vaguelyaware.com

A while back a wrote a rather long post about the Sirius/XM merger that I never ended up posting. Mostly because I needed to proof read it for errors, regardless, the merger still has not been either approved or denied, and well, it still bugs me that this is matter it so difficult for legislators and I would like to talk about what it means for investors and consumers.

First off I would like to say how critical this merger is for the satellite radio industry. If the merger does NOT go through, Sirius and XM will collapse in a matter of years. Why? Of course I have to have reason to say that, as all indications suggest they will be in the black in a few months, but they will still have to pay their loans off once they are cash flow positive. They will also have to deal with the fact that their satellites are not cheap to maintain and do not have an infinite lifetime, they in fact have a very finite lifetime. Most satellite operators plan for their spacecrafts to last no longer than 10 years. Well thats a few years away, and they could potentially gain even more subscribers especially with all the automaker alliances. While entirely possible, there are some new players in the sector that SatRad will need to contend with, and yes, I am treating this whole industry as a sector, radio. I don’t care if its terrestrial, free, internet streaming or time-shifted, its all audio entertainment. Current SatRad competitors: MP3 players (read:iPod), traditional terrestrial radio, thats right, no one cares about CDs anymore. New players: HD terrestrial Radio, streaming internet radio. You may say that streaming radio to your car isn’t quite here yet, but it is, Pandora already has clients for many Sprint phones and as Sprint and Clearwire are rolling out their 802.16 WiMax products the likelihood that a WiMax modem will find itself strapped in to every new car in America is not so far from a possibility.

Why this concerns SatRad: Sirius is only $12.95/mo which is a good price in my opinion. But if you were to add traffic data its up to about $18/mo still a good price. You are still stuck listening to what their DJs play. Now consider the possibility of Sprint doing something smart with their WiMax: one account with one modem costs $40/mo, too much for your car, but what if they allow you to get multiple modems for a bit less for each device, say $20/mo for each additional. Now your car can have lots of data for not much more money. Additionally the data goes both ways, meaning you can listen to whatever you want, streaming to your car with functional pause, next track etc. Add time-shifting for uninterrupted service even through dead spots. Why this is good for Sprint: allowing more modems at a lower price means people will get modems even for devices they don’t use much. If I could have my laptop get wireless internet for $20/mo, I would, even though my phone has internet, and I have WiFi everywhere I go. Sprint will only need to make sure that people don’t end up having 6 modems on their accounts rented out to friends to avoid the primary premium.

Market left wide open: The car computer hardware. See my next post, an idea I would like to explore.

The bottom line is that people like control of their music, but they also like new music. Wireless data connections will push both of those items to your car, bike, hush puppies, wherever you go, along with many other services you may want. Locational information, traffic data, even album art, we know how much Steve loves album art. Might be time Apple stepped up and offered a subscription based Pandora service going right to your devices.

Sirius needs this merger, and it should be approved for many reasons, mostly because monopolies refer to need based items, nobody requires you to listen to Howard Stern on your way to work.