We see continued pressure on Sirius shares in months ahead.
The Live 8 show created some excitement, but over the long term, its viability remains to be seen. There's going to be competition among digital entertainment outlets.
The new CBS seems to us off to good start, Howard Stern's exit could weigh on the radio segment.
Furthermore, bigger cable operators such as Comcast, vertically integrated Time Warner or well-clustered Cablevision, with relatively manageable spectrum constraints, are likely to face relatively minimal DTV or retransmission consent exposure.
Media operators that do not have a well- articulated digital strategy do so at their own peril.
These efforts toward product differentiation could face future legal challenges from the networks. Also, the potential advertising opportunity could take several years to scale, if at all.
We think the fourth quarter was hurt by higher-than-expected cost-per-gross addition of $141, in our opinion mainly due to non-recurring marketing expenses.
That's why the stock is under pressure.
We think the deal should be mostly positive for Time Warner, as it would offer AOL increased flexibility over the long term to grow its advertising revenue base, and monetize its branded content through broader exposure for AOL's vast stable of online properties, consistent with what we view as its well-articulated turnaround strategy.
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