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SIRI - Sirius XM Radio


Liberty

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Putting this quote from user "WayWardCloud" here, as I think these are really smart thoughts that he posted in the Liberty Media thread. 

 

I think even they didn't know the pandemic was coming.

 

I didn't mean to say that they should have seen the pandemic coming, nobody did. But one can safely predict that some unpredictable shit will eventually happen to their business and choose to wear swim trunks even though the tie is high.

 

All 3 are short-term impaired. But why are you not so bullish on Sirius XM? Of the three, it seems to be the least impacted by the coronavirus. All three are , but that one the least.

 

Oh yeah, nothing to do with the virus indeed.

I try to think of investments with a 5-10 years timeline in mind.

 

I believe satellite radio is an inferior technology with secular headwinds blowing stronger against it every day because it's a low-bandwidth high-latency one-way connection. I'm concerned SIRI could be the next QVC: high FCF + leverage works great until your boomer clientele starts dying off. I'm surprised SiriusXM hasn't yet reached its plateau followed by a decline but in my mind it's only a matter of time.

 

Malone has a history of never calling quits on melting ice cubes that are optically cheap. Here is what I picture could happen. When user growth eventually starts stalling, the stock will re-rate down to a more humble PE ratio. This will make it look cheap on a P/FCF basis. After all, even without growth, this thing is still minting money every month. So management decides to buy tons of shares back. Except the stock keeps getting cheaper and cheaper because now the user base is actually shrinking. At this point the PE ratio adjusts again and becomes absolutely mouth watering... All the earnings are plowed into buybacks instead of dividends which only ends up magnifying the fall. Value investing blogs are calling it a no-brainer, especially with all the wonderful hidden assets from their library coming in for free. The end.

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My concerns with Sirius are very similar to those expressed by WayWardCloud. To some extent, Sirius's position today is very similar to DirecTv or Dish in late 2000s. We know how things out turned for satellite TV delivery business.

 

Sure Sirius bought Pandora but there is heavy competition in this space: Spotify, Amazon Music, Apple Music, etc. 

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My concerns with Sirius are very similar to those expressed by WayWardCloud. To some extent, Sirius's position today is very similar to DirecTv or Dish in late 2000s. We know how things turned for satellite TV delivery business.

 

Sure Sirius bought Pandora but there is heavy competition in this space: Spotify, Amazon Music, Apple Music, etc.

 

Yes, they’d a good analogy. Better cellphone tech over time will kill this. Of course Sirius could just become platform agnostic , but then it would have compute with streamers, Spotify and a lot of terrestrial radio stations who went online as well

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I’m not particularly bullish on this either, but isn’t the bull (or at least non-bear) case that they are in the content production business (like Netflix et al) as opposed to just the distribution business (like the satellite TV cos)?

 

The point about melting ice cubes spending all their money on buybacks is a valid one. You really need to hope Mr Market offers you a good price to sell into with such situations if you are just a minority shareholder.

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Maffei said on the recent podcast that audio was a niche market he could be the King of it all. While in video scripted content there was no chance to compete with the amount of content out there. Not sure if this is his only thesis for Sirius. Niche market is great if it's got some scale and is not going anywhere. Frankly I am amazed radio is still around. And I hope they have the fortitude as they always have had to exit when the thesis has peaked.

 

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  • 4 months later...

Howard Stern apparently said at his show that they are NOT close to a deal yet. Probably just negotiating tactics to put pressure on SIRI to give him the best deal.

 

I think he was saying he hasn't seen the contract for $120 million, but if it was that amount, he would take it.

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