Sirius XM vs. Pandora vs. Slacker etc.
It is amazing how varied the opinions about audio entertainment are, and how passionate some of those opinions can be. In recent news it was announced that Internet radio provider Pandora was weighing the option of going public. Here at SiriusBuzz we covered that news and there was an instant smattering of discussion and yes, even some hate mail!
In looking at the audio entertainment sector it is important to separate the investment from the service. This discussion is not about which is a better investment, which will show more growth, and which will spend and/or make more money. Instead this is a discussion about what the services offer to consumers and how widely accepted these service are in general. Set the financial aspects aside and look at the services for what they are. The fact of the matter is that these services EXIST and will continue to EXIST.
Sirius XM has some distinct advantages which I laid out in recent article. Among those advantages were content superiority and the distribution platform. That being said services like Pandora have advantages as well. This article will lay out the pluses and minuses of each service so that, as investors, you can understand these services from a consumer perspective. After all, if consumers are not happy, how can a company succeed?
REACH
Reach on the Internet is defined as the percent of global internet users who visit a particular site. The higher your reach, the bigger your piece of the Internet pie. Among Internet radio providers, including Sirius XM Internet Radio, Pandora is on top of the charts by a wide margin according to Alexa.com. In fact, in terms of traffic, Pandora ranks as the 59th most popular website in the United States, and 359th in the world! Those are not numbers to scoff at (click chart to enlarge). In fact, numbers like these are quite impressive. In contrast Sirius.com holds a U.S. ranking of 884 and a global ranking of 4,185. XM’s site carries ranks of 1,736 and 8,545 respectively. This statistic may have some wondering what Pandora is doing right! The answer is many things. To give you some perspective, SiriusBuzz is currently the most viewed satellite radio news site. Our U.S. traffic rank is 28,648 and our global ranking is 139,189. This modest site has popularity, but is nowhere near the likes of Pandora or Sirius XM.
Simply stated, Pandora has reach with consumers. People visit the site in droves. Pandora with some 70 million accounts opened is the king of Internet radio. There is no doubt about that! The Internet platform is not Sirius XM’s to lose, it is instead Sirius XM’s to take. Given what Sirius XM has to offer in terms of content could we see such a move in the near future? Time will tell.
PRICE
It has been bandied about for quite some time that Pandora is free. The same holds true for Slacker. The fact of the matter is that the free versions offer limitations and most users, if they like the service, will upgrade to paid subscriptions with more benefit. Think of it as something similar to Sirius XM’s free Internet Radio test drive. The free aspect of all of these services is designed to get you to fall in love with the service and become a paid subscriber.
For those that already have Sirius XM Satellite Radio the Internet radio streaming add on is only $2.99 per month, or roughly $36 per year on top of about $150 per annum for the satellite feed. Want Sirius XM Internet Radio only? Be prepared to pony up $12.95 per month. Pandora’s premium tier, called Pandora One, is $36 per year and now that you can stream it to dashboards in A2DP bluetooth equipped cars, it represents a tremendous value for consumers. The big question is whether or not Sirius XM’s talk sports and news content (one distinguishing factor between the services) is worth while (as a $2.99 charge for existing subscribers or a $12.95 charge for Internet only subscribers) over the channel customization and mostly music content offered by Pandora.
Another consideration in pricing is what it will cost you to listen when streaming Internet radio over your cell phone. Slacker, another Internet Radio platform, has an interesting solution called station caching. You can easily program your phone to cache new content into your channels via Wi-Fi when you are at home or at the office. This solution provides the consumer with fresh and new content daily while playing from memory rather than gobbling up data time. Slacker is a bit more expensive at about $50 per year, but the caching feature is a nifty one that makes the added cost worth while. Go premium on Slacker and you can get ABC News as a bonus!
Radioio, the service Bubba The Love Sponge went to went to costs about $50 per year for 128kbs sound, and offers live content such as the Bubba The Love Sponge show. The live aspect is a new and upcoming technology that could well be matched by other Internet radio services making the content gap narrower. Are you an audiophile? Radioio even offers their ultra-pure sounding 192kbs service for about $100 per year.
