Amazon has their Cloud, as does Apple and Google. Now Best Buy is looking to enter the cloud as well. With all of this news about cloud based services, and all of the hype surrounding them, a natural question might be whether or not these services will impact Sirius XM Satellite Radio (NASDAQ:SIRI).
The immediate answer is that these cloud services do not compete with satellite radio, but rather compliment it. At this point these services are not really entering the radio space, as much as they are entering the "convenience of storage" arena. None of these companies have announced streaming channels, and none have gone out and hired talent like Howard Stern. That being said, there is not necessarily anything stopping these giant companies from moving in that direction if they are so inclined.
Think of these cloud services as lockers in the sky that contain the items that you yourself placed there. Your cloud follows you and allows you to remove items from your locker whenever you want. It is like being able to take your music and video collection with you anywhere, and listen or watch on any device. I can remember in my younger days having giant nylon cases that housed all of my cassette tapes. Later, with CD's, the storage became smaller. Now, the storage is not something you need to carry, but can access any time.
By contrast, Satellite Radio is like having curated content stored up in an orbiting satellite. Sirius XM takes the though process of a playlist away, and simply programs your music for you. As an added bonus you get all of the news, talk, and sports you could ever want. Satellite Radio also keeps the "active" connection between listener and curator alive, while cloud based listening is more "static" and "lonely".
Clouds are not better than satellite. They are simply a way of allowing consumers the ability to make their personal music collection more portable and more useful. At this point satellite does not have to worry about the clouds, because they are not targeting the same type of listening experience. In the purest sense of the word, these cloud services do indeed compete for my listening hours, but in the end Sirius XM has enough unique content and ease of use to make it quite viable.
Just because the competition is not fierce right now does not mean that investors should not pay attention to what is happening in the Cloud. MOG, Slacker, and Pandora could all be considered Cloud based services that have taken an extra step beyond what Google, Apple, and Amazon have done. In that sense, the competition is hitting closer to home. I know that there are many that say that these services do not make money. However, Pandora is only $1 per month per active user away from being a wildly profitable venture. This means that the cloud services are indeed worth keeping tabs on. It is one thing to compete against a Pandora that is struggling to make a profit, and something else entirely if Google enters the field.
In the end, the advantages Sirius XM has are unique content, a stable delivery platform that they control, brand awareness, and deep penetration into the car market. Some of these advantages will be around for years to come, and that should deliver at least some comfort. Nothing lasts forever though, so seeing Sirius XM improve with new services like the upcoming satellite Radio 2.0 will be important.
The moral....Keep your eyes open to what is happening in audio entertainment.
Position - Long SIRI - No Position Pandora, Amazon, Apple, Google