SiriusXM Inc., Company Analysis
SiriusXM Inc., Company Analysis
Thoughthe company enjoys monopoly in the provision of the services to dowith satellite radio provision within the United States, the companyhas had very serious competitions from its rivals. The competitionhas mainly been for the major advertisers and listeners, and this hasbeen faced from various external rivals. Besides, the company alsohas the competition presenting itself against the rivals on thepre-recorded music entertainment that are based on discs, which thevarious consumers could initially buy and play in their cars, homes,or other portable devices. With respect to this force, the followingchallenges have been face d by the company.
Broadcastersof Digital and Analog AM/FM Radio Programs
Thesecompanies have for a very long time had a large base of listeners whodemanded their products. Such companies put into use a business modelbased on advertising, whereby the various commercial advertisingcompanies would pay them. The company tried to rival thesecompetitors by placing various programs, such as educational, ethnic,news and religious based items. Besides, the company has ventured inthe sale of a large number of advertisement spots to quite a largebase of audiences. As such, the various radio stations got into acompetition for advertisers and listeners so as to get the largestmarket share.
Addedto this, most of the initial AM/FM stations have moved tobroadcasting the digital signals just as the company. This has led toeven a much more increased pressure on the company. Indeed, thesedigital signals have advanced to a level that they are at par withthe Sirius XM signals. The AM/FM radio stations have also started toventure into the internet radio, which is a very aggressive move tooutsmart Sirius XM. To counter this, however, Sirius XM has managedto continually stage as the most clear of them all and its station isconsidered as HD, compared to the rivals whose channels are merelygetting into the platform.
Thecompany saw a fall in its stock price as a result of constantcompetition and unwanted decision made by its major shareholder,Liberty Media. This company had actually gone the distance ofplanning on owning Sirius XM in full through its capturing of thecompany’s stake of up to 53 percent. However, the threats ofcompetition got a bit down and this made Liberty Media to back offinto pursuing other interests in the industry of cable. However, themajor advantages that the company has over its major rivals are thewide array of the sports contents that are exclusive and the factthat it is able to produce its own content.
Thecompany, being a content creator is far much ahead of its key rivalswho have to get third party firms to supply them with the variouscontents, thereby limiting their net income and even the efficiency.A larger portion of the content provide by the company is readilyavailable on its own satellite service, besides the content on thechannel line-up.
Sincethe company is able to produce its own content, it has an edge overits rivals in terms of the quality as it exercises full control.Indeed, even the channels that are offered by the Sirius XM stationsare usually very unique and different from all the others that thecompeting service providers are able to air.
Thecompany also managed to embrace a very strong marketing strategy,which has not yet been emulated by its rivals to date. Besides, thecompany has also managed to successfully take advantage of a veryrobust marketing strategy. Under this strategy, the company partnerswith various other companies so as to help in the marketing of itsproducts, one such partnership is the one with the automobiles,whereby it supplies them with the devices that are very instrumentalin reaching out to various people, and in return, they are assured ofthe subscription of by the users of such automobiles.
SiriusXM Radio has strong market position. The company is the world’slargest radio broadcaster measured by revenue and one of the world`slargest pure-play audio entertainment companies. Currently, thecompany is also recognized as the second largest organization withinthe media industry in the entire United States. This is based on theanalysis of the overall number of the subscriptions that are paidfor. The company recorded a subscriber base of about of 22.3 millionas at the close very first quarter of the financial year 2012. Withrespect to the estimates of the industry, the holding of the marketshare by the company is about 70 percent, within the satellites thatare pre-installed in automobiles that are sold in the US.
Thecompany has also been recognized as the major player within the paidfor radio market. In the indicated years, the company has constantlygained the market share making it emerge as a relatively difficultplayer within the industry. Currently, the company is enjoying arelatively very wide audience base, coupled with very large sellingopportunities of its services. Indeed, the strategy that the companytook to venturing in providing services in various languages has beenvery instrumental in realizing this. Compared almost all its rivals,the Sirius XM radio has managed to acquire a relatively larger marketshare and is enjoying very tremendous advantages if compared to itsother rivals.
Profitmargins and capital base of players
XMRadio witnessed a strong growth in its profitability. There was amarked increase in the operating profit of the company from $228.3million in FY2010 to $676.1 million in FY2011, representing a CAGR of72%. In addition, Sirius XM Radio`s operating margins increased from9.2% in FY2010 to 22.4% in FY2011. Similarly, the company recorded anet profit of $427 million in FY2011 compared to net profit of $43.1million in FY2010 and a net loss of $538.2 million in FY2010. SiriusXM Radio`s net margins increased from -21.8% in FY2010 to 14.2% inFY2011. Increasing profits and margins reflects the efficient costmanagement and sound decision making of Sirius XM Radio, which couldbe leveraged to fund growth plans in the future.
Positiveoutlook experienced by the digital radio services within United Sates
Overthe years, the demand for the services rendered by the online anddigital radio services have continually increased. Even to date, thisis still expected to increase. As at 2011, it is approximated thatthe revenues generated by the radio broadcasting industry in the USwas about $480 million. By the close of 2015, it is expected that themarket would grow at a rate of about 13 percent, which would be about$760 million. Fortunately, Sirius XM is one of the major playerswithin the broadcasting market of the online radio, as such, isexpected to have very tremendous benefits from this channel. Thecompany is noted to be offering Sirius XM 2.0, which is an internetand satellite services. Besides, the company has also involved itselfin the offering of music as well as other channels via Blackberry,Android and Apple powered device applications.
Dueto the constant growth in content consumption via the use of mobilesand smartphones, there are very high chances that the presence ofSirius XM radio within the market will grow drastically. In fact,though the company may be having very limited exposure to internetradio at the moment, it is likely to have an increase in its revenuesresulting from the online digital radio market that is already wellestablished. Besides, the increasing population of the Hispanics isan advantage to the company as it has currently focused in theprovision of content that is more of for the ethnic group. As at theend of the year 2011, the Hispanic population hit about 52 million,about 17 percent of the total population of the US. Currently, theestimation of the population of the Hispanics is expected to hit 133million by the middle of 2050, showing how potential the future ofthe company is. This move by the company may be referred to asdifferentiation, whereby it provides content that the other rivalshave not really ventured into. Currently, the company has shifted toprovision of Spanish content, which is a move sure enough to trapthis ethnicity as well.
Withrespect to the various threats that the company may face fromsubstitutes, there is very limited chance the company is likely tocrumble for any. This based on the company’s continued venturing onnew ideas and technologies, therefore keeping it ahead of the keyrivals in the industry. The company has managed to successfullydifferentiate itself from all the other companies by being able todevelop its own content. This is one element that makes the companyimpossible to emulate. Inasmuch as the various players in the fieldmay compete in terms of technology, the company has an upper handwhen it comes to the content that it provides in terms of the qualityand even the content.
Themajor challenge that the company faced, however, was the introductionof the internet radio broadcasters by the use of the smartphone thatwere internet enabled. Through these applications and the devices,the satellites that the company had installed in various locationswere subjected to quite some stress of being faced out. This wasespecially due to the ability of the devices to get good signalreceptions even in places that were quite remote, and in almost allregions of the country. The major companies that ventured into thiswere the online providers and media companies such as CBS, Pandoraand Clear Channels, which made the streaming of such channels freeover the internet, or at least, for a very minimal cost since therewas no additional cost of the dishes. These online broadcasters stagea very tight competition with the company, both at home, on mobiledevices, in automobiles and in all place where there was audioentertainment.