The Dawn of a New Media Era as Defined by Liberty’s John Malone and Sirius XM’s Mel Karmazin

By Rick King -

Every few generations our culture finds new ways to define itself. Usually there is no stronger indicator of culture’s shifting winds than the music a generation listens to. The method in which a generation listens to its music defines it as well. Is it possible we are in the midst of exactly that? Another media revolution of transformation in the winds, from terrestrial radio and television broadcasters to satellite media?

The current population wants access to information everywhere and on demand.  Generation “Unlimited” has no concept of limitation.  They live in a world where information of every type is available at the speed of an electron in more forms than they can count.  Information and how it is channeled to a user permeates every aspect of business.  AM and FM Radio don’t work everywhere geographically so it’s fading.  Same thing for television, initially change came in the form of cable and now with continuing dominance by satellite media.

How many people still remember the world of no television?  Black and White television broadcast?  The days when AM radio was the mainstay of the American living room?  In every single instance of such change, critics denied the very possibility it could happen.  Emotions have always  run especially deep in American society when it comes to our music and how we listen to it.

Evidence is mounting that we’re in the middle of such a cultural shift.  Investors who recognize such a change early on are usually uncommon.  There are several things to keep your eyes on right now.  First is Sirius XM Radio’s (NASDAQ:SIRI) recovery during a difficult economic period. Despite one of the longest mergers in corporate history between then Sirius Satellite Radio and XM Satellite Radio, Sirius XM Radio has emerged from 2009 as a remarkable story in underestimation.  On any given day diehard Sirius XM Radio fans and investors could rely on a myriad of articles decrying its existence.  Half a year after its merger was complete, media sources continued to publish content claiming it was destined for bankruptcy despite a clear end to those fears. If not fear of bankruptcy, readers would easily find articles claiming everything from failure of the company’s iPhone application to rumors of Howard Stern leaving the company.  All were obviously unfounded, but nevertheless the company emerged from 2009 going from a microscopic six cents (yes the number “6″ folks) way back in February 2009 to its recent peak of $1.18 in mid-February 2010.  Since then gains have retraced slightly below a dollar, closing yesterday around .953 with after hours movement to 97 cents.  Volume was a record-setting 609 MILLION shares as of today, April 7, 2010.

Now throw in a few other possibilities circulating the blog circles.  There are so many at this stage even loyal blog followers are having a difficult time tracking them. One prevailing theme reigns: John Malone’s Liberty Media is up to something.  Hints keep showing up each week. From his company’s efforts to delve into the recent Worldspace Satellite Radio bankruptcy proceedings to filings introducing the world to an entity known as “Liberty Satellite Radio,” and most recently signs Liberty might increase it’s ownership stake in Sirius XM Radio (which currently sits around 40%).

I would like to throw a theory to the four winds.

John Malone is undoubtedly one of the most successful corporate leaders to emerge post-crash. His maneuvers early in 2009 to provide assistance to Sirius XM Radio in sheer spite of efforts by Dish Network’s Charles Ergen to acquire the company shows the business leader’s mettle. Not only acquiring a 40% interest in a new media monopoly early in it’s fiscal recovery, but simultaneously thwarting Ergen’s bid at the Satellite Radio company’s assets and controlling his competition.

Consider what could come post-John Malone. There is no doubt Greg Maffei is a champion for the company, and Satellite Media as a whole. Add to this Sirius XM Radio CEO Mel Karmazin’s absolutely incredible survival ability, saving Sirius XM from an uncertain fate.

Why Liberty Media’s recent interest in the Worldspace assets?  Little did many people realize at the time, but XM Radio’s infrastructure – now part of Sirius XM Radio – is compatible with the Worldspace Inc technology. It took a while for our readers to pick up on the significance of that (but they rapidly learned from our own Steve Garcia, who has pretty much nailed this situation down from the beginning.)

Now bounce to another part of the drama.  John Malone stepping down from the DirecTV Board of Directors.  Could John Malone be ready to turn the reigns over to widely recognized successor Greg Maffei?  Think about this: if this occurs, would it not make perfect sense for Mel Karmazin, who steered Sirius XM through the 2009 minefield, to lead a combined global strategy headed by Liberty Media to push satellite radio content overseas?

There are more sides to the story than facets on a 100-carat diamond.  Any investor covering the satellite media companies will quickly declare something is going on.  As the plot thickens, readers continue to look for answers as it unfolds.

Who can blame them.  Many retail SIRI investors have already experienced gains other investors dreamed of during their entire investment experience.

Factor in more problems with terrestrial broadcasting companies keeping the lights on.

Stay tuned.

Disclosure – Long SIRI/No holding in Liberty Media