by Demian Russian
The potential synergies between Sirius XM (SIRI) and Apple (AAPL) are now becoming too big to ignore. Both companies have huge strengths to offer each other, particularly where they both have marked weakness. The iPod has 70% market share in the MP3 player market (according to the most recent NPD data) and Apple’s iTunes is by far the number one source for online music delivery, but both are lacking live content and an effective means of music discovery.
Sirius XM has been hugely popular with those that grew up with and have a thirst for the golden age of radio , but has yet to penetrate the younger tech-oriented generation. Apple’s strong relationship with this tech-engulfed demographic makes them an ideal partner. Likewise, Sirius XM could provide the missing link in Apple’s music business with sorely needed live content and music discovery.
The potential impact of the looming Q2 release of the Sirius XM iPhone/iPod Touch app should not be underestimated. Think of it as Sirius XM getting into the dash of a new OEM partner – minus the normally related radio subsidy and revenue sharing costs. That’s where the similarities end. What OEM sold 13.7 million of one of its models last year? Analysts are looking for as little as 9 million total autos sold in the US this year. Apple sold those 13.7 million iPhones in 2008 and there are now over 37 million iPhones/iPod Touches out on the street.
With the iPhone now available in 81 countries, the coming 3.0 software update and a new iPhone release anticipated, there appears to be no stopping its continued growth. Sirius XM’s live content could wake up all of those iPhones and iPod Touches out on the street and turn them into the new transistor radios of this generation. There have now been over 1 billion iPhone/iPod Touch app downloads in the months since Apple opened its iTunes app store. Sirius XM will get much exposure from its free to download app being available through iTunes, but what about breaking into the iTunes dashboard?
This could be a huge win for both companies. What if iTunes visitors could subscribe to and stream Sirius XM right through the iTunes platform? What if when they heard a song they liked, a single click could purchase that song? The ability to stream Sirius XM through iTunes would drive customer traffic there — and not just any kind of customers, the kind of customers that linger around the store until they find something they like, the kind of customers that keep coming back day after day. Sirius XM would add the kind of music discovery to iTunes that you just can’t get with 30-second song samples. Apple’s combination of marketing prowess and large engaged user base would be a huge asset in Sirius XM’s future subscriber growth.
What about hardware? While the new Pioneer XMP3 portable satellite radio is a technological wonder, allowing users to record up to five channels at once, can you imagine how popular a portable satellite radio designed and marketed by Apple could be? What about an in-dash Sirius XM radio designed and marketed by Apple? There is an old joke that people will buy anything if it’s shiny and says “Apple” on it. While there may be some truth to that, Apple does have a strong history of building innovative products that their customers flock to.
Would Apple ever make a play to acquire Sirius XM? They certainly have the cash — to the tune of over $25 billion in the bank. While Apple does have a long history of buying companies that they can easily integrate into their hardware and software businesses, a potential acquisition of Sirius XM gets complicated and brings up many questions. With Liberty Media (LINTA) now owning a 40% stake in the company and Sirius XM just recently putting a “poison pill” in place, would the roadblocks be too big?
Being that the iPod’s popularity was brought up as one of the main arguments for allowing the merger of Sirius and XM, there would certainly be eyebrows raised at the DOJ and the FCC, but there would also be legitimate arguments that it would be in the best interest of the consumer. While both companies are in the business of music delivery, their business models are completely different. Sirius XM and Apple have so much to offer each other. Rather than compete with each other, they can use their individual strengths to complement and coexist with one other.
Why has the Sirius XM iPhone/iPod Touch app taken so long to be released? Has there been a bigger partnership with Apple in the works? Way back in an April 2005 interview, Sirius XM CEO Mel Karmazin, stated: “One day maybe iPod will be interested in putting in satellite radio.” That day is upon us.
Paul absolutely no offensive taken. All I wanted to do was try to clarify my post by saying Mel at one point had a very good reputation for shareholders. What happened with Sirius well sucks to be Frank. I share your concern about shareholders getting the short end of the stick. I had invested in to Sirius pretty heavily at around 1.33 and well watched in agony it fall believing it would go back up. Hard lesson learned at around .5 I bought back in recouped all my losses since and have been very careful trading this stock. This stock is not for the faint of heart and ironically is a speculation stock in many ways just like this article. The fact is nobody or very few people know if this company is going to be headed in the right direction or the wrong direction. For us retail investors it is a waiting game. My only hope is that Mel lives up to his threat to screw them who bet against us. So time will tell us the rest of the story good day “Paul Harvey” No-No just joking, honestly I hope it works out for the best for all investors.
I love It Damien. This is the best article I’ve ever read . I hope they do it then we won’t, have to carry an Ipod and a receiver.I mean the apps cool but I want it on my Ipod not the Iphone. It could be one beautiful machine:)
ALSO,LOOK FOR MASSIVE INSIDER BUYING COMING OUT SOON.
Matt, The problem with this kind of hype is that before you know it, people start to think it is fact and before you know it, you have many people saying things like 6, 7, 8, 9, and 10 right after the merger. Do you see what I am saying because the same crap was said about the PPS just after the merger. What did that do, well if you were in then and had expected that then it pissed you off at the companty, at the CEOs (Mel), at just about everyone connected to the company. When I say the things I do, it is to get people ready for reality (Like when I told them dont expect a big short sqeeze after the merger, it is going to take time). You see it keeps people sane and not depressed enough to sell when the big thing they thought would happen doesn’t. There are to many people on these sites that think they are going to get really rich off this company over night. The problem is not many people hit the lottery, it is going to take time. How do you think I have been able to keep my sense of humor? You may not think I do but for those that have been with me through this ordeal for the time we have know I do, just ask cos1000 and killerkaul they know.
Now as for the "I told you so" that is just me, thats just the way I am, take it or leave it. Dont worry though, if you leave it because many do.
This is a great idea, i own a iphone and i purchase music that i happen to listen too in my car on the drive to work. For I tunes to blow up it needs radio to advertise original content. If i can get this all in one and can instantaneously purchase the song that I want. But this is a dream, that most likely will not happen. I would like to see a iCar or something that apple brings out.
Something that is more on reality is a partnership with AT&T. AT&T has been promoting back seat T.V.. But one thing that is missing is auto penetration. SiriusXm already have penetration into the auto industry. What is a back seat T.V. without a radio. I believe the backseat t.v. will be bundled with Sirius T.V. I am just waiting for this to come out. This would be huge as a Sirius share holder. This is what I am speculating.
I love this article. Very insightful. Sirius XM and Apple together are unstopable. The future of radio has just arrived. I have about 23,000 shares of Sirius XM which i bought @ 11 cents and 14 cents respectively. Im loving it. Im holding until well i dont know. 5 years ago the share were worth 60$ imagine doing 30$ a share now? wow….im just waiting patiently. even if it takes 5 or 10 years. it will be well worth it. Lets go Siri…..!!!!!