One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. For example, at Justin and Eric‘s urging, intrade listed several simple combinatorial markets, including baskets of states (e.g., “FL+OH”) in the 2004 US Presidential election and an October surprise market probing for a statistical correlation between Bush’s 2004 reelection and bin Laden’s capture.
Recently, again at Eric and Justin’s request, intrade launched a Sirius-XM merger market to predict whether the two satellite radio companies’ wedding vows will be blessed by the U.S. Department of Justice and the Federal Communications Commission.
The picture of XiriuM as a powerful monopoly threatening consumer choice is, to put it bluntly, laughable.
The problem I see for XiriuM is that one-way purely broadcast technologies are nearing extinction. Even if some media don’t directly utilize the Internet or even TCP/IP, they will almost surely use a two-way communications link of some kind. Why? Ostensibly, because consumers want personalization and interactivity. Perhaps more to the point, because publishers and advertisers want better targeting and performance metrics.
The only “way out” I see for XiriuM is to actually become an Internet service provider for cars, much like the (formerly broadcast-only) cable companies did, for example by bundling high speed satellite downloads with a low bandwidth cellular uplink. Even so, I imagine that latency would be a serious problem, as with HughesNet (formerly Direcway) satellite Internet service, meant for use in rural areas with no broadband alternatives.
So, although I have no idea how DOJ will rule, and thus have no advice for intrade bettors, I do know how DOJ should rule: “sure, knock yourselves out”. Plus I have some throw away advice for SIRI and XMSR shareholders:… Sell!
Good post. Unfortunately you missed the biggest point of electronic media going back to the beginnings of radio and the point that won’t change no matter what happens. Content Is King! There are about a million internet radio stations. There is only one Howard Stern and only one National Football League and only one Oprah Winfrey. He who has the content in media ALWAYS wins no matter what the medium. Otherwise you are just one of a million internet stations with 5 listeners a piece.
[...] David Pennock on the Sirius–XM prediction markets David Pennock on the Sirius–XM prediction markets [...]
> Content Is King!
You’re right, my argument is mainly about music, but music is a big driver of satellite radio sales, at least as big as the specialized content.
I agree that Howard, NFL, etc. are also big drivers. However, satellite pays for this content on top of their huge infrastructure costs. Internet radio can pay for content too (and once they have distribution they will have the funding). Moreover, Internet radio can arguably pay a whole lot more for content than satellite, because they have comparatively negligible infrastructure costs.
“You’re right, my argument is mainly about music, but music is a big driver of satellite radio sales, at least as big as the specialized content.”
When Howard signed with Sirius about 2 years ago they had 600 hundred thousand subscribers. Today they have over 6 million subscribers with Howard being on the air just a little over a year. There is no way music is as big a driver as Howard or specialized content. Not even close.
“Internet radio can pay for content too (and once they have distribution they will have the funding).”
About a million internet radio stations. Very fragmented industry. Doubt that any of them will have the funding or spend the money for bigtime content. Its possible. I doubt internet radio goes in that direction. Too fragmented. By that time Sirius and XM will be in just about every car with all the major content wrapped up.
Thanks for the great/insightful comments. You may well be right. I’m still convinced that Internet will have equal or greater penetration into cars for other reasons (maps, traffic, news, info, communication, etc.), so the question becomes whether consumers will pay for both.
Also, Internet radio may not be as insignificant/fragmented as you think. Yahoo! Launchcast alone averaged 2.3 million unique listeners per week in December 2006: http://www.arbitron.com/onlineradio/dec_ratings_2006.htm
[...] David Pennock, John Delaney’s poodle The Yahoo! “research scientist”: One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. […] [...]
[...] The Yahoo! “research scientist”: One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. […] [...]
“Also, Internet radio may not be as insignificant/fragmented as you think.”
I have no doubt you are correct that the internet will be pervasive in the car. I also think you are definitely correct that internet radio is wildly popular. I read it doubled its audience last year. I think it may have 40 million or more listeners already. Free Terrestrial radio is already wildly popular with 95% of the people in this country listening. Maybe internet can even reach that one day. BUT……WHAT WILL PEOPLE PAY FOR? 10,000 terrestrial stations, a million internet stations, OR Howard Stern and Major League Baseball. Answer is obvious. Content is king. People pay for content. Satellite radio has the content. Will big internet radio like AOL or Yahoo acquire content and move the internet in the right direction? Doubt it. Not as long as they view themselves as technology companies instead of the media companies that they should have become 10 years ago.
[...] – Put your most important sentence(s) in bold —which is what I’m doing right now ( ). Yahoo! research scientist David Pennock prefers highlighting his most important sentences in yellow. Most people don’t read on the Web; they scan. Thus, help them scanning your text. [...]
