10 Million Reasons for Sirius XM to Worry?


Satellite-radio skeptics love pitting Pandora Media (NYS: P) against Sirius XM Radio (NAS: SIRI) .

Pandora, which reports its quarterly results on Wednesday, is growing considerably faster than the satellite-radio giant. It closed out April with 51.9 million active listeners, a 52% boost over the past year. Listening hours -- and, more than likely, revenue -- are growing even faster than that.

Stack that up against Sirius XM Radio's more modest growth. Subscribers to the premium-radio service inched 8% higher in its latest quarter, while revenue climbed 11%.

However, it's not just Pandora that's gaining ground in the battle for the country's eardrums. Sources tell The Wall Street Journal's DealBook that Spotify is in the process of raising money at a level that values the international music service at a whopping $4 billion. Clear Channel's (OTC: CCMO.PK) iHeartRadio, meanwhile, announced late last week that it has landed 10 million registered listeners since relaunching the online radio service in the fall.

Is it me, or is it getting crowded in here?

Clear Channel's ascent isn't a surprise. The media giant owns hundreds of terrestrial-radio stations that draw 237 million monthly listeners. That's most of the country, making Clear Channel's audience the largest of any media outlet in the country.

Between its star-studded concert event and perpetual on-air promotion, iHeartRadio was going to find its audience. Clear Channel points out that the refreshed iHeartRadio app's addition of 10 million registered users in just eight months is faster than the initial adoption rates at Facebook (NAS: FB) , Twitter, Pandora, Spotify, and Facebook's recently acquired photo-sharing sensation Instagram.

Of course, Clear Channel stood on the shoulders of some of those giants to make that happen. It incorporated a Pandora-like music-discovery feature alongside the live streams of hundreds of its terrestrial stations. And it promoted actively on Facebook, giving anyone clicking "like" on its fan page access to the iHeartRadio streams a week before it went live to everybody else.

The exciting truth that no one is talking about
Despite all of the buzz behind streaming services, the biggest secret in the business is that terrestrial-radio stations -- and, obviously, satellite radio -- aren't going away.

Clear Channel points out that its 850 broadcast stations continue to be its biggest business, accounting for 98% of its overall listening. Sure, 10 million registrations in eight months is impressive. Attracting 45 million monthly digital unique visitors to its HeartRadio network last month is huge.

But why does everyone make the false assumption that Pandora, Spotify, and even iHeartRadio are swiping market share at the expense of traditional radio operators and Sirius XM? They're not -- but it's easy to interpret the numbers that way.

Pandora was bragging earlier this month that its share of the total U.S. radio listening market rose from 3.11% last April to 5.95% last month. However, it's not as if radio consumption is diminishing. Terrestrial radio took a few steps back as advertisers retreated during the recession, but business is generally holding up.

We also know that Sirius XM grows more popular with every passing quarter. Save for the first half of 2009, when the economy was at its bleakest and car sales had stalled, Sirius XM has closed out every quarter with more paying accounts than it had when the period began.

Streaming isn't killing broadcast radio. The services are simply expanding consumption.

Listening to Sirius XM or terrestrial radio remains a passionate pastime for drivers. Pandora and other streaming services are often fully incorporated in auto dashboards, but the local content on conventional AM and FM stations and the premium content and simplicity of satellite radio work. Streaming is gaining ground for mass-transit commuters or folks at home, where broadcast radio has never been much of a force.

So if we're listening more and doing so in new ways, isn't the music-listening pie itself growing? Absolutely.

Spotify, Pandora, and iHeartRadio will continue to grow faster than Sirius XM -- and considerably faster than terrestrial-radio stations -- but that doesn't mean they aren't all moving in the right direction.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

XM Satellite Radio was a Rule Breakers recommendation before the Sirius XM merger. It's now gone from the scorecard, but if you want to discover the newsletter service's next Rule-Breaking multibagger, a free report reveals all.

At the time thisarticle was published The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns no shares in any of the stocks in this story and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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