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.

If I were to gauge my own audio listening in the car I would say that I spend 70% to 75% of my time listening to satellite radio, 20% of my time listening to my iTunes, 5% of my time listening to Slacker, and about 5% listening to terrestrial radio. Clearly I have a preference. Clearly there is something unique about satellite radio that compels me to listen to it more than all of the other competitors combined. I would say that it is a combination of unique content, ease of use, and the ability to simply turn it on and go. My habits are probably not unlike the habits of the average person in my demographic that has satellite radio.

In my house, things differ. I listen to probably 50% satellite radio and 25% Itunes, and 25% Slacker. What is the difference? Simply stated it is the quality of the internet connection, and my selected device. In my house I use a Logitech Squeezebox. All of the services are easy to navigate and use on the remote. Perhaps it is this reason that I find myself not underestimating the impact a higher quality Internet connection or integrated ease of use in a car would have. Most people probably do not use a Squeezebox, so their listening habits may differ in their own home.

Satellite Radio’s distinct advantage at this point is in the car. They have contracts with OEMs that ensure the availability of satellite on a large scale. Satellite radio in the car is easy. No plugging in, syncing, or remembering to refresh your Slacker channels is required. That advantage that satellite radio has will last for a few more years at least. My point in bringing up other services such as Google Music is that the road these services have to play through a car stereo are not as difficult as the road satellite radio had to travel. I am thinking longer term, and my only point is that satellite radio needs to have a strategy in place. Anyone who disagrees with that assertion is being short sighted. Cell signals and Internet coverage will improve over time. I do not think anyone would argue that.

With that being said, Sirius XM has some compelling advantages over other services. Some were brought up in the comments to my latest article about Google Music. The reliability of satellite delivered audio content can not be debated. It does indeed have better coverage than content over cellular networks. Opinions on this will vary though. I live in Massachusetts and use Verizon. I get a terrific signal in the areas I spend 75% of my time in. However, if I drive thirty minutes away, I would be very frustrated if I was trying to listen to streaming content over my phone. In fairness, I do have a couple of dead spots right out of my driveway with satellite radio. I can drive a mile in either direction and am lucky to keep my XM satellite signal for 100 feet. After that though, all is fine. At this stage the signal availability on a national basis goes to satellite radio by a wide margin. It is a distinct advantage that satellite delivered audio content has over anything else. Whether you are in the middle of Death Valley, driving down the PCH, or somewhere on Interstate 95, satellite radio has you covered. Ever see those maps Verizon and At&T pull out on their commercials? Don’t believe the hype. There definition of coverage means you can hear every other word on your conversation! That does not translate well to music.

I think that consumers look for some key elements when considering their listening habits:

CONTENT

The saying that content is king has been bandied about quite a bit. It is certainly true that content is what brings people to the plate. The advantage satellite radio has is that they offer a wide range of content in not only music, but talk and sports as well. I feel that it is the talk, and sports that offer the biggest advantage here. Sirius XM simply has content that is not available anywhere else. From Martha Stewart to Howard Stern, to the CNBC, the service simply delivers more unique content than anyone else. This will be the case for quite some time, but as we all know, there will be a day where that could change. The advantage Sirius XM has is that they already have relationships with the cream of the crop. It is now their job to keep those relationships going. With music, the gap is narrower, but Sirius XM is still easier than the others to use, thus will carry an advantage for some time to come.

Ease of Use

This is just now becoming an issue in audio entertainment. In particular this is the case in the car. Sirius XM is as easy to use as an AM/FM radio. For the average person, That is a HUGE advantage over iTunes, Slacker, Pandora, etc. People do not want to take the time to plug something in, load an app, and figure out which playlist they want to hear. There are people who’s idea of a cell phone is for phone calls. Going beyond that simply is not an option for these people…they have not even attempted texting yet. This is more a generational issue though. The younger crowd is far more willing to go through some steps to get what they want. Personally I do not even bother to create playlists on my iPod. All of my music is there in one big playlist. However, I do know people that have dozens of playlists, and love it. The average person though, probably wants simple, and Sirius XM has that in spades over any other service.

