Should I Do It? Sirius

Simultaneously, Sirius has never had a single quarter of operating income or operating cash flow. And the losses have only gotten bigger as revenue has grown. In 2003, with just $13 million in revenue, Sirius had an operating loss of $313 million, and negative operating cash flow of minus $285 million. Over the past 12 months, Sirius lost $1.14 billion from operations and burned $362 million in operating cash flow, despite $424 million in revenue.

In addition, Sirius has numerous obstacles on the horizon. The first is the Apple(AAPL Quote) iPod, the dominant MP3 player in the marketplace. Auto manufacturers and audio-equipment makers are rapidly putting iPod connections into cars, presenting direct competition to Sirius' music programming.

In addition, Howard Stern's $500 million, five-year contract has set the bar extremely high in terms of the cost of acquiring talent and content. Should Sirius want to contract with popular radio personalities like Rush Limbaugh, it will likely have to pay enormous sums, especially since traditional radio companies will probably join the bidding in order to keep talent.

And in any case, the cost of renewing Howard Stern's contract will be immense, assuming Stern will even want to stay with Sirius. By the next decade, most cars will have Internet access, and it is possible that Stern could simply stream his show over the Web on his own.