AVAILABILITY
Satellite delivery has distinct advantages while streaming audio content on a cell is not yet a perfect solution. Depending on where you live, cell coverage can range anywhere from fantastic to spotty. This problem will not be solved overnight, but technology is constantly improving as are network speeds. That “buffering…buffering…buffering” mantra some satellite radio fans cast out as a negative against Internet radio simply does not happen in most cases. If you are experiencing buffering all of the time you need to graduate from your dial-up internet connection.
The automobile dashboard used to be home to AM, FM, HD, Sirius XM, and CD’s. iPod integration was next, and now smart phone integration is here. The ever evolving dashboard has allowed services such as Slacker, Pandora, and Radioio to take their wares to consumers in the car. It has oft been said that most radio listening happens in the car and that the OEM channel was the holy grail that Sirius XM possessed. With OEM’s now making smarter dashboards, these Internet radio company’s are now infiltrating onto Sirius XM’s home turf.
Within the next two years Internet Radio could well enjoy an OEM penetration that took Sirius XM hundreds of millions of dollars and 10 years to reach. All of this thanks to smart phones, smart dashboards, and A2DP bluetooth technology! While this may not seem “fair”, it is the dynamic we are dealing with. In the end, these leaps in technology are good for the consumer.
CUSTOMIZATION
Let me preface this by saying I am a huge fan and regular user of Sirius XM. I was among the first 50,000 to subscriber to Sirius and shortly thereafter became a subscriber to XM as well. I also use my iPod quite a bit and regularly tune into Slacker (which I prefer over Pandora). While I enjoy the selection and content on Sirius XM, I also like to jam to a song right now (iPod) and the customization offered by Slacker . If I like Jason Aldean I can type his name into Slacker and a channel is created that offers tons of Aldean as well as similar artists. If I get to a song I don’t like and I can skip it. Sirius XM Satellite as well as Sirius XM Internet Radio does not offer this skipping feature as yet, and it is the lack of such a feature that sometimes has me tuning away from the satellite radio service.
Lets face it, as well programmed as Sirius XM is, there are times you simply want to skip a song. You can’t. Personally, my solution is an XM SkyDock. It allows me to dock my iPod, listen to XM, listen to my iTunes library, and listen to cached music from Slacker. If Pandora suits my fancy, I can stream that through my smart phone in newer cars equipped with A2DP Bluetooth technology. The SkyDock affords me the best of everything in audio content.
The bottom line is that it is quite obvious that people become fans of these services for a reason. Whether it is brand awareness, peers, or the offerings of the service, people come in droves. What Sirius Xm needs to do is bolster their Internet offering to mimic some of the attributes of customization. What Pandora needs to do is allow for caching, and bring on live content like Radioio. What Slacker needs is better exposure, and what Radioio needs is more awareness. Not a single one of these services has demonstrated that they are the “best all around” in every category. There simply is not a defined winner. The one most capable of offering the best attributes of all services is Sirius XM. Whether or not they will do it is another story.
Position – Long Sirius XM Satellite Radio
Hey Spencer,
real quick thing, seems like recently Sirius LOWERED the royalty fee on primary accounts to $1.40 from 1.98 wonder why ? maybe they determined thats a sweet spot for new adds and still offers great cashflow benefits…anyway also I just so happened to signup today for my sirius sub on my new car as the trial was ending, and went through the options, I did the 1 year for now since Im kinda tight on money, and when I got prompted for the add-on option for the Internet option for pc and smartphones.. it was 1.26 A MONTH !!! this was all done online not over the phone with a customer service rep. seems like they are lowering their prices alot. probably gonna add alot more subs coz of this. I personally think that come the price freeze period expiration, they are probably gonna do the following :
Increase base price to 13.95 a month, include the online feed free for the extra dollar, so essentially everyone gets it but for a buck more to soften the blow. Maybe lower the royalty fee to $1.25, so like that automatically arpu should jump by atleast $1 and the company without affecting adds alot, and not affecting churn alot, the company will add probably about 200-300m in revenue, and they could aertise and huge savings compared to previous pricing, because previously :
12.95 a month plus 1.40 royalty plus 2.99 internet – 17.35 a month but very few people pay for internet fee so really the company would gain 0.65 cents per subscriber garantied by switching to a plan like this :
New plan sirius everything + internet 13.95 + 1.25 – $15.25 a month
that .80 cents in the end is an extra 160-180million a year, and seems to be a better value in the eyes of the consumer. Also Sirius could do addons for best of xm a lil cheaper, maybe lets say $3 dollars more a month instead of 4, so assuming 1 million people would do this :
3*1*12 – 36million but i suspect that alot more people would sign up with a lowered price package…
Arpu then would be probably about 15-15.50
at 15*20 million subs*12 months – 3.6 billion
Tony,
You are correct. The royalty rate was lowered. Sirius XM does not profit from the royalty rate. The higher rate was put in place to go retroactive. Once the past monies were recouped they lowered the rate.
