Sirius XM’s Moves Can Keep Them King Of The Radio Hill
Sirius XM delivers a vast array of audio entertainment that can carry an appeal to just about any taste. Whether you are a music fan, a talk radio junkie, or a sports radio fanatic Sirius XM has you covered. It is this reason that no matter what the platform Sirius XM is at the top of the radio mountain. Getting to the top was tough. The companies spent a ton of money and barely avoided bankruptcy to get there. For long term investors the wait has been long and arduous. It is for this reason that investors, as well as Sirius XM, need to keep on their toes and be vigilant about what transpires in the media sector.
I am oft accused of being a fan of other services. Guilty as charged. I enjoy satellite radio, Slacker, Last FM, iTunes, and even sometimes terrestrial radio. Just because I use these services does not make me a cheerleader for them. I use them because they are good. I use them because they are sometimes better at filling my audio entertainment desires than Sirius XM. As a fan of Sirius XM I can honestly say that most of the time I find what I want on satellite radio. However, there are times when, as good as it is, satellite radio and Sirius XM Internet Radio simply do not fit the bill.
From a Sirius XM perspective I had a very big concern that the company would let some unique content go, and that it was possible that such content could become a launching mechanism for another service such as Pandora. I was relieved to see Sirius XM sign Opie & Anthony. They have a loyal fan base that would move to another service with the duo had that been the path that was chosen. By signing O & A Sirius XM avoided that situation.
Sirius XM recently conducted a survey that 70% of their subscribers listened to satellite radio exclusively. That is an impressive number. It is a testament to the quality and variety of programming offered. That type of loyalty is something to be proud of. Now we need to look at the other side of the coin. 53% of the people exposed to satellite radio for a three month or longer trial period elect to not become a self paying subscriber. Yes, getting that 47% is very impressive. I would never take that away. However the fact of the matter is that satellite is not the answer for everyone. As an investor, my goal, and what I would hope is the goal of the company, is to improve on these metrics each quarter. Now is not the time to kick things into cruise control.
Just last week an Edison Research national survey showed that 20% of 12-24 year olds listened to Pandora in the past month. This compared to 11% that listened to an AM/FM online stream, and 8% that listened to any other Internet Radio (that 8% group would include Slacker, Sirius XM Internet Radio, Last FM, Radioio, etc.). Clearly Pandora is doing something right. Clearly Pandora is carving out a niche, and clearly they are at the top of the Internet Radio world. The question I ask is how Sirius XM allowed this to happen?
First things first. Music is music no matter what platform. For the staunch Sirius XM defenders out there I have some news. In most ways the music on Sirius XM is just as “canned” as it is on Pandora or Slacker. If I listed a playlist for any genre, I would challenge anyone to identify which service played it. The truth is that in terms of music some of these other companies have figured out a way to attract listeners from a category where Sirius XM has always been lacking. That 12 to 24 year old demographic is stronger with these other services. Is it that they “learn” the users tastes and cater a customized station to those tastes? Is it the album art-work? Is it the lyrics, or artist profiles? Is it the fact that you can skip songs you don’t like? Understanding that the music is identical no matter what the service, I think it is a good bet that it is these “little” bells and whistles that allow a service like Pandora to gain such a grip on the younger generation. Part of the issue also rests in marketing. Pandora and Slacker market heavily in the world of Apps. Sirius XM does nothing. Why allow an Internet Radio provider to gain such ground? Internet Radio is not going to die despite what some may have told you. It will grow. Most “passionate” Sirius XM fans don’t even bother to sample what else is out there…instead they say that everything else “sucks”.
Wake Up! What Sirius XM needs to do is grab the features that consumers like about these services and integrate them into their own service. This is perhaps a component of Satellite Radio 2.0. At least I hope it is. Sirius XM is doing the hardest part correctly. They are signing their exclusive content to deals. This keeps that content from migrating to, and thereby legitimizing, a competing service. I applaud Sirius XM for these moves. If they lock up Stern, and keep a grip on other top notch content (including sports, talk, and news) they will be able to maintain an advantage.
