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Beware of Competitors' Praise

by Roger Lanctot | 7月 27, 2016

In Tom Taylor's latest email blast he quotes SiriusXM CEO Jim Meyer saying that his 30M+ listeners are not making an either/or choice.  They are listening to multiple sources of content.

"And the example I'll use to add to that as evidence, look at all the new technology that has come to the vehicle in the last 20 years," says Meyer.  "Look at it all. It's billions of dollars and yet 200 million people still listen to FM to terrestrial radio every day."

Seekingalpha transcript of SiriusXM Q2 earnings call: http://tinyurl.com/hd7qg9r

This is Meyer's way of paying homage to the broadcast industry or what he calls "terrestrial radio."  There's a reason broadcasters hate being called "terrestrial radio."  It has to do with Meyer's preference for using the expression and for the impression it creates of an industry stuck on planet earth while his broadcasts emanate from space - while also being amplified on the surface.

The comment comes at the end of yesterday's Q2 earnings call Q&A session with industry analysts after a heated discussion of competitive threats from Pandora and other streaming services and in the context of SiriusXM parent, Liberty Media, making a $15/share bid for Pandora - which was rejected.  Meyer would like nothing more than radio broadcasters and their free content to sit idly by while he pats them on the head - all the while angling for a two-way connection to his listeners via his heartily touted and renamed 360L LTE platform.

What the voluble Meyer tends not to discuss on his calls is the billions of dollars in subsidies that have been paid to car makers to implement his service.  He did acknowledge the recent $1/month subscription increase, though it's unclear how many subscribers are paying "full price" vs. a promotional rate.  SiriusXM has very effectively confused its subscribers with a barrage of ever-changing bundles and promotional offers.

The key for SiriusXM is maintaining a robust core of premium and exclusive content that can only be found on its network.  Meanwhile, the company is looking to absorb competing vehicle connections - as reflected in its acquisition of the former ATX telematics call center division of Agero - and the prospective acquisition of Pandora.

Meyer hints broadly at the nature of Liberty Media's interest in Pandora, but makes clear in his comments that he does not consider streaming sources of content to be a threat.  And terrestrial radio?  Aren't they doing a great job, Meyer seems to say.  He wouldn't dream of trying to take away those listeners - but Pandora would be a good way to add millions of them to the existing 30M+ listening base in the U.S.

Meyer knows that the auto industry's Achilles heel is the subsidy checks he reliably signs.  What if the car makers could monetize those Pandora listeners...through SiriusXM?  A more important question is whether SiriusXM could hang on to those Pandora listeners.

Since acquiring the telematics call center business of Agero SiriusXM has managed to lose BMW's and Subaru's business.  Might this be the beginning of an exodus of telematics customers?  Would post-acquisition Pandora listeners flee to Spotify?

It's a tough call.  And it will be a tough sell to convince car makers to adopt an LTE connection without a SiriusXM subsidy, but wireless carriers know how to subsidize.  It's more likely that car makers will use the threat of a SiriusXM market entry to carve out better deals with their existing carrier partners.

SiriusXM does have a couple of additional aces up its sleeve.  As a satellite provider of broadcast content it is ideally suited to communicate urgent emergency communications, and SiriusXM is also positioning itself as a delivery mechanism for public key infrastructure (PKI) credentials for connected cars using dedicated short range communications (DSRC) - the technology being promoted by the US DOT.

SiriusXM is also working on a re-launch of its paid traffic information service, now mostly free, following its separation from original partner HERE.  SiriusXM execs promise that it's already the best in the business.  I guess it's going to be "huge."

In the meantime, the terrestrial broadcasters can acknowledge Meyer's "tip of the hat," in Tom Taylor's words, while working to leverage their much larger base of listeners.  After all, radio is everywhere.  SiriusXM is not.

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