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Pandora: The Death Knell of Sirius XM


With a few more tweaks, Internet radio will eliminate the need for satellite subscriptions.

Yesterday at the Consumer Electronics Show, Ford (F) Chief Executive Alan Mulally unveiled a new vibrant dashboard touchscreen featuring Microsoft's (MSFT) SYNC technology. Rolling out later this year in Edge and Focus models, the SYNC API will be able to communicate with iPhones (AAPL), BlackBerries (RIMM), and Android (GOOG) smartphones, enabling drivers to control their phones on the car's dashboard via Bluetooth and run a number of apps. Chief among them: Twitter, turn-by-turn GPS navigation, Sync voice command, and -- most notably -- Pandora's Internet radio.

Jokes about tweeting your imminent head-on collision aside, this is yet another step toward the standard implementation of free Internet radio in your car -- which has evolved from a pipe dream to an inevitability since appearing on home computers. And as much as hardcore Sirius XM (SIRI) fans and shareholders scoff at the notion, $13-a-month subscriptions for unskippable content can't compare to free, controllable, and infinitely more choices.

Enjoying Internet radio in your car used to be as simple as a hard wire connected from your iPhone to the input jack. As long as you maintain a 3G connection on AT&T (T) -- just be choosy about your route -- you'd be able to listen to your station of choice through your car's sound system. But as concern over driver distraction became more prevalent due to the rise in text messaging and mobile Twitter use, wireless connectivity triumphed over staring at a smartphone's tiny screen. In-car wi-fi will be the next step in the coming years.

A partnership between Pandora and electronics manufacturer Pioneer didn't hurt either. In the truest form of corporate synergy, a recent deal was struck between the two companies without either side exchanging a cent, according to statements made by Ted Cardenas, director of marketing for Pioneer, to the Wall Street Journal. Both companies believe customers are starting to see the versatility of Pandora Radio.

In addition to Ford's presentation, the announcement of this partnership has champions of Sirius XM on the rabid defense. But there are still enough hiccups in Pandora's service to keep Sirius XM safe for now.

The Pioneer system showcased at CES is a bank-buster at a whopping $1,200 -- not exactly an entry-level price to entice the curious. While Pandora is ad-supported, the free version of the app only allows a certain number of song skips per 24-hour period, thus limiting the total control you have over browsing new music, and puts it on an even keel with satellite. But Sirius XM offers many more options in talk, news, and comedy stations than what Pandora currently provides.

And if using the aforementioned AT&T, you're never guaranteed a signal decent enough for quality play.

But the writing is on the wall: Ultimately, satellite radio can't compete with the rise and increasing versatility of Internet radio.

Sirius XM has dropped from being a hot commodity to a penny stock, and spent the last year introducing new and higher fees to its customers, causing the total number of subscribers to dip for the first time since 2001. While Sirius XM hovers above 18 million customers, Pandora has over 40 million users. Sirius XM may offer hundreds of stations, but a Pandora playlist conforms to any song in your collection. And if your company hinges on the whims of one shock jock, that's a glaring flaw.

The $1,200 Pioneer stereo probably won't herald a meteoric rise in Internet radio, but it does signal the beginning of the end to satellite. It may take years, but the unlimited variety and better control over your music will undoubtedly win out.

Until then, there's always the iPod.

Editors note: An earlier version of this story incorrectly stated that Sirius filed for bankruptcy.
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