Satellite delivery, combined with the inclusion in 60% to 70% of cars gives Sirius XM a huge leg up. The challenge is maintaining that when Internet Radio is growing every day. I know, “the data plans are expensive”. I have heard it all before. Yet somehow smart phones are still selling at a record pace. I use an Android smart phone, and have unlimited data. Even if I lowered my plan, the data is still unlimited. The real facts are that the new data charges will impact about 1% to 2% of the people. I realize the “passionate” satellite radio fans do not want to hear that, but these are the facts.
If people are so passionate about this company why do they want to settle for being second or even third fiddle in the Internet Radio landscape? It makes no sense! Why, as consumers are these people satisfied with simply good content and a poor user interface? I would venture to say that 90% of these passionate fans are over the age of 35 and simply can not comprehend the thought process of anyone under 35.
Why do I write about these competing forces? Because I know Sirius XM can be better, and want them to remain on top. The hard part of locking up the content is complete. Why not do the simple things. Create a better Internet experience. Create a better user interface that allows for some customization. If a 12 to 24 year old is listening to something, why not want them listening to Sirius XM. Increase marketing to this segment. Create a service that appeals to them not only from a content standpoint, but a user standpoint as well. Get them to know the brand!
My mantra is that Sirius XM find a way to attract the younger generation before other services get their hooks into them. There is plenty of room for many services, but being number one on all fronts should be the goal. Sirius XM fans do not have to be afraid to talk about these other services, they need to understand them. Being great is about being able to adapt and overcome. Ask someone on the street what the greatest Internet Radio service is and you will be hard pressed to have that person answer Sirius XM.
At this point there are likely some “passionate” fans saying, ” but these other companies can not make money like Sirius XM”. I could not care less how much money they make. Sirius XM needs consumers not investors. The average radio listener has NOTHING to do with SIRI as an investment or any other media company for that matter. A radio service needs to appeal to radio listeners, not investors.
Because of their satellite platform, content deals, and auto deals Sirius XM is the king of the hill. There moves in the next year can keep them there. It is a question of whether they decide to be an all encompassing audio entertainment king.
Position – Long Sirius XM Radio
I can tell you exactly why 12 to 24 years olds listen to Slacker and Pandora. Both of my college age kids have an XM Sky Dock. I pay for the service on each as both were Christmas gifts and I gift them the service each year. There are other luxury services that their mother and I make available to them at their own expense. For example, they both pay for their own Android phones on our family plan with VZW.
Given the option neither wanted to pay for XM online. My son said no because Slacker is free. My daughter chose Pandora. Kids in this age group are not willing to pay for XM online. If it is even still available an online only account is nearly as much as a car. Pandora and Slacker can both be had for $4 a month.
This is the real challenge for Sirius XM, getting an age group that has known nothing buy free online services to give them money. That is tough.
The reason I chose Slacker over SiriusXM is the music. Slacker playlists go SO much deeper than satellite. And for $50 a year, it’s a lot cheaper. And, the sealer on the deal is the offline cache mode where I can take the music anywhere, with or without a connection.
“The truth is that in terms of music some of these other companies have figured out a way to attract listeners from a category where Sirius XM has always been lacking. That 12 to 24 year old demographic is stronger with these other services. Is it that they “learn” the users tastes and cater a customized station to those tastes? Is it the albul art-work? Is it the lyrics, or artist profiles? Is it the fact that you can skip songs you don’t like?”
Hmmmm . . . is it that it’s FREE?
Now I will answer my own question with a direct quote from Mel Karmazin at the Liberty Media Investor Conference on 10/1/10, ready? Here it is . . .
Quoting Mel Karmazin: “ARTS & CRAFTS MATTER BUT COMMERCE MATTERS.”
I stated in this very article that it was losing the content that was my biggest concern. I also stated that keeping the content is the hard part. They got that done.
Why not do the easy part now?
It is lunacy!
Pandora and Slacker blow Sirius XM Internet radio away on user interface and customization. PERIOD. Sirius XM needs to address this.
If Karmazin thinks that a good user interface is “Arts & Crafts” then he is going to lose the battle. The very fact that he brings it up should tell you that he realizes that something needs to be done.
Roadkill…..
Are you so blinded that you can not even admit that some of these other services blow Sirius XM away in user interface and customization?
These days MANY people are PAYING for these services by electing to go to the premium service.