The only reason Pandora has a lot of traffic is that they offer free music, we all know what happened to sites like Kazaa and Napster!
What Spencer Osborne failed to display from his visit to Alexa.com was that the majority of Pandora’s visitors are young with below average income.
Tom
I have addressed demographics in the past.
I’ll add one more benefit on the Sirius XM side, that needs to be mentioned. Usability! In dash Sirius XM is by far the easiest service to use. Easier to use than AM/FM. Turn it on and pick a channel. Thats it! Its also front and center….top of the menus…no digging through sub menus or having to open apps. I’ll reverse my thinking when Pandora comes our with a “Pandora/AM/FM” in dash radio.
Here’s my take regarding Pandora’s 70 million accounts….
Many new devices come with Pandora as a feature (DVD Players, TVs, etc). When someone gets a new TV, they always try out all the features. I even tried out Pandora cuz it was free and I wanted to see when my new TV could do. So I’m one of the 70 million even though I will most likely never user it again. My guess is that 9 out of 10 accounts are essentially inactive. It would be like Sirius XM only reporting on new account numbers and not churn. They would be reporting somerthing like 35 million accounts since inception if that were the case. Pandora should only count an account if its been used in the last 6-9 months. I bet the number would go way down.
The questions are:
1) When will the dashboard have it’s own connectivity and how much will it cost?
2) With that connectivity, how “connected” do people want to be in the future? Do we want to watch videos and advertisements while we are driving? Tweet and update Facebook status?
3) Can Pandora be a profitable company 5-15 years from now by offering the service for free or charging a subscriber $3/month?
4) How will Pandora build a moat?
Why isn’t Sirius bundling up Travel Link, Traffic, and Internet Radio into the monthly sub price to offer extra value to the customer and reduce churn?????????????????????????
This would help Sirius offer more bang for the dough and help differentiate itself from Pandora!
Spence,
Interesting article. I’ve been waiting for someone to put out an objective comparision os the various “new media” options for some time now. This is the best I’ve seen yet. I would mention that internet carriers are starting to charge extra or tier their pricing for those that use a lot of data streaming applications – a point that should be factored into the pricing of internet based options.
One other thing….May I suggest you use and editor in the future? Spelling, punctuation, and grammatical errors made this article difficult to follow…..and can tend to call into question the legitimacy of the source.
chalker…
Thanks…we were updating the site and somehow all of the edits got lost in the shuffle. The piece should read better now.
My girlfriend (24yrs old) is a huge pandora user. She plugs in her blackberry into the car on the way to work and trips. The music is not new but older music. Kind of like Netflix. People at my job stream pandora on their computers and it takes bandwidth. I recently blocked it. Anyway… She complained to me the other day about her Verizon phone bill. She said it was $140 per month! She called Verizon and they told her it was because of data usage! I don’t think she will be streaming it on her cell phone any more. She does play pandora on her laptop while cooking, cleaning or doing homework. It’s quick, easy and free. Keep in mind that everyone I know that plays pandora is because it’s free. Us young generation likes everything free… If not we will find a way to rip and get it for free. We don’t buy iTunes we share with kazaa we have torrents we have a massive library of music. Pandora has nice software but if you make us pay we will move on to the next free fad.
I personally subscribe to Sirius. I have some stocks so I need my CNBC everywhere even though I sometimes feel that the whole CNBC is a advertisement channel. we retail investors are brainwashed and pumped but don’t even know it.