PRICE

This is another aspect that was non-existent until satellite radio came along. Satellite Radio proved that people are willing to pay for a superior service. While the number of subscribers is not as high as we would like, the audience is large enough to be viable and good quarterly reports from Sirius XM will bear that out. Satellite radio fans see a great value for what they get. Some would even be willing to pay more. However, we need to consider the average person. The price point of Sirius XM being in the sweet-spot is a question that has yet to be confirmed. There are still plenty of people happy with free terrestrial, about 12 million happy with a modest fee on Slacker, and 60 million who take advantage of Pandora. Price will be a key component over the next few years. Sirius XM is still adding subscribers at current pricing levels, so they can compete at these prices. The real key will be if and when the ease of use and content offerings of other services improve.

The main advantage that Sirius XM has is that they are established. They are a known brand, and have deals in place with OEM’s that deliver more and more satellite radios to the consumer. These advantages will last for quite some time. These advantages can also stay in place if Sirius XM maintains the pressure that they have applied over the last few years. My opinion is that there are aspects of other services that Sirius XM should consider matching. I think that Sirius XM needs to improve their Internet service, and be ready to implement a viable competitive plan against the other Internet services. By doing this Sirius XM could further exploit the current advantages they already have, appeal to a wider demographic, and secure the future of the best radio on radio.

Sirius XM is by far my preference, and will be for a long time. I love the service. I simply don’t want to settle for what we have now. I want the best to stay the best. There is ALWAYS a way to improve and grow.

Position – Long Sirius XM Radio

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.

Recently Edmunds did express some reservations about months going forward. August and September will have tougher comparisons because last year those were big months in the cash for clunkers program. The headlines for July should help bolster the Sirius XM stock price going into earnings. The question is whether or not the reservations by Edmunds will be picked up and believed by analysts. The reality is that we will have several OEM’s either just having had their quarterly call or getting ready to have it. Sales and production data as well as auto industry estimates will all need to be absorbed over the next two weeks. Ford has already announced their quarter, but GM is expected to announce their own after the Sirius XM call. July sales figures should be announced on Monday and/or Tuesday of next week.

For Sirius XM investors the REAL news here is another positive month that will allow Sirius XM to meet or exceed all current guidance. For satellite radio the auto industry is already recovered. The REAL news is that success for Sirius XM is not reliant on annualized sales of 15 million or more. Sirius XM can produce REAL numbers that show a viable business with annualized auto sales of less than 12 million. Sirius XM does rely on the auto channel, but that reliance may not be as heavy as many think.

With 2011 auto sales already being projected at 13.5 million, Sirius XM should be able to offer up some impressive 2011 guidance later this year. The pieces are in place for Sirius XM to prove to the street that they can and will grow even within a depressed economy. Hopefully the company will frame their numbers in this call in a light that discusses and takes into consideration the longer term outlook beyond the current quarter.

Sirius XM should see some strength in the share price when the July SAAR and auto sales are announced. That share price could be bolstered with a good conference call on August 4th. The bears have had the advantage, but there are several reasons to see a shift, and over the next week we will see it play out. SiriusBuzz readers now have reliable SAAR information for July to work with as well as the knowledge that Sirius XM can produce in this environment. The roller coaster effect of the rest of the media may continue, but solid fundamentals will rule the day as SIRI produces solid metrics quarter after quarter.

Position – Long Sirius XM Radio

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.

What I see is that the auto industry is projecting between 11.5 and 12.5 million. In my mind this will be the number that we see. The industry will incentivize and do whatever is needed to hit that range. They are already prepared to do this, and this target has been their goal for months. Thus, the goals of the auto industry are very “safe” for satellite radio investors in terms of guidance issued by the company.

In simple terms, a “recovery” by the auto industry and the cyclical news that follows it do not matter to the fundamentals of Sirius XM. When it does matter is when Sirius XM takes it on the chin because of the sheer number of investors who simply are not as well informed about the dynamics at play. When this happens it is not a dooms-day conspiracy against Sirius XM. Instead, it is auto analysts following the auto sector. These analysts could care less about Sirius XM. When it matters is when those that do follow SIRI get caught up in the cycle of the auto news more-so than they should. All SIRI investors really need to worry about is that a minimum of 900,000 cars sell each month with a preference being that the sales be right around 1 million units.

