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Why the Mobile Web Won’t Save Sirius XM

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siriusxmThings may finally be turning around for troubled satellite radio venture Sirius XM (s siri). 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 (s aapl) 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, 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.

14 Responses to “Why the Mobile Web Won’t Save Sirius XM”

  1. Ervin Raab

    I was amazed how good the Sirius Radio was in a friends car. I believe for the price of 2-3 cups of decent coffee(monthly scrip. fee), the payoff is worth it.

    Ervin Raab

  2. M Ray

    Very misleading. I don’t even have satrad in my vehicles. For 12.95 you get Sirius XM fully loaded on a pc. Not everyone in this country has or needs a car. No equipment cost on internet subscription also. AND it’s the best.

  3. The one question that is unclear is whether unicast or some multicast / broadcast technology will bring music and video to the mobile. The reality is that as audio and video content starts getting unicasted to users (pandora etc. and now Sirius XM), wireless bandwidth gets used in spades – the math shows that, and there is anecdotal evidence of pressure on the AT&T network from iPhone users. So far, broadcast or multicast technologies like MediaFLO have had a rough ride, but isnt something like that the long-term solution?

  4. Thomass

    It’s the same article rewritten a 100 different ways, give us a break already.This is NAB bull$hit ,and Kevin Kelleher is a NAB tool.Write something original loser.

  5. Justin

    WHy do people keep writing the same BULLSHITT over and Over again, get fuken over it already, Sirius will soon EXPLODe you fuken loosers

  6. Agreed! Babble that ignores compelling content beyond music and mlb, backseat tv and the endless possibilities that are open to a monopoly with the spectrum they possess.

  7. lifetime subscriber

    Well not completely old, found it informative. When WIMAX comes of age shortly, then Sat radio is dead, completely, Do Not Resuscitate

    • Everyone thinks it’s how you get the entertainment to people and not WHAT type of entertainment you get them. Doesn’t matter if it’s wimax ( and why wouldn’t sirius be able to broadcast in wimax as well), web, sat, or am/fm, it’s what you’re broadcasting. Sirius has a lot of talent on board, they pretty much have every radio personality out there, they just need the cash to take advantage of that, and hopefully now with the new bond deal they will be able to. Then the argument of FREE, yeah sure there are plenty of free music sites out there, but you get what you pay for or in that case what you don’t pay for, and, free can not stay free forever, music royalties will either make these free music co.’s start charging or close up shop, it’s inevitable. Every good co. evolves, look at MTV,VH1 just to mention a couple and so will sirius. Luck has a lot to do with it, if the FCC had not taken as long as they did, we’d be having a totally different conversation today. Auto sales will come back, the consumer will spend again, and sirius will eventually be profitable. I’m rooting for the underdog.

  8. Neal Barkett

    You bring up some interesting points, but what you’re missing the boat on is Sirius Xm’s CONTENT. What Sirius has not done as of yet is to get the masses to understand what Satellite radio offers in the way of content. It’s staggering to say the least. I’ve been a subscriber for 3 years and am still finding new channels of great entertainment that you won’t find anywhere else. Also if your driving any real distance you never lose reception like AM/FM. I think if the company can get a “real” marketing plan going, they are on their way especially when this economy recovers.