Competitors

We are all well aware that Sirius XM is a subscription service. We are also aware that over 16,000,000 Americans are willing to pay for subscriptions themselves. What we don’t know is if the current pricing structure of Sirius XM is at that magic point that maximizes potential. Sirius XM is still relatively young as a company, but the service ages almost daily with the amount of services and methods that people can obtain their audio entertainment.

There has been a lot of talk lately about “Cloud Computing”. The concept is simple. Your data, in this case videos and music, are stored on the net for streaming from any capable device anywhere. It is a model being considered by iTunes, and is already working with many other services such as MP3Tunes. Simply stated, you no longer need massive amounts of storage to hold your music and videos. With cloud computing, your entertainment is stored elsewhere, and you can access and stream it any time. New smart phones are great, but with all of the apps that users seem to love, space becomes a premium, and users are forced to choose between apps and some music or movies they have on the device. Cloud computing makes that choice easy.

NPD recently polled 3,862 iTunes users and posed a simple question to them. How much would you pay per month to have your iTune library stored for you?

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The mobile Internet platform has plenty of audio entertainment choice out there for consumers. Sirius XM has apps on the major platforms, but they are far from alone. Pandora and Slacker have been long time mainstays of consumers who stream over their phone, and it seems that each month another service announces their presence to the world via apps.

Yesterday Rdio and MP3Tunes went live on the Android Platform. While the services do not stream live content, they do fill a niche that satellite radio has not yet addressed. Rdio allows users to browse and listen to their own playlists previously saved in an online account, or access content on-demand from an extensive library.

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The Internet is a great resource used for everything from conducting businesses and people to being a place where many get their entertainment. It has literally become a facet of our daily lives, and as network speeds improve, we have begun to get more and more uses out of the Internet.

For Sirius XM investors it is an issue that carries particular interest with the Internet radio facet of their business. Central to the issue is the U.S. Court of Appeals in Washington which made a decision in April that states that the FCC does not have seem to have the authority to have oversight of broadband, and by extension may not have the power to enforce “Network Neutrality” that bars broadband services from controlling what information flows through their networks.

This issue pits the owners of broadband networks against the services that do business on them. This is not only about music services such as Pandora, but also services such as Google, Amazon, and any company that maintains a presence on the Internet. Music and video centered services seem to take the limelight because their services are data intensive, and put a lot of demand on the systems.

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In an interesting move United Airlines has opted to utilize Microsoft’s Zune to entertain flyers. Up until the end of May the air carrier used Sirius XM. The contract with satellite radio was not renewed.

Zune, which has had trouble gaining penetration into the market, is likely using the deal to gain exposure much like satellite radio did a few years back.

The deals with airlines do expose travelers to services, but the effectiveness of such deals is difficult to measure. Sirius XM is still the music entertainment provider on Jet Blue.

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.

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The FCC has issued a press release regarding their decision on the WCS spectrum which sits adjacent to the spectrum owned by satellite radio. The issue has been ongoing for years, and while the FCC is adopting new rules, the new decision is one that will have both WCS and Sirius XM claiming small victories while neither side will be completely satisfied.

The FCC Press Release states, “The Federal Communications Commission today adopted rules that will make available 25 megahertz of spectrum for mobile broadband service in much of the United States, while protecting adjacent satellite radio and aeronautical mobile telemetry operations. Mobile broadband promises to be a significant contributing factor for economic growth and job creation in the 21st century. To promote mobile innovation and investment, the National Broadband Plan recommends that the Commission make 500 megahertz of spectrum available for broadband use in the next 10 years, including 300 megahertz for broadband use in the next five years.

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Jacobs Media is traditionally known as an organization that caters to mostly to terrestrial radio. They do however tackle other things as well, including some interesting data that became part of the fodder during the merger process of Sirius and XM Satellite Radio. Recently Jacob’s conducted a survey of more than 26,000 rock radio listeners from around the country, and one of the results was very interesting.

In their data, Internet radio provider Pandora is King of the online listening hill. Now before I get bashed away for daring to write about Pandora on a satellite radio site, let me clarify my stance. Pandora is a service that has many subscribers. While some may feel that it is dead or dying, the facts prove otherwise. To ignore it because it is “competition” is a fools exercise.

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In a move that has had little press, and perhaps demonstrates the track of FCC with regard to hearings and decisions, HD Radio stations may be allowed to increase their signal strength output beginning today. While Sirius XM is awaits a decision that will possibly cause interference from the WCS spectrum, HD Radio is getting the green light to up the power.

The FCC order permits FM’s HD licensees to increase their digital power by 6dB without prior notice or by as much as 10dB by first filing an informal request. It has been alleged over the years that HD causes interference of its own. Through the process, the FCC did have request for review and a petition for reconsideration filed, but it seems that it will be ignored, and HD Radio will begin boosting signal strength today.

It is anticipated that the roll out will not be at all stations. Some stations have costly build-out issues that will prevent them from jumping onto the additional power band wagon as yet. It is anticipated that the bigger markets will see the boosts first.

Position – Long Sirius XM Radio