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Sirius XM stays relevant, for now

A month ago, I wrote about the future of satellite radio or more precisely, the potential lack of a future. Well, a lot has changed since then, so I thought it might be worth another look.

First of all, Sirius got a $530 million cash infusion from Liberty Media, which saved Sirius from bankruptcy. And last week, the company announced a new Iphone application that allows people to stream Sirius Internet radio content via 3G wireless.

Today, Motley Fool's Tim Beyers looks at how many subscribers Sirius might lose to web radio outlets like Pandora. He asked people what they're doing and got mixed responses:

"When my XM subscription came up for renewal in December, I called to cancel it because I found Pandora to be a better service -- it's free and I can create my own custom stations," reader Mandy Porta wrote.

Others responded with the fervor of a National Rifle Association rally. "I'll stick with my XM radio until they bury me with my earbuds in my cold, dead ears," wrote reader Janet Groene, who edits a blog about traveling via RV.

Beyers' conclusion: "...Sirius XM is bleeding subscribers now, (but) a beleaguered Web radio industry isn't yet ready to fill the void. Not all of it, anyway."

It's true, so far, Internet radio is small-time, but that could change if the President's plan to create a national broadband network comes to fruition. Last week, the President offered up more than $7 billion in stimulus money to build more networks. There was a line out the door at the Commerce Department of lobbyists and telecom companies interested in getting their hands on the money.

One of appealing things about satellite radio is its reach into places not served or underserved by broadcast outlets. A national broadband network would have the same kind of reach.

If you want to know what Sirius CEO Mel Karmazin thinks, Fortune has an interview with him. Karmazin doesn't dismiss the threat of Internet radio, but he believes Sirius will stay one step ahead in delivering content people want and want to pay for. All kinds of ideas are swimming in his head, including making more mobile video channels available, and:

"We could also have 130 more audio channels," Karmazin says. "We could go to Wal-Mart and say, 'Hey, Wal-Mart, how would you like to have a channel that's just for you?' We could say, 'Hey, Mormon Church. How would you like to have a channel?'

Trouble is, Internet radio can offer thousands of channels -- for free. For fans of Sirius, the good news is that Liberty Media's cash infusion has bought Karmazin time to think about where the company should go. Maybe he can make enough money from Wal-Mart and the Mormon Church to pay his high-priced talent and continue to expand. But as of now, his business model still relies on what may be a shrinking number of subscribers.

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You were right. Sirius XM has to change their business model. But they're doing it in the wrong direction. They raised the rate on additional radios (car, home, office), making it less appealing to have XM wherever you are ... or making it more appealing to buy a mobile unit that works everywhere, and de-subscribe the car, home hi-fi, etc.

Then, they decided to discontinue the free access to XM Online, the Internet streaming add-on (with some channels that are no longer on the satellite), that was provided with the top-choice "XM Everything." No longer Everything apparently. You could renew within a 10 day window to lock in the XM Online for free, or start paying a monthly surcharge later on.

No less than three associates have experienced unexpected charges from Sirius XM, for time already paid for, or time that was given "for free." One customer who prepaid for a year called to complain about the surprise quarterly charge, was promised a refund, but found on his next month's bill that he'd then been charged the yearly rate,... again.

Clearly, the game is afoot at Sirius XM. And doing something unmentionable to existing customers is part of the battle plan.

Geez. People won't put up with that crap. Karmazin was correct about one thing - in defending the merger, he said Sirius has competition from other kinds of media. Unless he adapts, Sirius will likely get buried by those competitors as they grow in number.

Sirius radio is probably the best thing to come around in this information age. It offers so much from national news channels to the best music on the planet.Thanks to them I don't have to be subject to all of this liberal crap that is polluting the media.I will always be a subscriber and I am not alone.

Gigaom had an article on Mar 12 that Congress was holding hearings to determine if over the air radio stations should be required to play royalty fees for music played on the air. If radio stations paid like internet radio the playing field would change if free music was harder to find.

Mark, I think this could definitely be a factor, and Karmazin may even be counting on it happening. In the Fortune interview he points out that radio allows for the discovery of new music, and that's something people will always want. It'll also be interesting to see how the model for Internet radio music evolves.

I don't care about any of this. I owned XMSR shares, now SIRI, since back when. And, wathced it fall for a 90% loss. That is until I purchased more at .05 cents to lower my cost. Now, I am down 70% and own 10,000 shares. Price has climbed a tad as of late. I view it as a lottery ticket. If I can get back to even - SELL! I see its satellites as being worth more than the current share price. And, Karmazin is not a visionary. Any hope of him turning this debacle around is nuts. Worse yet, he lies.

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