Should SiriusXM Go Global?
For as long as I can remember investors of SiriusXM (NASDAQ:SIRI) have longed for and embraced the idea of expansion. When XM signed a deal with GM expansion into the automobile was what everyone wanted to see come to fruition. Investors had visions of a day that satellite radio would be standard equipment, and automakers would actually pay Sirius and XM for chip sets. Then it was expansion into more content. Howard Stern, Opie &Anthony, Oprah, Ellen, the NFL, the NHL, The NBA, and finally Major League Baseball. We all celebrated each move and embraced them. Certainly they were expensive deals, but we all carried a vision.
After that satellite radio expanded into Canada. Visions of added revenues entered the minds of investors. People got the feeling that satellite radio was invincible and destined to be the greatest form of audio entertainment across the globe.
Global expansion has been something contemplated by investors for a long time. The concept caught fire again when Liberty Media’s John Malone brought it up a few months ago.
Having a vision is a great thing, but as an investor you need to be grounded as well. The auto sector has never seen full penetration and likely will not. Automakers do not pay for satellite radio chip sets, and probably won’t anytime soon. SiriusXM in Canada exists, but the revenues are not very substantial. In short, see the vision and potential, but ground it in reality if you are going to plunk down your hard earned money investing.
Yes, going global sounds great! But there is a lot to consider. It costs money to expand. You need to be able to support the market. You need content for each market. You need customer service reps, sales reps, and offices in these markets. You need management, employees, and talent in each market. You need OEM deals, cell phone deals, repeater networks, licensing, and that is just the beginning. Spotify spent almost a year setting up its U.S. launch, and even then is still not profitable here after launching a year ago.
SiriusXM is just getting to the point of impressive profits and cash flow. Expansion can happen at some point, but investors need to be well aware of the costs associated with trying to expand. Expansion needs a defined plan, a defined schedule, and defined goals. Expansion needs to enhance the business not cripple it.
There are certain products that cross nations and cultures. Clothing can expand across markets quickly. Nike is known the world over. A fragrance can do the same. Satellite radio has huge potential, but it also requires massive amounts of capital and coordination.
Here is an example. If you go to Brazil, you will hear radio in Portuguese. You will hear music that feature Brazilian artists speaking Portuguese. You will hear Portuguese speaking DJ’s, and Brazilian news. As an American, you would feel out of your element. SiriusXM’s current line-up does not serve the interests of Brazilians. As likeable as Nicole, Stanley, Ryan, and Rich are for Americans that listen to Hits 1, there is likely little appeal from the fab four in Brazil. Compound that and consider Argentina, Chile, Venezuala, Columbia, Bolivia, Ecuador, Guyana, Paraguay, Peru, Suriname, and Uruguay. There are 12 nations in South America alone to cater to. Central America, including Mexico, adds another 8 to the mix! And there are dozens of islands in the Caribbean on top of that! Simply stated, just to cover this hemisphere, we are talking about a massive undertaking.
Global expansion is a great vision, but it takes a lot to make it a reality. It took a couple of years and many concessions to even get into Canada! And so far the reward has been quite modest, even after years have passed. Having a grand vision is great and powerful. Without it we will not progress. However, it is a long process that does not come easy. If you are an investor that has been waiting years for an impressive return on SiriusXM, the thought of global expansion may add a lot more years to getting to that reality.
In my opinion any expansion by SiriusXM needs to be measured, strategic, and consider the impacts to the bottom line. SiriusXM has taken years to define and refine the best business model as it relates to the auto sector. That is smart business. The company needs to apply the same business principles to international expansion. Investors need to consider the very real hurdles such expansion has.
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I am skeptical of this discussion without a complete understanding of even the technical challenges of global operations before considering the cultural differences. SIRI’s SDARS spectrum is licensed in the US by the FCC and in Canada by their equivalent governing entity. To think about global expansion SIRI would have to do some heavy lifting with the ITU and regional governing bodies. That process alone takes years and significant time, people, and dollars. Then the company can think about a Brazilian Portuguese product and OEMS and logistics and what not. I don’t see global expansion happening in the near to mid term.
Stephen…..
Agree….satellite services will be even more challenging than the ip delivered product. I do not think many investors understand that the SiriusXM we all love here does translate to other places easily on a technical or cultural level.
