SIRIUS XM SATELLITE RADIO NEWS

Writing about satellite radio can be an exercise in futility. Sirius XM has very passionate fans, and they have those passionate fans for a reason. Getting commercial free music and unique content anywhere in the nation is outstanding, and satellite radio created a revolution in how we listen to and obtain audio entertainment. The merits of satellite radio stand alone. In covering this sector, I am perhaps sometimes remiss in pointing that out. Being around it so long, you can sometimes fall into a trap of thinking that everybody already knows this.

In covering satellite radio, I inevitably follow pretty much anything that has to do with satellite, media, and the Internet. I have seen start-ups come and go. I have seen terrestrial radio shift their business model. I have seen Internet come and go. Some “competitors” have weathered the storm, and the shifting dynamics of technology always keep me on my toes as to what services are viable.

Yes, I write about Pandora, Slacker, Apple, Google Music, and several others. I find these services have some compelling things that attract the attention of consumers. This is not to say that they are better than Sirius XM, it is only sating that they have facets of what they do that are compelling. In some areas these services outshine satellite radio, while in other areas they fall short. My focus has always been that Sirius XM should try to appeal to any market segment possible. My philosophy is that as good as satellite radio is, it is not perfect. I know that saying this is not the popular thing, but I try to deal in reality.

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Sirius XM has announced the launch of a new weekly show to be hosted by Mike Posner. Posner has had an interesting rise to the top, and like many things today, it seemed to be fast paced. Posner having a show on Sirius XM is a natural fit, and is yet another example of the type of content satellite radio can offer that other services fall short on.

In their press release issued yesterday Sirius XM pointed out that Posner, a singer, songwriter, producer and recent Duke University graduate, got his music career going when he self-released two mixtapes and signed a record deal with J Records while still in school. His notable song “Cooler Than Me” gets regular airplay on Sirius Hits 1 and XM’s 20on20. The song has been a staple in virtually every countdown for about a month now. .

The timing of the Sirius XM announcement is just about perfect. Posner’s debut album, 31 Minutes to Takeoff, will be released on August 10th. Unlike many of today’s pop artists, Posner co-wrote and/or co-produced every track on his album. Entertainers who write their own music, in general, garner more royalties under the current structure of royalty payments.

The Mike Posner Show will debut on September 10th on Faction (Sirius ch. 28/XM ch. 52). The show will air Friday nights at 9:00 pm EST. In giving listeners some insight on his show Posner stated, “It is going to be so fun to document what happens in my life in such a refreshing manner. Plus, I can’t wait to show people all the cool music they’ve been missing. My show is going to have the best playlist ever!”

Position – Long Sirius XM Radio

It is a subject that has been in the news for quite some time, yet satellite radio fans and sites seem to ignore the news. In my experience one thing that no one should ever do is ignore Google. The company is a giant, has a bankroll bigger than many nations, and does not often fail at something they attempt to do. In news today it was speculated that the Google streaming music service will use audio ads.

MediaPost has been following the subject closely, and their latest information about audio ads for Google’s Streaming to Android Smart Phones is yet another aspect of the service that makes it a potential to many audio entertainment services. MediaPost mentioned that a service like the one speculated for Google will compete not only with iTunes, but services such as Pandora. What audio entertainment fans should realize here is that Google does not tend to do things only part way. I would anticipate a full service offering that will compete with everything out there.

In addition to this news it is also being reported that Internet will be in 5 million cars by 2015. Analysts Frost and Sullivan note that, “Brought-in apps such as Internet radio are the latest developments in the automotive apps and services market. There is a gradual shift in the United States and Europe from embedded telematics to hybrid connected telematics in terms of allowing features to run from a smartphone inside the car. Within this hybrid connected space, vehicle manufacturers have enough traction to allow Internet radio apps to run inside the car from the smartphone and control it using vehicle Human Machine Interface (HMI).”

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With only a few selling days left this month, but about a week before official numbers are announced, satellite radio investors are likely trying to gauge anything they can in order to know how to trade their position. Earlier this month Edmunds estimated a July SAAR of 12 million. A few days later JD Power estimated a 12.2 million SAAR for July. Even with these estimates there was still room for caution. As SiriusBuzz readers are aware, the most concentrated selling in the auto channel happens in the final week of the month. July has been no exception.

Combining the early estimates with contacts of our own, we are confident that the SAAR for July will come in between 12.15 and 12.25 million. This represents a substantial SAAR increase over the 11.08 million SAAR experienced in June. Over the past few days analysts have been busy crunching numbers and applying the government SAAR metrics to the data. I have also been busy speaking to my contacts, and trying to establish a meaningful range that would be useful to investors. at this point I am comfortable issuing the range of 12.15 to 12.25 million SAAR for July.

While seeing a number above 12 million is music to the ears of many, some caution is warranted. SAAR projects sales over the next 12 months, not for 2010. The actual number of sales should be in the 1.1 million neighborhood for July, matching the May sales month that was so impressive. Still, this is very positive news for SIRI in that the number of auto sales in July will be well over the 1 million per month SIRI investors like to see. This enables growth and what will turn into positive metrics across the board for SIRI.