If you want to settle for a second rate internet radio interface that is fine. Many wont. If you want to settle for apps that are not even in the app marketplace, that is fine. Most wont
If you expect consumers to pay, that is fine. Most won’t.
context & historical perspective:
https://siriusbuzz.com/forum/showthread.php?p=65138#post65138
Honestly, I think this is what Sirius needs to do :
Next year raise prices by $1.00 for primar accounts but include the online feature to kinda soften the blow.
Add a online only sub, that does not include howard stern, or any of the talk, just purely the music channels, for a low fee, like 5$ a month, or $55 for the year – 1 free month of if sign up for a year. Obviuosly theyd need to offer a freebie which includes enough ads to cover royalties, and push the online sub… I think honestly if they did this, along with whatever SAT 2.0 might have to offer, they could dominate and crush pandora/slacker/last.fm etc.
I think in the first year of doing this they could EASILY add 1 million online subs alone…
Pandora, Slacker, and others are music services.
SiriusXM is a kaliedoscope of broadcasting. Last night I lisented to the Notre Dame-Boston College football game. Right now I’m listening to Jonathan Schwartz on the Sinatra channel.
If I’m hungry and need to eat a decent meal, I go to a full service restaurant, not a donut shop.
Pandora, et al are donut shops.
SiriusXM is a full service restaurant for my mental appetite.
But remember James, at the donut shop you still have to pay for the donuts . . . .
Pandora et al are more equivalent to the free continental breakfast at the Holiday Inn or the free Happy Hour chicken-wings at the local go-go bar (which in my case is “Centerfolds” on the Asbury Traffic Circle) . .
Roagkill….
The fact that these services have you THINKING they are free is a testament to their success at getting consumers to pay without having the mantra of a fee service. If you want unlimited skips, more streams, lyrics, etc., you have to pay.
I would venture to say that you likely have not spent much time exploring these services.
Like I said, in the music arena, you would not be able to tell the difference between the services. A fact most “passionate” fans like to ignore.
There is a saying….If you can get the milk for free why buy the cow. Right now people buy the cow because of exclusive content that is outside music. If that begins to change, look out.
James….
In terms of sports and talk Sirius XM has an advantage. In terms of music, the other services have the edge.
The music selection on these other services is more customizable than with Sirius XM. They are far from a doughnut shop.
Interesting read, Spencer. You do raise some legitimate points. Never a good idea to ignore any competition…no matter how inferior. I would suggest that Satellite Radio 2.0 will address many of your concerns?
Boomer…..
Pandora and Slacker are actually SUPERIOR to Sirius XM on the music front. Thinking they are inferior would be a bad mistake.
Spencer, my reference to “inferior” is regarding the overall content and service. I am very optimistic that Satellite Radio 2.0 will take away any advantage Pandora and Slacker may currently enjoy. As far as the targeted age group that you are concerned about, I am afraid they will always choose a “free” or minimal cost alternative…I know, I was young once…lol
You cannot build your business model expecting 12 year olds to pay for a discretionary service. This is why Pandora will fold because you cannot sustain your income on “free” or “almost free” and ealing with teens. And it is stupid to set a goal of competing with “free”. All Pandora and the likes want is to blow up their image and sell, be it privately or publicly. They have no future.
I am sure siri is aware of its challenges. Unfortunately, they had to deal with too much on their hands. Now that they are gradually addressing the revenue and cash flow they will definitely start investing in features that people ask for. It simply takes time.
siriusroadkill, I’m willing to pay for what I want. I have tried various internet music services over the years. I’ll pay the subscriptions and take user friendly two step SiriusXM—turn on radio; punch the button of the station I want.
My primary reason for installing Sirius in my vehicle was to stay in touch with the financials and that has been a very wise reason. Reality is Sirius has yet to cost me anything.
Spencer, I’m a professional traveler. When it come to listening to music when traveling, I want to hear recordings I have never heard before. I just finished a 4K mile trip over a week and heard maybe 100 recordings I have never heard. Equally important to a traveler is the weather and traffic stations. Twice in the last 15 months, ch. 156 (SF & Seattle) has saved me from driving into two road closures.
I want that kaliedoscope of broadcasting I said SiriusXM provides. Music is only a part of that.
Hey James, I’m with ya . . I was actually trying (unsuccessfully I guess) to make the point that your analogy is overly generous in equating Pandora to something consumers would willingly pay for.
