Sirius Cools Off while Apple Aims to Muscle Up with This Move
It was a hot few weeks for Sirius XM Radio (NASDAQ:SIRI) before the stock cooled, but not before it closed up just over 1 percent for the week (a total of 11 percent since April 10). News of Jim Meyer moving to permanent chief executive status and its recent earnings served as capable catalysts for Sirius, which runs satellite radio yet would like a bigger chunk of Internet radio. Now that Apple (NASDAQ:AAPL) looks ready to launch iRadio, that road will be tougher to travel.
Sirius is doing quite well with its monopoly of the satellite radio business. The growing market for new cars — most of which come with Sirius pre-installed — is providing a steady stream of new subscribers, while the used car market is offering even more opportunities to pick up customers who get hooked on free trials of Sirius. Over 40 percent of those who try satellite radio after a car purchase end up subscribing.
Sirius is making a small play to get into Internet radio, but for now Pandora (NYSE:P) is running the show in that department. With its some free, some paid membership model, Apple might want to follow its lead when launching iRadio. According to Forbes, that day might arrive sooner than expected, though not without some intense negotiations with record companies who want to bring Apple’s price-per-song up to the level paid by Pandora, or beyond…
The idea is that Apple’s designs on the industry are still unclear. Naturally, Apple would want to reinvent Internet radio on some level, making it either less expensive, less ad-heavy or more attractive in terms of catalog offerings. Since it has iTunes at its disposal, Apple may already have the weapons it needs to rattle Pandora to its core.
Yet record companies see one of the last bargaining chips they’ll have for the foreseeable future in this deal. Why make Apple meet the Pandora price when it could push the envelope much higher? Unfortunately for the record industry, some of the powerhouse record companies may have already caved in and signed off on an iRadio deal. If Apple would like to pull the trigger, its arsenal might be stocked as is.