Where Will Sirius XM Be in 10 Years?

Sirius XM has had a troubled existence dating back to when it was two separate satellite companies.

Before the 2008 merger, neither company had the critical mass of subscribers needed to support their huge programming costs. Even after the deal went through, then-CEO Mel Karmazin needed to make a deal with Liberty Media in2009 to avoid a bankruptcy filing.

Liberty remains the company's majority owner and it now has plans to spin off a tracking stock to follow its interests in the much healthier companies. Since those desperate days when it needed Liberty's help, the lone remaining satellite radio company has grown and stabilized. The company makes money now and its CEO was nothing but positive in the company's most recent third-quarter earnings release.

"With subscribers at an all-time high of nearly 29 million and record adjusted EBITDA and adjusted EBITDA margin, our third quarter was one of the strongest performances in our company's history," said CEO Jim Meyer. "We are confident of our continued success in the fourth quarter, and we are increasing our guidance for self-pay and total net subscriber additions, revenue, and adjusted EBITDA."

Despite all that seemingly good news, many investors and analysts question whether satellite radio will be a viable business for the the long term. Three Motley Fool contributors weigh in below with opinions on that.

Sirius XM stock has rebounded from lows, but has never regained its early heights. Source: YCharts.com

Rick Munarriz (It will survive and grow):There was a time when Sirius XM was openly dismissed as a transitory technology. It was supposed to go away when the connected car would crack open the realm of cheaper app-fueled ear candy.

That hasn't happened. Sirius XM's base continues to grow, up another 2.2 million subscribers over the past year to hit nearly 29 million by the end of September.

It would be silly to bet against Sirius XM in the coming years. We're still early in the migration process, but you probably don't believe me, so let's sub out bullish promise for basic math. There are now 80 million cars in the U.S. with Sirius or XM receivers. Yes, that means that more than half of them are dormant given Sirius XM's subscriber count, but let's get beyond that point.

There are more than 250 million cars in the country, so Sirius XM is really in just a third of the cars out there. That's going to change. With three out of every four new cars rolling into showrooms with factory-installed receivers, we're going to keep seeing Sirius XM's potential subscriber base grow. Sirius XM sees its installed base more than doubling to 180 million in 10 years. Before you begin thinking that there are going to be a lot of useless inactive receivers in cars, humor me as I compare Sirius XM toNetflix, anothercompany that bears pegged as a transitory technology. When the appetite for DVD rentals faded it was supposed to join Blockbuster as a historical footnote, but it took advantage of its wide base of subscribers to become an instant force in streaming. Why can't that be Sirius XM?

Sirius XM is generating nearly $1 billion in subscriber revenueeveryquarter. Who cares if in-car connectivity makes online radio more compelling than satellite? Sirius XM will already have a model with at least $4 billion a year in subscription revenue that it can use to attract magnetic on-air talent and content. It will flip the switch just as Netflix was able to in migrating from one consumption platform to another.

Sirius XM is the leading provider of premium radio now. It should be the leading provider of premium radio in the future.

Daniel B. Kline (It won't be around): Sirius XM has an excellent product. I've been a subscriber since before Howard Stern joined Sirius and I use the service every day. The problem is that most of the reasons I listen are quickly becoming either non-exclusive or irrelevant.

One of the original draws of satellite music was that it had curated music channels. Before streaming music services became ubiquitous, this was a nice idea, but given their rise, it's much less useful. Every streaming company offers playlists, some offer personalized radio, and others deliver pretty much every song ever recorded. That makes what Sirius XM offers already out of date.

The satellite company has also been a destination for talk, most notably with its about-to-expire deal with Stern. Even if the controversial host signs a new deal, it could be argued that there is simply no need to pay for talk shows when the world of quality podcasts has exploded. I listen to Stern daily, but I also listen to Nerdist, Talk is Jericho, Bill Simmons, and some of our own Motley Fool podcasts. Keeping satellite just for talk, especially if Stern leaves, is not needed either.

That leaves sports as the last real reason to subscribe. The problem is that local radio still exists and most people live and work in the market where their favorite teams play. Getting to hear New England Patriots games when I drive out of New England is nice, but it's not something I would keep satellite radio for.

Most of what I get from satellite now lives in my phone. As it gets more convenient for people to stream from their phone to their car, then the reasons people pay for satellite will go away. It's hard to picture Sirius XM making it another 10 years due to that.

(It will be around, but struggling):Sirius XM Radio is no stranger to bucking the odds. The company battled back from near bankruptcy during the depths of the financial crisis and has fended off upstart Internet radio competitors, all the while growing and turning a profit.

While the company is on solid ground today, a lot can change in 10 years, especially in the two industries the satellite radio provider is intertwined with -- music and automobiles. Sirius XM has grown to prominence largely due to its partnership with automakers as the car is the place where radio is most often consumed.

The prospect of self-driving cars, however, could significantly diminish the need for radio behind the wheel. Radio may still remain popular inside vehicles, but with drivers' eyes freed, the ability to read, watch TV, or surf the Internet inside the car all present themselves as competing options to radio. No one knows if or when self-driving cars will go mainstream, but if they do, the innovation could cause Sirius XM to lose one of its biggest advantages.

Similarly, the way music is consumed has also changed dramatically as streaming players likePandora Media, Spotify,and nowApplehave sprung up to challenge Sirius XM, which launched in 2001. Pandora is now in over 100 new vehicle models, and the company has signed up at least 5 million new users in cars. An Apple car, which seems to be in the works, would almost definitely include a built-in Music component, and even without dashboard integration, new cars are designed for smartphone compatibility making apps like Spotify easy to play.

The challenges for Sirius XM aren't going to get any easier over the next 10 years, but the company has proven itself nimble and its subscriber base is sticky. If it can continue to provide compelling content, it should be a viable radio option in 2025.

The article Where Will Sirius XM Be in 10 Years? originally appeared on Fool.com.

Daniel Kline owns shares of AAPL.Jeremy Bowman owns shares of AAPL and NFLX. Rick Munarriz owns shares of NFLX. The Motley Fool owns shares of and recommends AAPL, NFLX, and P. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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