Traders will play the news and emotion of the roller coaster. SIRI traders will use auto numbers to tug the emotions of investors. I have seen dooms-day headlines, and rocket-ship headlines. The REAL FACTS are that FOR MONTHS the auto industry news has been well within what SIRI needs to hit or exceed guidance. SIRI investors need to learn to separate the real news from the headlines they see, and learn that SIRI will react to auto industry headlines because the majority of SIRI investors are not “in-the-know” on what all of these numbers really mean. Being “in-the-know” simply means you have an understanding of why things are happening. It does not mean that the equity will respond the way it “should” based on the real facts. Being “in-the-know” simply gives you an advantage of taking action if you so desire.

Will the auto industry sales be bumpy? Yes they will. Will this create roller coaster headlines? Yes it will. Rather than fight this, why not embrace it and use this to your advantage in terms of SIRI. Roller Coaster headlines are a traders dream come true.

Edmunds – Buckle Up – Industry Recovery Is Going To Be Bumpy

Position – Long Sirius XM Radio

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

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.

Satellite Radio investors should take note, but at the same time can have confidence in the advantages that satellite delivery has. Satellite radio is still the best method for consumers to access to notch content in their cars. Still, technology will not remain still, and Sirius XM, if they plan on participating in Internet delivered radio, needs to start some major planning as soon as possible. Why should satellite take note? Another form of potential expansion for satellite radio is through smart phones, and in the longer term by adding more nations to the service. In France, Orange, a major carrier just signed an exclusive deal with Deezer for music content. The exclusive deals on the international stage are similar to the exclusive deals sought by Sirius and XM when they were competitors. If exclusive deals in Europe continue, it could lock out international expansion for Sirius XM before it ever gets started.

In the short term, Sirius XM can march along on their way to profits as they have been, but anyone considering long term must entertain the possibilities that the Internet will make its way into cars sooner than many anticipated only a few years ago. It is already there for millions that have smart phones. Getting in the dashboard of an OEM is no longer about a chipset, it is about a USB port or bluetooth connectivity.

Sirius XM reported 583,000 subscribers for Q2 and will be reporting their quarterly results on August 4th.. They could well match that subscriber tally in Q3 and Q4. This represents great growth potential in the near term that can not be ignored. Could we see a satellite vs. terrestrial vs. Internet in the next few years? The possibility certainly exists. For those wondering why some media analysts are not as bullish as they might be…Google and Internet Radio could be a factor.

[via NYPOST]

Position – Long Sirius XM, No Position Google or Apple

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.

With the Q2 conference call only about a week away, the natural question is whether this is the typical run up prior to a call, or is it another more natural indication that a reversal is at play. For the moment, I would lean to the recent action being a play on the pending conference call. What will be interesting is if SIRI can hold these gains after the call. What we need to watch for are reasonable moves that carry good volume. If the equity moves too high too quickly prior to the conference call then we will see a retracement. Traders will be playing these moves while longs and those in cash will be waiting to see the numbers.

Technically things look good, but understand that this move may have little to do with technicals, and could be more about a conference call play. Time will tell.

Position – Long Sirius XM Radio

Sirius XM’s Fantasy Sports Radio channel is a highly focused channel. It is all about playing fantasy sports, drafting a winning team, and networking into a social circle that crunches statistics more than most would like to admit outside their fantasy sports circle of friends. With the development of Fantasy Sports Radio, Sirius Xm has given the Fantasy sports world a national stage that simply did not exist before.

It is a great step in the right direction. It is a step that makes Sirius XM unique, and one that can help differentiate Sirius XM from the competition. Yes, it is a focused group, but sometimes focused channels are enough to be differentiators for a consumer.

The other aspect of this channel I like is that they have a web page that is more interactive than most on Sirius XM. The web page actually carries the latest news with links to sites like rotowire.com. This shows that someone with a knowledge about the subject put some thought into the process here. If you have a captive audience, why not keep them on the site. The channels Facebook page already has 730 fans and is sure to grow steadily.

There are a couple of things I would like to see, and this channel is probably one of the best to do it on. Why not offer up a chat room where sponsors can advertise (more revenue) and fans can congregate to chat about the latest moves, or a league to join? I would also like to see the page offer up some leagues of its own so that this channel gives fans every reason to listen, participate, and get together on line? Take the concept to its greatest potential and the rewards will come through loyalty and word of mouth marketing. The bottom line is while the interaction with fans on the web page and Facebook page is a great start, there is still a lot of potential to be tapped.