Less like a donut (which is willingly paid for) . . . more like a continental breakfast (which is not).
I guess something got lost in the translation?
I never went to an arena-league football game (though free tickets were certainly abundant); didn’t have to . . I recognize a bad business model when I see one. When Jon Bon Jovi plunked-down $20,000,000 on that Philadelphia franchise, he might as well just opened his kitchen window and thrown the money into the Navesink River.
Enjoying arena-league football and all of its high-octane gadgetry doesn’t make it a good business model . . . nor does it make it a threat to the NFL.
Arena-League football WAS an advertising business. Pandora is simply an advertising business disguised as a content provider.
Roadkill….
PISS-POOR Analogy with Arena Football. Internet Radio has well over 100 MILLION users. Pandora alone accounts for well over 60 million of them.
Pandora is now in the black. They KNOW that they need to increase revenue to keep costs in line. The royalty fees are not good, but the 25% of revenue is. How do they increase revenue? By adding QUALITY and a user interface people want.
Slacker and Pandora have both added comedy. Slacker has added ABC News. Non-music premium content is their way to increase revenue to a point where they simply give a 25% revenue share. HMMM….sounds like the OEM business model and revenue share Sirius XM has….BUT Sirius XM has to pay royalties on top of the revenue share.
You see, my worry, and the worry of every satellite radio investor should be that Sirius XM can keep unique content. When Pandora or Slacker continue to bring in new content the unique aspect of Sirius XM narrows.
You see, the cost side of internet radio is not as awful as many think when compared to satellite. No satellites to launch, no revenue share with OEM’s, no devices to manufacture, etc.
Slacker and Pandora know they need non-music content. They are already convincing large numbers of people to get modest subscriptions by making them reasonably priced with additional features.
I am an avid satellite radio fan, but see the great features other services offer. Someone commented earlier that they listened to Sinatra on Sirius XM. The others offer it as well. As I said, I could type up 10 songs played on any genre and you would be hard pressed to tell me what service it was played on.
The Internet is going to become more and more available. People will pay for it on their smart phones not because they want Slacker or Pandora, but because they simply want the internet. At that point they will find Slacker and Pandora becay=use these companies are:
A: Smart enough to market their service
B: Available in the app store
C: Are customizable
D: Their apps are user friendly and interactive
All of these issues are easy to tackle when you have the cash flow Sirius XM has. Sirius XM needs to use the Internet platform to bring these types of users to the satellite platform and vic-versa.
“Pandora is now in the black.”
Hi Spence, could you provide the link for the 10-K/10-Q on that? Thanks.
Once I’ve had a chance to review the audited financial statements I will get back to you.
“Internet Radio has well over 100 MILLION users. Pandora alone accounts for well over 60 million of them.
Pandora is now in the black.”
It is interesting how quickly someone will accept information that they have limited means of verifying yet they will continually allege impropriety when Sirius XM reports “adjusted income from operations” even though they can read the filings if they wish.
Interesting.
Content…not music…content. Re-signing O&A…huge…bigger than most think…same when Howard comes around…will be huge. Almost weekly…definitely monthly…new channels, new special shows, events, etc are on SIRI. Nowhere in a vehicle…not a single other service…can you get CNN/MSNBC/CNBC/Comedy/Talk/Adult/Music/Sports/Maxim/Oprah…and on and on…and on…and on…NOT A SINGLE SERVICE out there is anywhere close to giving all this content, uninterrupted, throughout the USA 24/7, no signal loss. This is a service that i, for one, would pay double for. And when SIRI brings 2.0 out and raises prices by $2-3 next year, they will immediately be bumping their yearly revenue by about 20%…or about $600 million…that is HUGE.
This service is in its infancy…it’s not about music…it’s about entertainment…it’s about making EVERY possible audio entertainment option that you can listen to available in your auto or at home. I can listen seemlessly from my auto to my iPhone to my TTR1 Table top WIFI radio in my house…i am fully connected to SIRI and wouldn’t have it any other way.
I truly don’t understand why we continue to have this Pandora conversation. It’s like saying podcasts on itunes will put CABLE TELEVISION out of business. It’s truly rediculous. I downloaded Pandora onto my iPhone just to see what it was about…after a year of having it on my phone, i have listened to it for about three hours. Not too impressed. It’s my belief that Pandora’s sub #’s are hugely overestimated as many people who get the apps don’t end up using them for long.