Here is an article with a similar argument to my own, citing a more recent development (AOL Music on iPhone):
http://www.alleyinsider.com/2008/6/iphone_aol_radio
HI David – According to published reports Sirius is going over 20 million paid subscribers this year with projected EBITDA of about 600 million dollars. Has internet radio killed it yet?
SIRIUS XM Reaches 20 Million Subscribers
Press Release Source: SIRIUS XM Radio On Tuesday November 30, 2010, 8:30 am
NEW YORK, Nov. 30, 2010 /PRNewswire/ — SIRIUS XM Radio (Nasdaq:SIRI – News) today announced that it recently surpassed 20 million subscribers, a record number of subscribers in satellite radio history.
Mel Karmazin, SIRIUS XM’s Chief Executive Officer, stated, “Reaching and surpassing 20 million subscribers is a significant milestone for us. We have added the last 10 million subscribers faster than the first 10 million — despite a tremendously competitive environment — representing a strong endorsement of our service and our programming by discerning consumers who want and demand the best in audio entertainment. As a leader in audio entertainment, SIRIUS XM has assembled the best content, personalities, and entertainers that satisfy our subscribers’ diverse interests.”
In celebration of this milestone, SIRIUS XM previously announced a special, subscriber-only broadcast of an exclusive Paul McCartney concert at the Apollo Theater in New York City on December 13, 2010.
About SIRIUS XM Radio
SIRIUS XM is America’s satellite radio company, broadcasting more than 135 channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to 20 million subscribers in cars, trucks, boats and aircraft, and through a wide range of mobile devices.
SIRIUS XM offers an array of content from some of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers. SIRIUS XM programming is also available at sirius.com and xmradio.com, and on Apple iPhone and iPod touch, BlackBerry and Android-powered mobile devices using the SIRIUS XM Premium Online App.
SIRIUS XM has arrangements with every major automaker and its radio products are available at retail locations nationwide, as well as shop.sirius.com and shop.xmradio.com.
http://finance.yahoo.com/news/SIRIUS-XM-Reaches-20-Million-prnews-2589258261.html?x=0&.v=1
Press Release Source: SIRIUS XM Radio On Wednesday September 14, 2011, 1:37 pm EDT
NEW YORK, Sept. 14, 2011 /PRNewswire/ — Sirius XM Radio (Nasdaq:SIRI – News) today provided 2012 financial and subscriber guidance and affirmed its previous guidance for 2011.
(Logo: http://photos.prnewswire.com/prnh/20101014/NY82093LOGO)
SiriusXM’s guidance for 2012 includes:
Revenue growth of 10% to approximately $3.3 billion,
Adjusted EBITDA growth of 20% to approximately $860 million, and
Free cash flow growth of 75% to approximately $700 million.
“Our new guidance for 2012 demonstrates our expectation of robust growth next year,” said Mel Karmazin, Chief Executive Officer, SiriusXM. “SiriusXM’s outstanding financial performance in the midst of considerable economic uncertainty will continue in 2012 as we grow our subscriber base and free cash flow and anticipate that our revenue and adjusted EBITDA growth will accelerate.”
The company also affirmed its existing 2011 guidance, including:
Net subscriber additions of approximately 1.6 million,
Revenue of approximately $3 billion,
Adjusted EBITDA of about $715 million, and
Free cash flow approaching $400 million.
“In the 10 years since SiriusXM launched service, we have expanded our programming line-up to provide an unparalleled listening experience. On January 1, 2012, we will increase the base price of Sirius and XM Select from $12.95 to $14.49 per month and will adjust prices on many of our other programming packages. This is the first price increase on our basic service packages since the addition of the NFL, NASCAR, Howard Stern, Martha Stewart and many college sports to our programming line-up. Through continued investments in technology, the best and most diverse programming in radio is available to our subscribers in cars, homes, offices, business establishments, on the internet and smartphones. We will expand our programming and technology further with the launch of SiriusXM 2.0 in the coming months,” said Karmazin.
About Sirius XM Radio
Sirius XM Radio is America’s satellite radio company. SiriusXM broadcasts more than 135 satellite radio channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to over 21 million subscribers. SiriusXM offers an array of content from many of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers.
SiriusXM programming is available on more than 800 devices, including pre-installed and after-market radios in cars, trucks, boats and aircraft, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available at siriusxm.com, and on Apple, BlackBerry and Android-powered mobile devices.
SiriusXM has arrangements with every major automaker and its radio products are available for sale at shop.siriusxm.com as well as retail locations nationwide.
http://finance.yahoo.com/news/SiriusXM-Provides-2012-prnews-1607834342.html?x=0&.v=1