The news sent ripples through the cell phone community, not just AT&T and their iPhone users. They all have great phones with awesome capability. You can use apps to do everything from basic calculations to editing photos, but it is the data that is so meaningful to many smart phone users. The ability to get on the Internet from anywhere is something that attracts many to upgrade to smart phones such as iPhone and Android.
AT&T recently announced that they are planning on phasing out unlimited data plans. For many this could be a major concern. Especially those that like to use Sirius XM, Pandora and Slacker. Streaming music is data intensive, and if a user does not have an unlimited plan, there is a danger of having to cough up the equivalent of a mortgage on a cell phone bill.
The announcement by AT&T could be followed by similar announcements from other carriers. What are those that stream music going to do? Well Slacker, a competitor of Sirius XM Internet Radio and Pandora has already developed a solution that will deliver the content people want while taking it easy on data usage.
Slacker has announced that they have completed a version of their app that allows for station caching. This allows users to listen to their customized Slacker radio channels through memory on the device rather than streaming. Users can easily update their channels for fresh content when they get into wireless areas, and then listen to hundreds of songs later on without chewing up their data plans. Slacker basic is free, but users will need to use Slacker Premium to take advantage of caching. Slacker premium is priced at $4.99 per month. Slacker’s caching apps have been available on Droid and Blackberry since February, and just recently became available on iPhone. The $4.99 charge will likely be minimal when compared to streaming live for a fee from the cell carrier.
Pandora, one of the most popular music service apps is likely equipped to offer something similar. The way they run their business model should allow station caching to work for their apps as well. The interesting question for satellite radio investors is how Sirius XM can accomplish something similar. Currently Sirius XM’s Internet Radio business does not allow for customized stations, and there is no caching ability at all. Sirius XM may have to shift gears if data streaming becomes cost prohibitive for cell users. At a minimum, the company should be developing a strategy to deal with this issue.
Whether satellite radio fans want to admit it or not, Pandora and Slacker do have some advantages over satellite radio. I am not saying they are better or carry the same depth of content, but certain advantages do exist. Customized channels is one key feature that users of these services really gravitate to and like. The costs of the services are a lot less than Sirius XM, and because of that Pandora and Slacker carry a large appeal to the younger and often more budget conscious crowd. This builds bran loyalty for Slacker and Pandora users. If Sirius XM is already perceived as more expensive, the additional costs to stream that content because of costly data plans could exacerbate that situation.
More costly data plans do not impact only Pandora or Slacker. They impact any company that offers streaming content. Sirius XM Internet Radio is included in this crowd. Slacker has developed an easy solution to offset the impacts. Pandora can likely do the same. The question for Sirius XM is how they will react to these new cell phone pricing plans to minimize impact on their business.
Position – Long Sirius XM Radio