Anyway, long on Siri with over 80,000 shares. I like casino stocks. Have a nice day. Stop searching for answers you want to see. Go out smell the roses and come back be happy at the end of the year.
This is very interesting. Does your girlfriend know that her data usage went up because of pandora or was it because of something else?
It is because of Pandora, Facebook, and Twitter. She views a lot of photos off facebook and I see her using Pandora in the car a lot while driving around. After a few days ago I haven’t seen too much of it. She used to use slacker?? radio but I see more of Pandora.
And please be careful in saying that her laptop usage is “free.” She paid for the laptop, she paid for all the WiFi gadgets, she pays for the Internet connection (presumably), and that connection fee includes the cost of a certain amount of data usage, so all those costs need to be factored in as well, even though they can be at least partially attributed to other apps.
And I wonder how long that connection fee will stay as low as it is right…oops, some providers are raising them as we talk here.
This is true. Do you know that they stop selling DSL for businesses? You have to get a T1 line. I currently have for her place a dryloop dsl which is about $25.00 per month. Now that we are moving over to sprint and getting HTC and EVO’s maybe we can try tethering off our 4G phones and cancel the DSL to save money. Sprint is charing us 10 bucks extra each phone for the 4G connection. I can see the wave of fees now. They have to cover for all this massive downloading. It’s a mafia the telecom companies. If they decide they want to rape you they can.
I don’t understand why Sirius does not have:
1. A service like Onstar
2. Better interface for ipad or cell phone app
3. Stream videos to the cars or boat
4. Make it cool, sexy and fashionable for youngsters. Like get Justin Bieber as a spokesperson
5. Put more money in marketing (Where the hell are they???)
6. Compete with DirecTV (can they?)
7. Sell a LoJack version maybe can go with the Onstar package
8. Get more international channels.
9. Make a Skype version. Get into the Satellite telephone business. Why not???? Who needs cell phones when you have a satellite phone. Imagine natural disasters. The government would love this reliability. I would love service everywhere I go and not have to rely on cell sites.
I am a devout customer of Sirius/XM. The content from the service is not matched. The Sirius/XM package creates no need for a TV. The varied offerings are many.
In do respect, how can Slacker and Pandora be compared. The question for an individual is: are they more comfortable in a compact car or a larger car offering more luxery items?
People the number one reason companies go public is because the owners want to cash out. Pandora has hit a brick wall. They want to cash out. Take the money and run. Let the share holders hold the bag before the company is worthless. There’s a sucker born every day and some old fart who doesn’t understand technology will be talked into saying it’s a good deal from the likes of Cramer and buy the thing. -Peace.
Siri long.
Please, Spencer, be more careful in interpreting numbers. With 17 million paid subscribers, Sirius can claim a certain amount of confidence from subscribers. As indicated above, citing Internet traffic and number of accounts opened for Pandora is essentially meaningless, unless you can come up with actual usage data or some other measure of confidence for comparison.
And, speaking of usage data, it doesn’t matter if it’s WiFi at home or cell use in the car, providers are becoming increasingly active in looking for ways to charge people for data usage at high levels. As pointed out above in another post, already the claims that Pandora is less expensive are nonsense in some cases, and increased data usage fees will make that true in every case. With more usage, Pandora and others need more infrastructure, and therefore will have to cost more. With more usage, Sirius already has the infrastructure (and coming soon apparently to Hawaii and Alaska by simply repositioning a satellite, once the repeater trial has completed), and the cost per subscriber will go down as subscriptions go up.
Finally in your analysis, you neglected to mention that bandwith shortages are already becoming an issue. How will Pandora et al. be sustainable for on-demand mobile apps when more and more people use cell phones for other purposes?
In short, you have provided some interesting comments and some of them have validity, but your article fails to live up to your claim to examine the pluses and minuses, and especially fails to look at the longer term implications of some current trends.
Rick,
I stated that Pandora has had 70 million accounts open. That is accurate. We do not know hopw many are paying customers, or even customers that deliver some form of revenue.
The average Pandora listener tunes in about 11.6 hours per month. Pandora made money in 2010, and is on track to do so in 2011.
