Sirius XM Valuation

What follows is an excerpt from a valuation write-up on Sirius XM.

A comparison of the competitive landscape for internet radio vs. satellite radio is interesting. There are countless ways to listen to music online, but there’s only one way to listen to satellite radio as Sirius XM (originally two competing companies) is the only provider of satellite radio in the US and Canada. Satellite radio’s chief asset is the fact that it is not localized: drivers can receive the same programming anywhere in the footprint of the service. Additionally, the company sees its content as a competitive advantage (in commercial free radio, sports coverage and news, talk & entertainment).

Valuation Model

Monte Carlo Simulation

Liberty media stake in Sirius XM

From an old interview with John Malone (2001):

“Probably the most persistent thing I’ve always wanted to be involved in is satellite. I’ve always wanted to be in the satellite business, I always thought that satellite was a great complement to cable because it would give you ubiquitous distribution and plus the satellite as a transport mechanism fulfills a need for cable and the ubiquity fulfills a need for the public. And from the earliest days, the regulatory and political processes kept cable companies out of satellite and I always thought that was a terrible public policy mistake, which I tried to overcome in all kinds of structural ways, by PrimeStar… we really started with Scientific-Atlanta and a thing called HomeSat when the small satellite receiver for C-band first became available. We started a company called HomeSat and we were going to sell a service to rural households based upon a small C-band dish. There was no scrambling at the time, so we found ourselves in a great deal of difficulty trying to sell something that people could steal. Later on, when we finally scrambled, which incidentally is really where a lot of my disagreements with Vice-President Gore originated, but we did scramble the satellite signals. We launched a channel called NetLink and we became directly or indirectly the major provider of satellite services to homeowners who owned satellite C-band dishes. We then ultimately ended up creating something called PrimeStar, which you may remember, which was a joint venture in the cable industry to offer K band, KU band, satellite services using digital compression. Most people don’t realize, but PrimeStar was the first company that used digital compression on the satellite. DirectTV at the time was still strictly analog and did not use any compression. So we were earliest in that, but our efforts to grow that business were blocked by regulatory barriers.”

Further Reading

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