Try to listen to dozens of NFL/College, etc. various sporting events on another service. Well…wait…don’t try…another service doesn’t exist.
SIRI will be at $1.50 by EOY and $3-$5 by end of 2011…2015? Who knows…that’s my opinion…
Go SIRI
Great post Joe! You are so right about people not using the Pandora apps. We have three in our family, just asked the kids and they said they NEVER use it! I listen to XM 4-6 hours a day and rarely listen to the music stations.
Yeah, but soon as those 18-24 yr olds graduate college and become official grown ups, they are going to want more than just an Internet jukebox. They are going to want exclusive content. Sports. Talk. Live concerts. Interviews. Uncensored content. Grown up stuff. Once they move the F out of mommy and daddies house, or their dorm room they’ll want more. The difference between $4 a month for just a generic Internet music jukebox and $6 to $12 for all that sat rad has to offer will be a no brainer.
That being said, SiriusXm needs to take Pandora out of the equation. I’ve being saying this for years now, and told by some on this site and others, that then was not the time. But it was then, and it is now….Sirius xm NEEDS to offer a pandora like feature. Price it similarly to Pandora…make it free for basic and charge for unlimited skipping etc. Real in thos 18-24 yr old hip/cheapo students with no money. Get em hooked. Then reel em in.
Just like people can upgrade to best of Sirius or xm….give those kids the option to upgrade from the free or cheap jukebox service to all that siriusxm has to offer. Do it all. Do it better.
Sirius xm has the content. Of they add this functionality…there will be NO reason to opt for any other service. They’d have ALL the bases covered.
No commercials. Uncensored media. Sports. News. Live music. Great diversity in programing.
I just hope the Siriusxm 2.0 Mel was hinting about is more than just a simple tweak. They need to nip Pandora in the bud NOW. And they still can. But a year is a long time to wait for 2.0 in this fast paced world we live in. It’s an eternity.
Be bold. Be brave. Offer the pandora like Internet jukebox for free with a path to upgrade. Don’t be afraid. Sirius can slip so much more into this service than Pandora ever could. Commercials for their uncensored content. The possibilities are endless.
Spencer, I will agree with you on one point about the music.
Back when XM and Siri were separate, I knew several people who had subs for both. The all said XM’s music was better. I took an interenet XM sub. and they were right.
Since the merger, the 40s ch. has become the Big Band ch.
Sirius Pops, ch 79 and Escape, ch 76 have become ordinary.
Before all three of the channels were the Kings of Content—-now, the Knaves of Content. In a word, they are no longer eclectic.
Spencer, yes SIRIUS does have issues to work out just as Pandora does. But being ahead of the game the odds are in your favor. I question what the real cost for unlimited access for Pandora really is for a new subscriber, I bet that is not cheap as you say. Only those that are grandfathered in get unlimited data. The age group that you targeted 12-24 do not buy new vehicles right now the parents do. With the SAT.2.0 coming out next year, a lot of your issues will be address. Pandora, Slacker,Etc. has to rely on another company to deliver their content where as Sirius stands alone with uninterrupted service and content.
I have to say the 12-24 years old probably have little to NO budget- it other words it is FREE-
What Spencer is trying to get at is, at one point maybe in 2 or 3 years mostly everyone will have internet on their phones. So it’s not a question of whether the people will pay $30 – $40 extra to access the internet from there phones because by that time it will be the norm. It’s kind of like the cell phone in the 80’s it was a cool and novel concept but eventually gained mainstream acceptance in the late 90’s and early 2000’s. At that point what is an additional $3 or $4 dollars for a subscription from Pandora or Slacker to the consumer? None!
Sirius has the advantage of exclusive content at the “moment”! As a Sirius investor I would like that to remain indefinitely. But unfortunately we cannot ignore the competition and the fact that technology changes at alarming rates. Sirius needs to make improvements and have a better presents on the internet front. It’s the old basic SWOT(Strengths, Weaknesses, Opportunities, Threats) Analysis. Without doing this analysis, Sirius will just sit down be happy and content with what they have until one day a competitor just sneaks in and takes everything under their noses. Remember it is a business! When you run a business it about providing what the customers want, making a profit, and taking taking profit away from your competitors.