, Not Tragedies" by Panic! At the Disco

Fill in the empty spaces with a Gregorian chant or a traditional dirge, and you have one heckuva mix tape. You have to go back three summers to find the last time that shares of the largest player in the satellite radio duopoly traded this low.

If you're feeling especially twisted, go back to December of 2004. That was when shares of XM peaked above the $40 mark, granting the company a market cap of $8 billion as it lapped the 3 million subscriber mark.

Now compare that with the company's "after" snapshot. Today, XM commands an audience that is more than twice as large, even though its market cap is just shy of $3 billion. The average subscriber is paying more for the luxury of XM's growing slate of channels, too. The flipside to this, of course, is that even though XM has grown over the years, so have the losses.

That is problematic. XM and Sirius (NASDAQ:SIRI) have appealed to investors as fast-growing plays with cost structures that are high on fixed overhead but margin-friendly sweet on the other side of the breakeven line. These days, XM isn't growing all that quickly, and that breakeven point seems to paint XM as a jittery fiancee who keeps moving back the wedding date.

We're going to tackle XM's problems today. We're going to fix them, too. That's right, fix them. Someone's got to do it, and if CEO Hugh Panero isn't going to do it, you and I may as well give it a shot.

Another brick in the fall
Things haven't gone well for XM lately. Despite being the market-share leader, rival Sirius has added more net new subscribers over the past two quarters. It's at this point where a few XM fans will write me about the heinous way in which Sirius counts its subscribers. Save it. The disparity is too great at this point to quibble over the practices, especially since it's XM that has had to scale back on its year-end subscriber targets. Twice.

It's worse than that, though. Just when you think XM is finally going to turn itself around and take a step in the right direction, it finds a way to go in through the out door of ineptitude. It let Sirius walk away with the NASCAR dads. It started throwing legal fisticuffs at the music industry that it relies on to woo new subscribers. The FCC cracked down on emission standards on the next-generation line of XM receivers. It got so bad that a director bolted from the board back in February as he warned of a "significant chance of crisis on the horizon."

Can XM do anything right these days? It was an early investor in global satellite-radio provider WorldSpace (NASDAQ:WRSP), which went public at $21 last summer and now trades for about the price of a Big Mac without the fries. Talk about giving Refco a run for its money for the title of Worst Recent IPO.

XM can use a little R-E-S-P-E-C-T
XM is prettier than it thinks. It just needs one of those Pretty in Pink makeovers. The company recently reshuffled its marketing department, and it probably couldn't have come at a better time. XM has let bears, Sirius, and even terrestrial radio bully it around, needlessly.

Back in March, Clear Channel (NYSE:CCU) slapped XM with the ultimate insult in forcing four of its commercial-free music channels to run ads. Clear Channel was one of the first investors in XM and a content provider. Clear Channel? WorldSpace? A board director who tramples over women and children to hop on the first lifeboat? Nice job choosing your friends, XM. Next time, try a collie.

The Clear Channel sandbag is all too telltale because it exposes XM as a wimp. If saying that means that we'll never see The Motley Fool Finance Channel on XM, I'll take it as a compliment, because it means that XM finally decided to cowboy up and learned how to throw a punch.

Think about it. That one devious move by Clear Channel finds Sirius billing itself as the only source for "100% commercial-free music" now. XM quietly fought back by adding some new music channels, but where are the snarling teeth to let the public know that the Sirius dog's bark is worse than its bite?

You have to get to the bottom of every press release to see XM claim that its lineup includes "more than 170 digital channels" while Sirius is "more than 125 channels" of programming. One would think that XM would be shouting this disparity from the rooftops instead of spending an insane amount to let us know that David Bowie swiped Snoop Dogg's bling.

The XM marketing message needs to educate and draw blood at the same time. Fight back at Sirius. Fight back at terrestrial radio instead of tossing it the Opie & Anthony lifeline. You're not ugly, XM. Sure, you don't have Howard Stern, but nobody's perfect. Come out with fists flying, because you have clearly seen what the sad result of letting others swing at you has produced.

When Sirius landed the NFL, it went with ads starring John Madden, Tom Brady, and several New England Patriots wide receivers wondering why Sirius was Brady's new favorite receiver. I'm sorry if I can't recall the XM baseball spots. All I know is that XM should go for the jugular, dismissing the NFL as mostly a Sunday sport with a tenth of the regular-season games as the daily game of baseball. Who commutes on a Sunday? Roll with that as a catch phrase if you want, but then showcase why baseball on XM is superior to local baseball on terrestrial radio by showing how fans can turn the knob to receive visual scoring updates from all of the games taking place.

Bowie? Snoop? Bob Dylan? Having musical celebrities with their own shows on XM is great, but you can't hang marketing on personalities that are better known for the musical performances that can be heard anywhere else. The emphasis has to be on highlighting proprietary talk celebrities. You've got a few. You need more.

Oprah Winfrey should help when she arrives in September, but you need exclusivity as you raid terrestrial radio for the handful of true stars still out there. For the love of God, XM, you know who they are. Pay them. And pay what it takes to grant them an early release to get them on your airwaves as quickly as possible.

Teaching the Sirius dog to play dead
No one sees nasty ad campaigns as a moral victory. They feel desperate. Naming names isn't what the top dogs do. Well, here's an announcement: You're no longer the top dog, XM. There's a smaller company with a larger market cap eating your lunch, and you're handing it the tater puffs. You have become the 7-footer in gym class who's afraid to dunk, and it's pathetic.

Am I crossing the line? Am I being overly vicious? Take notes. You'll need them. This isn't all about spiking your marketing message, landing you-know-whos, and ringing up our biz-dev department about that TMF financial-network thingy. It's also about a Wall Street makeover.

If I hear someone else bring up the argument that satellite radio is toast because of the iPod, I'm going to scream. Allow me to provide some talking points. Yes, Apple Computer (NASDAQ:AAPL) has grown from zero iPods to 50 million units sold in the same time that XM and Sirius have gone from zip to 11.5 million collective subscribers. But isn't that proof alone that they are not mutually exclusive technologies? Isn't one whetting the aural appetite for the other? If digital downloading is a dagger, do a better job in detailing the potentially lucrative deal you have in place with Napster (NASDAQ:NAPS). Apple may be the one company that you don't need to sucker-punch, but feel free to let it rip when it comes to tearing up the HD radio and Internet radio models for their obvious shortcomings.

In a nutshell, stop being nice. The market isn't being nice to you. I'm not being nice to you, either, and I'm the guy who recommended your shares to subscribers of the Motley Fool Rule Breakers growth stock newsletter service late last year. I still believe in you, but more so in the mold of what I think you are capable of than the shell of that vision that you settled for.

Take a swing. Hit me for practice. I would welcome the chance to fetch an ice bag as I work on a new mix tape.

XM is an active recommendation in theRule Breakersnewsletter service. The stock is trading significantly lower today. Thankfully, the average pick is showing a slight edge over the S&P 500. You're welcome to swing away at Rick with a free 30-day pass to access all of the newsletter's content services, including a lively subscriber-only discussion board.

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