Sirius XM’s Fantasy Radio is a very cool concept that is sure to deliver those that participate hours of enjoyment day after day. Congratulations to Sirius XM on making Sirius XM an even more unique place in the world of audio entertainment.

Position – Long Sirius XM Radio

Hearing Ford once again reiterate a 2010 industry sales total of 11.5 to 12 million vehicles is also good news for satellite radio. That number is just above the 11 million Sirius XM used in offering their guidance for 2010. The good thing here is that SIRI is set to beat their guidance because of the better auto sales, but the numbers are not so huge that the costs associated with that growth are overwhelming. In my opinion, even at 12.5 million vehicles sold in 2010, SIRI can present good metrics across the board and will be able to demonstrate the sustainability of their subscription model.

Ford stated that they are keeping in line with their planned Q3 production. The good news for SIRI investors here is that most OEM’s are keeping inventory levels much tighter than years past in an effort to improve cash flow. Lower inventory means that Sirius XM will not have subsidized chip-sets sitting in radios that have not yet reached dealers. This new strategy by OEM’s will carry long term benefits for SIRI as it will also improve cash flow for satellite radio. There is a ways to go before we get to auto sales of 15 or 16 million per year, but with about 12 million this year and an anticipated 13.5 million next year, the horizons for SIRI are getting brighter.

Position – Long Sirius XM Radio, No Position Ford

This morning Sirius XM announced the time and date of their Q2 conference call. This call has been highly anticipated ever since the company announced earlier this month that they had improved churn, improved the take rate, and added 583,000 net subscribers in the second quarter.

Thus the street knows that the subscriber metrics look good, and clarity on how that impacts other metrics has had a chance to be absorbed. Combine this with the news that July auto sales should come in above the 1,000,000 magic number and it is no surprise that SIRI is beginning to see more action. Sirius XM has oft seen run-ups going into earnings. This is another reason that even with good volume this move should not be a surprise to anyone.

Analysts have now had some time to sharpen their pencils and revamp their models, taking into account better churn, and more subscribers. Sure getting subscribers costs money, but it is through these subscribers that the company will be able to continue to grow. In trading today SIRI has pierced through a key resistance point at $0.97. So far volume is at about 125 million share, whereas the average volume is in the neighborhood of 75 million. If Sirius XM can close above the $0.97 resistance on this volume it would be a win for the longs in the stock. Yes, everyone wants to see the $1.00 level broken, but things need to happen one step at a time. The next key resistance point sits at about $1.02 and is stronger than the lower point shareholders hope to close above today.

Long term EMA’s and many technicals were all bearish yesterday. Today, on an intraday basis, many technical indicators are shifting to bullish. It will take additional confirmation on Monday to see the tide turn. One positive is that we are seeing new volume and thus interest in SIRI.

Watch for analysts to begin issuing notes on the pending Q2 call, but bear in mind that some may not update targets until after they can digest the official numbers issued by SIRI on August 4.

Position – Long Sirius XM Radio

In the meantime, Ford has pulled a bond offering as a result of new regulatory reform. The rating agencies such as Moody’s and S&P seem to be fearing legal liability associated with the Dodd-Frank legislation which speaks to accuracy of ratings and holds ratings firms to the same type of standards that auditing companies must adhere to.

Ford was trying to sell of some debt related to auto financing. The auto financing industry has seen a rebound, but credit markets are still tighter than they have been in the past. In particular, those with poor credit are still having difficulties getting financing. Ford, which has its own financing arm, has been able to offer consumers more in way of financing options. The company has benefited. As has been anticipated since this spring, GM is working on a deal of their own to obtain a financing arm.

Even with credit arms of their own, if the companies can not sell their debt off in the form of bond offerings, it could constrain the credit markets for consumers. Without ratings debt becomes harder, if not impossible to sell off. The SEC announced yesterday that it would temporarily allow bond sales to go ahead without credit ratings in bond offering documents, however, it is the ratings that allow potential bond buyers to gauge their risk, and potential bond buyers are limited to buying AAA rated bonds.

It is obvious that something has to give, and that it may take some time for things to shake out.

Catch a video on the subject via Business Insider

Position – No Position Ford, GM