Mac Greer: Let's talk some Sirius XM.
Shares up on earnings. Jason, record revenues and
the integration of Pandora, well,
that seems to be going well. A lot of optimism.
Sirius XM acquired Pandora last year.
Jason Moser: The conversation for us regarding
Sirius XM for a long time has all revolved
around Howard Stern, and would there actually
be life beyond Howard. He obviously won't
last forever. I think we're actually starting
to see signs that there may indeed be life
after Howard. I think the Pandora acquisition
is going to play a pivotal role in that. Initially,
when we saw they were doing that deal,
there were some questions as to what they
could get out of Pandora that they don't already have.
What it boils down to is data. When you
combine these two entities, they're essentially
going to have an audience of over 100 million
listeners. There's going to be about 40 million
self-paying subscribers, about 75 million
who are not paying for subscriptions,
but either listening on the ad-based model or
whatever. We talk a lot about how Starbucks
has a lot of different levers they can pull
when they want to try to generate more traffic
in the store. Whether it's a treat receipt
or a buy-one-get-one-free, whatever it may be.
I think that Sirius is going to play that
same card here with Pandora. They're going
to get a lot of data here to be able to offer
up some new products for listeners.
A couple of examples here. One thing they're
going to do in early February, they're actually
going to give select Pandora listeners an
offer to buy a $5 a month mostly news and
talk Sirius subscription. That matters because
most all of the cars that are coming out now
are all satellite-radio-enabled. They just
struck a deal with Toyota where Sirius XM
is going to be the provider for all Toyota
cars going on the road here through 2028.
They're projecting 200 million cars on the
road over the next decade that will have that
satellite radio hardware. Giving a product
that scratches whatever itch the listener
has is going to be critical. Having Pandora
is going to give them the data to be able to do that.
Greer: It also seems like, going forward,
the secret sauce for Sirius XM increasingly
is going to be news, it's going to be talk,
it's going to be live sports. Music feels
like it's become so commoditized.
Moser: Yeah, I think you hit the nail on the
head there. You can get whatever music you
want anywhere. There are a million offerings
out there. Spotify, Amazon, Apple, Google,
you name it. Where Sirius has really differentiated
themselves is the breadth of the content that
they offer. Whether it's sports, news, talk,
comedy -- look at the relationship with Netflix.
They're leveraging some of that Netflix
comedy to offer it in audio form on Sirius XM.
More and more, it's becoming kind of like
a Netflix in that regard. They have a little bit of
something for everyone. If they can figure
out ways to monetize that as optimally as
possible, and whether that's just catered
offerings to people who want a certain thing,
or people who want the whole package -- remember,
we're coming into a very polarizing election
year here in 2020.
Greer:​ I've heard that!
Moser: I'm certain there are going to be a
lot of people that would love to have access
to a news-and-talk-style offering that's going
to be reliable. That's the beauty of Sirius radio,
the satellite is so reliable.
Andy Cross: Also, the defensive mechanism
that this, against the likes of Spotify,
the other competition that Jason mentioned.
The top line growth rates for Sirius have slowed
a little bit. Taking on something like Pandora
to help bring some excitement back to both
the product, as well as for shareholders --
the stock has reacted nicely on the news
over the past couple of years. Thinking through
how this changes the landscape of providers when
it comes to music and talk radio is really interesting.
If you were in the Sirius boardroom,
you're saying, "Hey, we have to make some
kind of move here, and here's a Pandora price
that's pretty reasonable to get the assets that they own."
Moser: Yeah,
they'll have a Pandora channel
on Sirius XM here in the coming months.
They're starting to place some big bets on podcasts.
They felt like they missed that boat
more or less. I think it's all based on growing out
that offering, using the data to slice
and dice different product offerings to give
at least an option for everybody out there,
considering how many people are going to actually
have access to that
satellite radio via the car.
Greer: It's really amazing, we were talking
before the show, when you look at the 10-year
stock chart of Sirius XM. It wasn't that long
ago that this stock was trading for under $1.
There was a very, very fair, reasonable
question: are they going bankrupt? I didn't
invest in them, and I love Sirius XM as a
consumer. I think a lot of people probably
underestimated the power of Howard Stern.
Moser: I think you're right. They obviously
made a very smart bet in using him to really
launch that offering. Such a loyal listener
base on the Stern side of things, when he
moved over to Sirius. That enabled him to
do a lot more, as well. He didn't have to
worry so much about the FCC anymore. I think
it's made the show a lot funnier. Granted,
it's probably not for everyone, but hey,
I'm one of those loyal listeners. I think what
Howard Stern ultimately bought them,
other than really awesome content, he bought
Sirius a lot of time to actually build up a subscriber base.
And now that they have that base -- they
also have some data on that user base,
because they have a pretty slick app there -- they're
more and more able to slice and dice and come
up with product offerings that give you what
you want to listen to when you want to listen to it.
If you can offer it at multiple price points,
or even possibly a free ad-supported model,
which it sounds like they're coming
out with, hey, they're making it available
to the biggest space possible. That's important.
Cross: We talked about the
advantage of subscription businesses,
when you think about the Apples
and the different profit margin between their
Services business and Hardware business.
Sirius actually has higher profit margins than Apple does
as a subscription business. Just a little,
28% vs. 26%. But it's telling. This is why
Tim Cook, looking at the Services business
and reporting the gross margin that they reported
this quarter, and saying, "Hey, this is the
future of what Apple may look like,"
it's just a matter of getting the revenue growth
high enough for that to make a meaningful
difference for Apple's shareholders.
Greer: Any chance that Apple would buy Sirius XM?
Doesn't make sense?
Cross: I don't think so!
Moser: Yeah, I don't think that's right up
their alley. Content is such a tricky business.
When you have a company like Sirius that's
already bringing Pandora into the mix, I don't know
that they would b e interested in an
acquisition like that, anyway. I'm sticking
with Square. Apple needs to buy Square.