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We have seen the up and down motion of auto sales with each passing month. Up one month, down the next. High SAAR estimates followed by low SAAR estimates. The July numbers will be more of the same. May auto sales were up, June auto sales were down, but July seems to be tracking nicely. One moment auto analysts are ready to project recovery, the next they are thinking things might be slower than anticipated.

Sirius XM, in reality is somewhat insulated from this roller coaster given the fact that their guidance is well within the averages presented by the auto sales numbers. In fact, the SIRI guidance is safe on auto sales of 900,000 per month. The problem is that most investors are not aware of this fact, and thus when the auto sales roller coaster goes down, the SIRI equity can suffer with it. For investors in the equity this can remain very frustrating. Readers of this site understand these dynamics, and the frustration is compounded because you see it happening. For traders, July auto look to be good, and a spike in SIRI could happen….BUT…caution has now been issued.

Edmunds is reporting that there is reason to have caution for second half auto sales. Some of what they say makes good sense. The “recovery” has been tied to incentives. The “recovery” has been aided by higher than normal and more concentrated fleet sales. These issues give reason for Edmunds analysts to pause in proclaiming a full blown recovery, and thus projecting 2010 sales above 11 million, but below 11.5 million.

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The news yesterday was centered around the iPhone and the rights of people to “jailbreak” their iPhone for use on other networks. It would not seem that such news would impact satellite radio, but an old term familiar to followers of satellite radio was key in the FCC decision to make it “legal” to jailbreak your phone. That word is INTEROPERABILITY.

Interoperability was a key component in the legislation that brought satellite radio to reality years ago. It also became a catch phrase during the merger process when HD Radio wanted a mandate that all satellite radios also include HD Radio. The FCC never acted on that request by HD Radio, but congressman Markey of Massachusetts did introduce legislation that would have made such a requirement law if the bill passed. The bill died a slow death in committee, but on the heels of the FCC decision on jailbreaking, some may get the wild idea that the issue is so important to the FCC that it could be worth another try.

“Apple fought hard against the legalization, arguing that jailbreaking was a form of copyright violation. The FCC disagreed, saying that jailbreaking merely enhanced the inter-operability of the phone, and was thus legitimate under fair-use rules.”

HD Radio has had a tough go of things. While they have been slightly successful in getting into the dashboards of cars, there are signal issues that seem to limit the effectiveness, and many consumers, in a jab at the technology, comment that they now get better sound quality on their commercials. HD is still trying hard, and ad spots on terrestrial radio touting HD can be heard frequently. Some industry analysts think that HD will fall by the wayside before the network is ever big enough to satisfy consumers. It is these shortcomings that merit satellite radio investors paying close attention. I would not put it past Ibiquity to try the legislation route once again. If that happens we at SiriusBuzz will certainly let you know.

iPhone Jailbreaking

Position – Long Sirius XM Radio

As we reported here last week, Google seems to be in the midst of getting their ducks in a row to launch a music service. The New York Post is now reporting that Google Music could be ready to launch as early as November of this year. It is being reported that Google has not only began talks with record labels, but is also talking to the Harry Fox Agency.

Google’s Rubin is now speaking to the Harry Fox Agency is a sure sign that talks with record labels have gone smoothly enough for Google to move to the next level. The New York-based Harry Fox Agency collects and distributes license fees to music publishers and houses rights to some 27,000 songs.

The entry of Google into the music business is something that anyone associated with the space should monitor closely. While some think that Internet radio is not really competition for satellite, the entrance of Google could prove that the space is viable. Google does not simply move into a space without a plan in place. They have dominated smart phone sales thus far in 2010, putting a major dent into a business that many thought belonged to Apple. The Google rumors, including a cloud based system, have many competitors scrambling to keep up.

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Some SIRI investors are anticipating a run-up going into earnings. It is something that has happened like clockwork over the years, and it looks to be happening again. The age old question however is whether or not SIRI can hold the gains once the numbers are announced. I have long been of the opinion that it will take several quarters of pure and strong metrics to allow SIRI to maintain the steam after a conference call. Even with the bullish run over the past two trading days, SIRI remains in the middle of a trading range between $0.90 and $1.10.

As readers of this site know, I like to watch volume, support and resistance and moving averages. I prefer these technical indicators because they are easy to follow and without too much drama you can have a decent indication of what is happening with the stock.

From a volume perspective SIRI has had two great days of volume on an upward move. To me this bodes well and helps establish new and stronger support levels. From a support and resistance standpoint, SIRI has now closed directly on the very strong $1.02 level. I would have preferred to close above $1.02, but this is SIRI, and nothing comes crystal clear when it comes to this equity. That being said, closing at $1.02 on decent volume is good. Now enter the moving averages. I have been watching the exponential moving averages. They are once again converging, and with a close at $1.02, the EMAs will be giving off very bullish signals. This is good.

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