Thank you for the comment
Actually this question has already been answered. However most don’t have the ability to do any real DD themselves wit out information being fed to them via news feed. There are answers scattered in many different places. This is all public information that needs to be woven together, some information easier found then others. If you really want the answer to your question. You should start by reading Liberty’s most recent S-4 Filing in its entirety. I’m certain its coming much sooner than many think do some research. Good luck.
Jel2,
The question has not really been answered in the sense that I am posing the question. There is little doubt that Liberty intends to expand. I have read all of he filings made by the company, listened to all public comments made by he company, and gained insights not available to most because they have not been reported.
The question is whether expansion is good for the investor and their goals. Most investors get a bit naive when it comes to this subject. They see it as a positive or their investment when it could carry the opposite impact.
If liberty were to say today that they were expanding satellite radio into 25 market over the next 18 months met investors would cheer up until the point that they realized the costs would be overbearing with such an aggressive schedule.
The point here is to get people to think about expansion ahead of the announcements.
I haven’t yet read ONE article yet that DIRECTLY and SPECIFICALLY points to the very public information scattered in many of many places. No offense, but I honestly highly doubt you have done any “real” research that inconclusively results in whether or not “Sirius” IS going Global (other than speculation, some comments & articles) or you would have written about it (with the available REAL concrete public evidence to back it up). I’m pretty sure I’ve gotten this one figured out and I have yet to see 1 other source or publication that has also (other than speculation). Whether its good for the investor is another story which we’ll eventually find out (listen to Mel’s jabs in the most current CC). FYI This is not coming in 18 months. I hope you didn’t take offense to how this was written. Good luck.
Jel……
I have read the filings,, listened to comments, and spoken to other sources. There is a fine line between offering up speculation and offering up concrete plans.
See, there are some very real insinuations regarding expansion. One key is how fast hat happens.
I do not have a desire to be like other sites that get the masses raving bout some potential without having really researched the issue. Expansion is in the cards, but connecting various it’s can be a Dangerous game.
The point of this piece is setting realistic expectations… nothing more.
Fair enough……. But when some one who literally writes specifically on Sirius/XM uses words in generalization like “filings”, “comments” & “source’s” when there are much more SPECIFIC concrete public record available as we speak with out generalizing, (that for the most part I’ve chosen to keep to my self) and I have yet to see any publication point out what I believe I’ve figured out (backed by facts). I find it very hard to believe that some one who writes specifically on the company would pass up the opportunity to write about the inconclusiveness and inevitability these scattered facts (if they actually had the direct evidence to back it up). I think we both are taking each other responses out of context, its like your saying “you know” but based of speculation and I’m saying there is public information available to piece together that makes it 100% non-speculative to me. I understood the point of the piece and I wasn’t bashing it I went off topic. Soon we’ll see if I’m right? or an idiot. Anyway good work & good luck.
Wow! It appears you were all thumbs with this one. Spelling and grammar check are your friends 🙂 Still an interesting article though, as usual.
Man, it seems everyone checked their brain at the keyboard when commenting on this article, indlucing mee. Either that, or I have suddenly become dyslexic.
Dyslexic’s Untie!
Excellent and insightful article. Would love to read more about Sirius XM’s future beyond the Liberty Media takeover. Long on Sirius XM.
One forgot to mention the now defunct Sat radio service to the rest of the world,while Sirius and XM had the radio service sewn up in N America. I talking about WORLDSPACE,who beamed to Africa Europe and Asia and Au and NZ. Now if Sirius XM were to gain a hold of the satellite assets left behind,could that be a jumpstart to going global?
World space is essentially gone at the moment. Liberty Media even backed off. A partnership is always possible, but likely not profitable. Cell companies dominate overseas right now.
Remember what I said about those news feeds?
This guy jel is like an annoying second grader saying “I know something you don’t know, I know something you don’t know.” Put up or please shut up. You look like a fool.
Nice article but I think if everyone has the same doubtful attitude towards expansion it will in fact take 10 more years to happen. I for one think it is not that much of a challenge as you make it sound.
Consider the point of content tailored to the geographic region. Maybe start small with sports, most of Latin America would be interested in listening to all futbol games possible.
