This is the "Oprah moment" that XM Satellite Radio(Nasdaq: XMSR) has been waiting for. This morning, XM launched channel 156 as Oprah & Friends. Ever since the satellite radio provider announced the $55 million, three-year deal back in February, investors have been lining up on both sides of the fence.
Bulls feel that XM is getting a bargain, drawing the queen of television syndication and a proven celebrity so powerful that she can disrupt the book best-seller lists with a simple nod of the head. Bears counter that unlike the $500 million, five-year deal that Sirius(Nasdaq: SIRI) landed with Howard Stern, Oprah Winfrey is only making a partial commitment to the satellite radio medium, starring in just a weekly one-hour show with no intent of giving up her lucrative television career the way that Stern walked away from terrestrial radio.
There is some merit to the cynical argument. What makes Stern attractive to Sirius is the exclusivity of his satellite radio show, despite secondary efforts to carve out revenue streams through video on demand.
However, bears are missing the point if they underestimate the gravity of the situation. Yes, Winfrey's actual appearances may be sparse, but the channel's programming allows access to the stars that she had created. If you're a fan of Winfrey's television show, having a cast of the physical trainers, financial planners, spiritualists, and home improvement celebrities that are fixtures on the show is an appealing proposition.
It's also important to point out how this positions XM at the retail level. XM commands the lead in car manufacturer installations, but has lagged in the retail market since late last year. Given the broad slate of shows starring the likes of Maya Angelou and Winfrey's best friend Gayle King, fans won't be satisfied with simply having an XM subscription in their car for their daily commutes and errand hopping. In theory, this could be the channel that makes XM a force in the home.
One can argue that this is what Sirius has been trying for some time now with Martha Stewart of Martha Stewart Living Omnimedia(NYSE: MSO) fame. The problem is that Stewart is no Winfrey in terms of star power and -- more importantly for the medium -- that Stewart's niche in home entertaining and house crafts is better suited for the visual format of television. Winfrey's show and the chatty nature of her guests and hosts make radio the perfect platform.
Winfrey as an entrenched golden brand may not need this kind of amplification. XM, on the other hand, can use a little of Winfrey's magic touch. Even though shares of XM have marched 40% higher over the past two months, the stock is trading well off its all-time highs set just before the 2004 holiday season.
You can't spell Winfrey without win, and that seems to be exactly what XM has on its hands this morning.
XM is an activeRule Breakersnewsletter recommendation.
Longtime Fool contributor Rick Munarriz is a Sirius and XM subscriber. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story.The Fool has a disclosure policy.