Why the Mobile Web Won’t Save Sirius XM
Kevin Kelleher | Friday, July 3, 2009
Things may finally be turning around for troubled satellite radio venture Sirius XM. Following a long and costly merger, the company became desperate for new financing just as credit dried up, and managed to avert bankruptcy only by selling 40 percent of itself to John Malone in exchange for a loan paying 15 percent interest. Last week, Sirius secured another half-billion dollars in high-interest debt, and CEO Mel Karmazin got a 20 percent raise and the option to buy 120 million new shares to celebrate his success.
Success, that is, if you define the word as simply avoiding failure. Things may be turning around, but Sirius XM has a long way to go before it finds true success. It needs to create a lot of new revenue to pay off all that debt. It needs to reverse the deterioration in the number of net subscribers that took place last quarter, when they fell 2.1 percent to 18.6 million. It needs to expand its allure beyond the car market, which will remain in a slump for the foreseeable future.
With the launch of Sirius XM’s iPhone app, the hope has emerged that the mobile market will provide the answer. The Sirius XM App is the fifth most popular download in Apple’s App Store, although the drop from the No. 3 spot since last week suggests demand is waning fast as current Sirius subscribers download it. That may help deter more subscribers from canceling their Sirius accounts, but will it lure in new ones?
To answer that, you need to ask whether there is a home for subscription-based satellite radio on mobile devices. Sirius XM subscribers pay between $9.99 and $19.99 a month, although the two most popular plans are priced at $12.95 and $16.95 a month. But to listen to satellite radio on the web, whether on PCs or mobile devices, costs another $2.99 a month.
New subscribers enticed by the iPhone app will need to shell out $240 a year for the music, and that includes strings such as awkward integration with the iTunes music store and no access to popular programs like Howard Stern or MLB Play-by-Play (meanwhile, MLB.com is starting to stream videos of select games as well as highlights of other games to the iPhone).
The problem is, other companies are showing that you can stream radio content to the iPhone — minus satellites — for a whole lot cheaper. Pandora, ooTunes, Wunder Radio, Slacker Radio and others stream music without monthly fees. None are perfect, but they are free. The future of mobile music looks like Spotify, which many consider the ideal music app and which is finding a home on Google’s Android phones. That could prompt Apple into allowing Spotify apps into its store, and that in turn could pave the way for other on-demand music sites like Rhapsody to follow.
The real allure of streaming radio on mobile devices isn’t just that we can avoid the commercials, bland playlists and inane DJ banter that pollutes the FM band. It’s that they can stream music more cheaply than costly satellite networks and, more importantly, that can be interactive, allowing we listeners to discover new music at will, to personalize and share playlists and to listen to what we want, when we want.
It’s taking some time, but it’s the direction mobile music is heading. It’s not, however, a world in which satellite radio can thrive. So Sirius XM is likely to remain what it is today — a very fancy car radio. And right now, that’s not a strong enough foundation on which to build a true turnaround.