Bankruptcy Close for Sirius Radio

Just when you thought free FM radio was a thing of the past, it may now have a clear path for a comeback.

Sirius XM Satellite Radio Inc. suffered a 31% drop in shares during this morning’s trading coinciding with reports that the company may be close to filing for bankruptcy protection. The stocks dropped 3 cents to 8 cents per share, which is a significant blow considering that the company traded shares for around $4 just two yeas ago [CNN].

Since their inception in 1999, both Sirius and XM offered more than 100 varying music and talk channels and attracted millions of subscribers who were sick of hearing the same pop-radio-friendly music across hundreds of stations owned by the same company.

However, Sirius and XM’s monopoly on satellite radio was no better than the one they were trying to combat. The two companies lost millions of dollars each quarter, chiefly because of marketing costs. Even a merger of the two satellite stations in July 2008 resulted in more financial despair in 2008′s third quarter, where Sirius XM lost $4.88 billion selling shares at $1.93.

And now they’re at 8 cents?! Seriously, even if Sirius XM files for bankruptcy protection, as reports from the New York Times and Wall Street Journal both indicate to be true, it sounds like a lost cause. In our current economic recession, barely anyone can afford gas, let alone pimped-out cars complete with the latest in satellite radio technology.

Today’s 31% drop in trading says it all. FM radio is free and always has been, so people with money problems (which is nearly everyone) are going to opt for free radio. And beyond that, free Internet radio websites like Pandora and Musicovery are taking a huge toll on the demand for Sirius XM. And this is another whole tangent that I could carry on with for days, but with torrent files widely available, it’s just easier to download anything we want and upload it to our MP3 player or iPod.

I never invested in the Sirius/XM craze, mainly because my gut said to me, ‘This is just an expensive fad and pretty soon it will be gone because people will want something better for cheaper.’ Behold, the power of intuition.

Do you think Sirius XM will be able to pull itself out of this one? Even if it does, how much longer will it last before something “better for cheaper” comes along to cause more financial troubles?