catalyst" of Liberty Media ( LMCA) scooping up cheap shares on the open market. "Competition" and "monopoly" are two concepts that Sirius investors have never been able to fully grasp, even though Internet radio giant Pandora ( P) continues to grow each quarter and appears to be able to monetize its listening audience by virtue of growing ad revenue. Then there is Spotify, iHeartRadio, terrestrial radio, and online radio stations from titans such as AOL ( AOL) and Yahoo ( YHOO), all of which can easily be streamed to your smartphone by downloading a free app. Yet, investors remain convinced Sirius XM has no competition and is a monopoly. But I wonder what will be made of the news that came out on Tuesday from Samsung? Samsung is in a neck-to-neck race with tech giant Apple ( AAPL) in the fight for smartphone supremacy. Many do not realize that Samsung is in fact winning by having surpassed both Apple and Nokia ( NOK) in global device sales in the first quarter. As a way to attack Apple's popular iTunes service and to a lesser extent Research in Motion's ( RIMM) BlackBerry music service, Samsung plans to launch its own mobile music service for its latest Galaxy smartphone model called Music Hub. While analysts were quick to focus on its impact on iTunes and possibly Pandora, I think the real victim from any success of this service will be Sirius XM.
For investors who continue to be impressed by satellite delivery platform, Samsung is about to demonstrate exactly why I have been insisting for quite some time that the IP standard is the future. Although the company will initially offer the service for free through the customers of the new Galaxy phones, it said that it will make it available to any competing device. Music that is purchased through the service will be stored on the cloud and will then appear on all devices owned by the consumer, both on the cloud and locally for off-line listening. The best part of all of this is that Samsung will allow users to upload and store their own music to the cloud so it can be accessed from either their personal computers or smartphones. So the question is, what will be the motivation for customers to continue to pay more money for a one-way satellite music service? With Sirius reporting 7 million cancellations for 2011 and 4 million the year before, I wonder what type of impact this new competition will have on its service. That's assuming investors consider Samsung a threat to Sirius' so-called "monopoly." What exactly is the future of satellite radio? It is hard to say at this point that it has one, absent a cloud strategy. The satellite delivery mechanism is limited in its ability to engage the 21st century consumer. Sirius XM would have been a good idea in 1995. However, in 2012 and beyond, unless you have a cloud strategy and are based on the IP platform you are a dinosaur or, as Rocco Pendola recently suggested, you become extinct. However, the winner of all of this continues to be Liberty Media, which seems to care very little about Sirius' business and appears interested in acquiring the company solely for its assets, which include $8 billion in future tax benefits. Remarkably, Sirius NOLs, or Net Operating Losses, which are currently valued at $8 billion, are more valuable now than the entire company, whose market cap has fallen to $7 billion.
So, in essence, its failures are now worth more than its successes. If that is not an indictment of any company, I don't know what is. For investors who continue to think Liberty cares about the stock, as I have said recently it has already gotten the cake. The stock will likely continue to fall and Liberty will continue to (as retailers like to say) "back up the truck" -- except, it has little to no risk in when it buys.