February 11, 2009

Sirius Radio Now Looks Like an Outer Space WebVan

WebVan's debut in the 1990s as a way to order groceries online and have them shipped to your home or business sounded like a fantastic way to leverage the power of the Web. But as we all know now, the costs of deploying expensive, expansive warehouses in many metropolitan areas, not to mention the costs of delivery and promotion, were way beyond what was sustainable. Hundreds of millions of dollars in venture capital, not to mention stock holders after the firm went public, went up in smoke, as the company spiraled into bankruptcy.

The idea may have been ahead of its time or just poorly implemented, but it stands as a tragic example of where hope came ahead of logic. And now we're seeing it again - with all the news around Sirius XM Radio's potentially filing for bankruptcy, after the struggling satellite radio company found that slowed growth in the face of lower native car installations, competition from iPod/iTunes/iPhone, and the inability to pay massive accumulated debt, have combined to make the current plan unsustainable.

And again we have what looked like a very cool idea, costing billions of dollars to deploy, on the brink of failure. And again, we see shareholders who believed in the idea, ahead of the reality, getting wiped out. In what's already been a horrific last year for the stock market, Sirius' freefall has been notable - especially considering it's not involved in banking or real estate.

A few months ago, in a podcast with Wayne Sutton and Kipp Bodnar, I said we "knew" Sirius would pull through because it had a compelling offering, and that threats to its business were overblown. Boy, was I wrong. I may have been looking forward to getting Sirius Radio with my next car, whenever that happened, but it doesn't look like that's going to happen any sooner than my dialing up WebVan for some eggs and milk.