The issue of cost also has to consider perception. Does the consumer associate the cost of a data plan with one particular service? I would think that most simply have written off the costs of their cell plan to something else.
I also address the “clogging of networks” in another piece and pointed out that Sirius XM’s infrastructure and distribution platform has HUGE advantages. Did you look at the links back to those articles?
Nope, haven’t seen them yet, but I will. I am pasting in a link just below this to an article on that subject. Hopefully your system will allow it.
http://www.infoworld.com/d/net.....danger-715
And the issue of cost, perception or not, certainly needs to be clarified. Pandora et al. are most certainly not free, and will become even “less free” with increasing data usage charges. As is clear from one of the posts, Pandora can involve charges much higher than Sirius. The fact that the charges can be hidden does not remove them, and in fact this might be fodder for a more detailed “pluses and minuses” analysis.
While it may be accurate to say that Pandora has 70 million accounts open, that number is meaningless, so I have to wonder why you even mention it. It’s just as meaningless to say that Sirius broadcasts to four hundred million people or so (although many aren’t receiving the signal). Yes, 70 million people took the time to open a Pandora account. So, exactly what does that mean?
Rick,
I agree that there are many moving parts and tons to consider. As for the 70 million….I would not call it meaningless. It demonstrates that their service can attract large numbers of people. If you can attract numbers like that you have something special. As you say, people are interested in going through the sign-up process.
To give some perspective, internet marketers hope to get 1/10th of 1% of the people who see an add to click it. If they accomplish that, they are being successful.
The other fact is that Sirius XM Internet Radio has the same benefits and limitation of the net as Pandora et al.
Actually, in checking your links, I did see those articles.
Attracting large numbers of people does not automatically mean that you have something special. If you want, I can cite dozens of historical examples, but one comes to my aged mind in particular: the pet rock fad. What it might mean instead is that it is just a passing fad, with no real significance at all.
Oh. Cool. Pandora. Next?
Again, I contend that that number is meaningless.
Yes, I agree about Sirius’ limitations on the net, and that their distribution model in general has huge advantages, but what I have not seen anywhere yet is a truly factual and well-researched “pluses and minuses” article. Perhaps one day…
Rick
I do see your point, but pandora has been around for a decade and I would not call that a fad.
Hasn’t it only been the past couple of years that Pandora has really become popular? Rocks were around for a few years too before pet rocks became popular.
There are many business and websites that have been around for a decade but still can not make any profit! The site and business model attracts mostly teenagers and free stuff lovers type of audience.
Spencer, you make this comment about Slacker: “You can easily program your phone to cache new content into your channels via Wi-Fi when you are at home or at the office. This solution provides the consumer with fresh and new content daily while playing from memory rather than gobbling up data time”
Isn’t this just gobbling up data time in an only slightly hidden form? Isn’t the point here that Slacker allows people at present to gobble up “less expensive data time” through a Wi-Fi connection? And (here it is again) what happens to that cost when the providers start charging more for that data usage? How would Slacker continue to be viable?
Out of the 70,000,000 Pandora subscribers, probably ~700,000 are paying. That is .01% or, 1 out of 100 decide to pay monthly.
Put that into perspective, the US 2010 population is 309,000,000.
309,000,000 * .01 = 3,090,000
3,090,000 * 36 = $111,240,000/yr Rev from paying subscribers.
Than you’ll have to subtract the costs of exclusive content??? royalties, and SGA.
What is even more revealing is that you can exclude (being generous here) at least 40%.
Out of the 309m, the market size for pandora is 170mil.
Then 170million x .01 = ~1.7 million subscribers.
The number is rather low, but when you factor in that Pandora doesn’t hold any significant moat, the number becomes even more realistic considering the competition from Sirius and other Internet based business.
Lets round that 1.7mil subscribers to 2million. With 2m @ $36/year. That is $72,000,000 in annual rev.
Pandora has to compete with no significant moat advantages, battle itself with it’s free vs $36/month offering, and probably has to increase its subscription price in order for it to be a profitable business in the long run.