Let’s not forget that the world is more and more becoming an English speaking planet. I remember this year watching the runners from Kenya winning as usual only now they are able to speak well in English about their trial and tribulations of getting to that win…
I am sure that folks in China would be interested in the current SiriusXM content. Don’t you think there would be a significant amount of interest in the NBA following Jeremy Lin and hearing all the games being broadcast?
What about American travelers worldwide i’m sure it would be a great thing to know that you can take your portable receiver on vacation in Greece and listen to your favorite shows if you feel the need.
SIRI going global is a challenge and a large undertaking as we all know but let’s not rule it out thinking the world won’t want the content…
Its not that I am doubtful it will happen… it will. Many investors simply think it is an easy process… it is not.
As for American content abroad… not the best business model. Any content in china is highly regulated.
Worldwide leverages several things….Music…..Live music ( live nation )…..The big thing is sports. You can partner with the leagues. There is more interest than people think. Soccer is a worldwide sport. Premier league games would be a big draw. Financial news. Leverage from new lower cost bigger coverage satellites. It can be very accretive.
I agree Gtx, seems like sports content takes a little bit less man power or chemistry to produce over a hit talk show that is more based on cultural humor (howard stern).
And more to your point, it’s just a matter of licensing existing sports content from around the world and then delivering it everyone via satellite.
I would say that the U.K would be a very high adoption rate and low churn. I think folks in England are more comfortable with Satellite delivery in general. When I visited as a kid I can remember a service called Sky getting beamed in to all the pubs via satellite for sports and to my knowledge at the time in NJ (usa) not many people had satellites for anything. That, and our American humor is going to be influential on people all over the world so let’s see the interest in certain markets for now that aren’t Canada.
BTW, to me it seems strange to try Canada and be surprised when that doesn’t break records for sales but not try other markets.
Spencer, the language issue you raise for Brazil is a red herring elsewhere. Other than local dialects, and other than Brazil, Spanish is the common language for Mexico, Central America, and South America. Good strong Spanish deejays could, in my opinion, capture a significant presence in that market. It may be 20 nations, but it’s one language.
Sirislyrick….
I o not know what level of experience you have with the Latin culture, but my experience tells me it is not that simple.
I have family from puerto Rico, and family from Mexico, and close friends from chile. While we love to say the language is the same, it actually differs quite substantially depending where you are from. A hair clip in Chile is slang for female genitalia in Mexico. There are words used in puerto Rico that ate unique to that area. Mariachi is big in Mexico, but not in other on tries. There is a certitude commonality, but very distinct cultural differences eist as well. Enrique Iglesias will transcend borders, pitbull will do the same, as will shakira. However, the attitude and daily life of these differing cultures. Mana is much bigger in Mexico than in any other Latin culture.
Sirius XM’s Latin changes are great for the melting pot that is the U.S.A. Out of 15 Latin channels, my family listens to a couple, and to a T, says that while they are good, they do not represent Latin America outside the U.S.A.
if Sirius. XM were to try to expand into Mexico, it would need to add substantial content to be viable as a subscription service. The company has made great, if not HUGE strides in presenting a product to Latin americn people here in the U.S., but would have a long way to go to make a viable service in other nations.
I realize it sounds so simple, but it is not. My family that wants Latin programmiing that meets what they are looking for uses Spotify, and you old probably be stunned at how different the content is.
Believe it or not, most gringos (and I use the term in jest as I am a gringo) believe that the terms Latino and Hispanic are interchangeable. They actually have very distinct meanings.
Again, I have no idea of your history, so you may be well aware of what I am saying. I know many readers may be enlightened by what I am saying here.
It ounds simple to expand, but the reality is it would entail substantial work. I would even venture to say that there are some readers that learned for the first time that Brazilians do not speak Spanish, but instead Portuguese. I used brazil because it is the 6th largest economy in the world (don’t tell an Argentinian that though) and likely the place where satellite radio could gain a foothold if marketed properly.
All of that being said, expansion from an IP delivered standpoint could happen much quicker, much less expensively, and much more effectively to the bottom line….at least initially.
Bottom line, expansion is not as easy as some believe.
I go to the US frequently and Sirus/XM radio is exceptional, you can listen almost what you want, anywhere. I would not mind paying for the service in Brazil, even if only through the internet and the original contents, no translation or localisation.