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Marketplace Scratch Pad

Sirius XM stays relevant, for now

Scott Jagow Mar 16, 2009

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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