Fa fa flooey and wow.see you in 5 years
The online Wall Street Journal links to this article as a “must read” for Sirius investors, and says that “(a)ll the pros and cons” of Sirius, Pandora, and Slacker are weighed.
One of my points in all of the above is that no such thing happens here.
People looking for real advice would seem to do well to look elsewhere, and that apparently goes for the Wall Street Journal as well.
Rick
You are certainly entitled to your opinion. I welcome it. If you search pandora et al on this site you will see many articles discussing the subject. Regular readers here have seen these.
Please bear in mind that this site is not my full time job and is provided for free. I try to get a lot of information out there.
I am sorry you are disappointed.
Cheers
I suppose I’m more disappointed with the Wall Street Journal than with what you say here, Spencer.
Slainte
Rick
No worries. I appreciate the feedback. I would encourage You to poke around some past articles here and give me your opinion. Most Satellite radio fans wont give internet radio any credit at all. I typically get slammed with hate mail if I even mention Pandora. I try to be objective, and try to put out timely and relevant pieces. Not everyone likes everything I write. It comes With the territory. Please take a look at the site as a whole.
It’s obvious we’re all concerned about the internet competition or there wouldn’t be so many comments on it when Spencer tries to paint the whole picture for us. Let’s be honest owning shares can make us a wee little bit biased. We need to realize that, as I’m trying to myself, stocks are just pieces of paper. I want Sirius/xm to win but it’s because I own shares. The reason I own shares is because I understand the business, I like the management team, and I like the content. I can see a light at the end of the tunnel, but there’s always going to be competition. I’ve got to realize if that competition has a better plan/idea I cannot be married to this or any other company.
I have used pandora and I use it as a selling tool for smartphones. Pandora is easy to use, it’s portable, and for 30 hours, its free. I don’t use more than 30 hours. If I did, I would pay for it. As for the prices on my data phone. Yes, I do pay for using the data but I get more than just pandora from the data. I use it for everything!!!
Pandora is worth the money if they were to charge, when considering their very accurate music choices based on the band that you choose when setting up station play lists. XM/Sirius does not have this. Instead, for example, you are at the mercy of what XM/Sirius considers “Rock” which is not always accurate: I wouldn’t consider Elvis Presley ‘rock’. Oldies, yes. Not rock. Bands i’ve never heard of are aplenty on the Rock channel. This is not kool. I pay to hear music that I am familiar with. So, content wise, disappointed with XM/Sirius. Pandora is superior. And it is free.
This is fascinating. Thanks for the info as I have a love/hate relationship with Sirius (where I currently have let my Stiletto go without service for the 2nd time in 6 years).
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Howard is not as good since Artie left and I despise that Robin thinks that people actually want to listen to her talk politics (Richard and Sal’s calls are wonderful however). Despite all the offerings, the only other station I ever listen/ed to was 1st Wave. I don’t drive a lot, so I am ambiguous.
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Meanwhile, I’m grandfathered in with Verizon on an unlimited data plan (it’s not cheap), I have Wifi at home, and I just got an Android Bionic with Slacker on it. Neat!
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The music customization is fantastic and I am competent w.r.to downloading mp3’s and podcasts. The 4G phone also connects pretty nicely to my NetFlix subscription, so I think I am set.
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I still haven’t figured this all out — I will probably pay the $3.99 for the Slacker subscription because it seems like a great service. And at some point, Sirius’ disfunctional renewal process may chase me down with a low-enough “teaser” renewal rate . . but while I miss Howard a little bit, I don’t miss those repetitive commercials with the same sallow-voiced announcer.
Love Pandora while others are great dad uses here and there when offer free service Sirius I use Pandora if had money would pay for free no ad Pandora and can use on On Star and in cars just the same. Benefit of Pandora listen music that is custom to what you like and not what radio wants. Simply Sirius Radio is still radio just slightly better get a clue and learn Pandora was made to help you hear music similar to music you already listen too and like. Not what Sirius stations think you will like and want to hear old and new chances got on Pandora not Sirius who wants a whole station dedicated to Elvis Presley why great in his time still new generation will rain supreme and win in long run after old leave. So will Pandora. So shut up and just admit Pandora free or paying for is far better and Sirius just use because works with their car/truck.