Sirius XM Radio (NASDAQ:SIRI) announces earnings on May 2nd. Although the stock is up over four-fold in 2 years, the company is staring straight in the eyes of an incredibly unfavorable trend for satellite radio: internet radio.
Sirius skeptics have always pointed to the competitive threat of internet radio, but the old boogie man is finally shape-shifting into a bona fide villain. The biggest advance for internet radio has been 3G and now 4G. I for one listen to Pandora on every car ride now that my smartphone supports the cause.
To be blunt: smartphones with excellent broadband delete any good reason to pay Sirius XM (NASDAQ:SIRI) a steep monthly fee for satellite radio. Thus, if Mel Karmazin wants to make what could become the strategic decision that will ultimately save SIRI from obsolescence, he must buy Pandora now. After he integrates the popular internet radio company, his business development team should spend 90% of their time snapping up any similar companies significantly disrupting the “on-demand” music/radio space.
After all, great companies don’t see themselves in terms of tight definitions which limit future prospects. In the case of Sirius XM (NASDAQ:SIRI), Karmazin need to stop defining his company as a “satellite radio” provider and start branding SIRI as an audio distribution company. The new frame of mind will lead to many more opportunities in during a time when audio has the chance to be everywhere and consumed in new and exciting ways. Look out Warner Music (NYSE:WMG) and Live Nation (NYSE:LYV).