Things never get dull for the country’s lone satellite-radio provider. Shares of Sirius XM Radio Inc (NASDAQ:SIRI) moved sharply lower on the week, shedding 5.5% to hit $3.27. The media darling’s drop was far worse than the more modest declines for the Dow and Nasdaq.
Sirius XM slipped after Apple Inc. (NASDAQ:AAPL) unveiled a streaming service and deeper iOS integration in cars. Higher mortgage rates may also be problematic for Sirius XM Radio Inc (NASDAQ:SIRI). Meanwhile, Pandora Media Inc (NYSE:P) made a surprising move that could lower its streaming royalties. But at the same time, the number of shares of Sirius XM sold short did decline slightly in the latest bimonthly report.
There was more going on this week beyond the share-price gyrations, though. Let’s take a closer look.
Apple turns up the Radio
There has been iRadio chatter for months, and reports that Apple Inc. (NASDAQ:AAPL) had struck deals with the final two major labels last week made it a lock for the tech giant to announce its new platform during this week’s WWDC.
iTunes Radio will be built into iTunes as a free ad-supported music-discovery service. Users who want an ad-free experience can pay $25 a year for the existing iTunes Match service that will now include ad-free iTunes Radio.
The product itself sounds like a bigger threat to Pandora Media Inc (NYSE:P) than to Sirius XM Radio Inc (NASDAQ:SIRI). The model is certainly similar, and the premium offering is even priced less than Pandora’s $36 a year.
However, Apple also revealed that it’s working with at least five automakers to integrate iOS in their dashboard technology by as early as next year. If iPhone owners can stream iTunes Radio seamlessly from their Bluetooth-enabled car audio systems, does Sirius XM Radio Inc (NASDAQ:SIRI) become a luxury instead of a near necessity?
It may not seem like a big deal now, but mortgage rates hit a 14-month high this week. According to the Mortgage Bankers Association, the average rate on a 30-year mortgage has spiked from 3.59% early last month to 4.15% now. The move has resulted in a 36% plunge in refinancing applications.
How does this play into satellite radio? Well, let’s think about car sales. Showrooms are always hungry to make deals, so you can bet that automakers will be aggressive in keeping financing rates low. However, a lot of people who were taking advantage of low refinancing rates and rising home prices to take out money in a refi to buy a new car or other big-ticket item will now be less likely to do so.
Sirius XM Radio Inc (NASDAQ:SIRI) relies on new-car sales to grow its subscriber base, so this bears watching.
Pandora goes terrestrial
Pandora turned heads on Tuesday when it announced the purchase of a small radio station in South Dakota.