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Thread: How can you justify the riches of internet radio?

  1. #31
    sxminvestor is offline
    Quote Originally Posted by MUSCLE13 View Post
    Spencer writes

    Whether or not these services make money is not really the issue. The fact that they exist and can bring in consumers is why we need to monitor them.

    Then a poster answers him, sxminvestor, talking about fragmentation. I guess he is probably reading my posts here. The real answer to Spencer on this point is he has been so gung-ho on Sirius competing full force on the internet. Practically berating them for not taking on Pandora with a similar offering (I am guessing 2.0 has some personalization), but in the same vein Spencer is missing one key point in his thesis. Nobody is making big money on internet radio. NOBODY IN 17 YEARS. Pandora has 80 million registered users and they aren't projecting profits yet either in their S-1. And the flood of competition is coming.

    Spencer wants Sirius to go full force into the net when that part of the radio business doesn't make money. So basically if they followed that advice and put big resources into getting a big part of the consumer base to the net instead of sat, Sirius would drastically lower margins and be competing hard in a space with 0 barrier to entry. They would be 1 out of hundreds of thousands. With sat they are 100% of the space. Their EBITDA margins would beg for a lower stock price. Net radio for Sirius is a nice churn reducer. Maybe some added ARPU too for the sat sub base too. Its not a good business and Spencer's thesis is flawed.

    Pittman called Pandora a feature instead of a business yesterday in the article. Does a person following this business think that a feature is what Sirius should be? Sirius is a cash flow business. Internet add-ons are nice. Thats all they are. Prove to us that this is a business Spencer when you guys can't name one internet radio company that has made it a cash flow machine. Do you invest on hope or EBITDA?
    Hey Muscle,
    Yes, I have echoed some of your thoughts, learned a lot from you listening to you on Playground site. Your EBIDTA growth estimate projections for Sirius is one of the main reasons I did not get scared out of the stock thinking it was toppy at one time only because I was not experienced like you with radio and media.

    Sorry if I parroted you a bit but you are 100% right on and I am curious if you have revised your estimates for year end price target based on EBIDTA growth. I think you were at around 2.56 if I'm not mistaken.

  2. #32
    MUSCLE13 is offline
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    Joined: Jun 2007 Posts: 301
    Quote Originally Posted by sxminvestor View Post
    Sorry if I parroted you a bit but you are 100% right on and I am curious if you have revised your estimates for year end price target based on EBIDTA growth. I think you were at around 2.56 if I'm not mistaken.
    I am at $2.78 on my 1 year target. You can look at the EV/EBITDA analysis here.

    http://messageboards.aol.com/aol/en_...Unhidden=false

    I cited some of Tinker's aggressive projections on EBITDA growth in the analysis and assigned a 20 multiple.

    I actually believe Spencer is a rather intelligent guy who really feels that the internet is the way to go for the radio business. I couldn't disagree with him more. I believe he has a fundamental misunderstanding about zero barrier to entry and how it destroys media business models. That's my opinion. Or he just is basically ignoring the fact as many do.

    Make no mistake about it. Phone radio apps will suffer from the same fragmentation that happened to internet radio with PCs in the 90s. Pandora isn't making money with 80 million registered users and they are dominating the phone apps. What happens 5 years from now when there are 1 million radio stations available on smartphones as there on the internet at home today? Fragmentation. There is absolutely no barrier to entry.

    In my opinion there are serious flaws in Spencer's thesis. I honestly believe if Mel followed Spencer's blog posts and put heavy emphasis on internet radio it would cause horrendous EBITDA margin problems. Thank goodness Mel has seemed to design a way to enhance and keep SAT RADIO subs with the internet business thus far. Internet radio is not a good business. As a churn reducer I think it could work. As an EBITDA growth business, it hasn't produced anything substantial in 17 years. If Spencer has the model that works I sure would love to see it. I think the whole industry is still searching for it.
    Last edited by MUSCLE13; 03-04-2011 at 05:04 AM.

  3. #33
    MUSCLE13 is offline
    Senior Member
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    Joined: Jun 2007 Posts: 301
    From Tom Taylor's newsletter

    Excerpt, Bolding for emphasis -

    Thumbplay made its fortune selling ringtones and then tried cracking the online music-rental market using a cloud-based technology. After one year, it wasn’t successful, with perhaps just 20,000 subscribers paying $10 a month. Nobody has ever persuaded Americans to embrace the all-you-can-eat monthly subscription model, though Spotify is queued up as the next in line to try it. What Pittman wanted was the Thumbplay technology, so it and its 65 people could be integrated into iHeartRadio. (Thumbplay’s ringtone business isn’t affected by the music service selloff.) Clear Channel says the Thumbplay technology will help “ensure that our listeners have the radio and music experience they want, on whatever device or platform they prefer." Clear Channel will maintain the current music service, but won’t seek new customers.


    http://www.radio-info.com/newsletter...-on-radio-info

    Interesting - Listeners won't pay and add to that fragmentation? The net radio model has some enormous hurdles. That doesn't mention the enormous VARIABLE costs.
    Last edited by MUSCLE13; 03-04-2011 at 08:21 AM.

  4. #34
    MUSCLE13 is offline
    Senior Member
    MUSCLE13's Avatar
    Joined: Jun 2007 Posts: 301
    Tom Taylor's article make one ponder this. Getting down to the basics of media - What will people pay for? One thing - Unique content. Music has become so easily available everywhere there is nothing unique about it that people will pay for.

  5. #35
    sxminvestor is offline
    Quote Originally Posted by MUSCLE13 View Post
    I am at $2.78 on my 1 year target. You can look at the EV/EBITDA analysis here.

    http://messageboards.aol.com/aol/en_...Unhidden=false

    I cited some of Tinker's aggressive projections on EBITDA growth in the analysis and assigned a 20 multiple.

    I actually believe Spencer is a rather intelligent guy who really feels that the internet is the way to go for the radio business. I couldn't disagree with him more. I believe he has a fundamental misunderstanding about zero barrier to entry and how it destroys media business models. That's my opinion. Or he just is basically ignoring the fact as many do.

    Make no mistake about it. Phone radio apps will suffer from the same fragmentation that happened to internet radio with PCs in the 90s. Pandora isn't making money with 80 million registered users and they are dominating the phone apps. What happens 5 years from now when there are 1 million radio stations available on smartphones as there on the internet at home today? Fragmentation. There is absolutely no barrier to entry.

    In my opinion there are serious flaws in Spencer's thesis. I honestly believe if Mel followed Spencer's blog posts and put heavy emphasis on internet radio it would cause horrendous EBITDA margin problems. Thank goodness Mel has seemed to design a way to enhance and keep SAT RADIO subs with the internet business thus far. Internet radio is not a good business. As a churn reducer I think it could work. As an EBITDA growth business, it hasn't produced anything substantial in 17 years. If Spencer has the model that works I sure would love to see it. I think the whole industry is still searching for it.
    Hope you don't mind I pasted your opinion in another forum to try and educate some others, of course advising it was yours.

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