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Sirius XM Analyst Lauds 'Serious Content Upgrades'

Barton Crockett says a baseball deal extension and an agreement with a Spanish-language radio star set the firm apart from music services like Pandora and Spotify.

Lazard Capital Markets analyst Barton Crockett in a bullish report has lauded satellite radio giant Sirius XM Radio for a couple of recent "serious content upgrades."

He cited a just-announced Major League Baseball deal extension and an agreement announced last week with Spanish-language radio star and former Univision Radio host Eddie "Piolin" Sotelo.

"We see these deals as a meaningful step-up in content that drives sub growth and separates Sirius XM from music services like Pandora and Spotify," the analyst said.

Crockett reiterated his "buy" rating and $5 price target on the stock of Sirius, which is controlled by John Malone's Liberty Media.

Discussing the undisclosed cost side of the content deals, the Lazard analyst wrote: "We also believe these deals are consistent with guidance for long-term program cost improvements."

Sirius XM has not disclosed financial details.

However, the company's former deal for MLB matches on XM cost $60 million per year through 2015, Crockett said. "We had assumed in renewal in 2016 that costs would drop to $12 million per year, consistent with the writedown of the MLB contract at the time of the Sirius/XM merger, the norm that MLB always costs less than NFL and the fact that the former MLB cost had been bid up by competition between the now merged Sirius and XM," he explained.

"While we don't know the new MLB terms, we do know that Sirius XM is retaining guidance for lower program costs as rights deals renew," he continued. "So, we believe that for now we can retain our former long-term assumption for an MLB cost step-down in 2016 even though Sirius XM is obtaining expanded rights" by making games available on Sirius as well.

Addressing the Piolin deal, Crockett said: "We believe Piolin's audience is over 3.5 million" before his recent departure from Univision, which was clouded by a report  of sexual harassment allegations from a former co-worker. "We assume that Sirius XM found a reasonable way to become comfortable with this issue and believe that Piolin could provide a substantial boost to Sirius' growing efforts with Hispanics," the analyst concluded.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai