It’s probably the most fundamental, immutable law of the business world. Commerce 101.

Excessive profits invite competition. In time, those competitive forces will pressure margins and drive industry returns down towards its cost of capital.

Unless there is a protective economic moat in place. Something that stymies the encroachment of rivals. These metaphorical trenches are what keep competitors at bay… allowing the business to generate excess returns.

But what if there was no need to erect such defenses? Because there were no potential assault on the kingdom. No pillagers. No competition. Maybe it has been beaten into submission. Or never even existed in the first place. Yes, I’m talking about a monopoly.

That’s not a hypothetical scenario.

While rare, there are more than a few examples (past and present) of powerful businesses that exert dominant control over an entire industry. Perhaps the most infamous is John D. Rockefeller’s Standard Oil. Rockefeller was as ruthless as he was brilliant, doing everything possible to get products into the hands of customers more efficiently than rivals.

Instead of paying $2 or $3 for barrels to transport kerosene and other goods, he bought the wood and hired workers to build them for half the price. Instead of paying top-dollar for shipping, he arranged lucrative, high-volume freight rebates with railroads. By exploiting supply chain efficiencies and natural economies of scale, Standard Oil was able to undercut rivals and muscle out smaller players — effectively crushing the competition.

Those that stood in its path were simply bought out. In one six-week stretch, Rockefeller acquired 22 of his 26 closest rivals in the refinery-heavy Cleveland region — absorbing their operations into his own vertically integrated network. By the turn of the century, he had consolidated approximately 90% of the market share for refined petroleum products.

Eventually, the Sherman Antitrust Act and U.S. Supreme Court toppled the mighty empire, cracking it into 34 smaller companies. Today, the descendants of that breakup include Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP) and ExxonMobil (NYSE: XOM).

But don’t shed any tears for Rockefeller. He held his shares and amassed a colossal fortune equivalent to $350 billion in today’s dollars — making him one of the richest men in history.

Of course, Rockefeller isn’t the only business tycoon to build incredible riches by stifling competition. Andrew Carnegie cornered the steel market. And Cornelius Vanderbilt monopolized certain railroad and shipping trade routes. These titans of industry are etched in history, their very names synonymous with wealth and power.

A monopoly is loosely defined as a situation where one producer controls the entire supply of a good or service for which there are many buyers. In theory, this provides nearly unchecked pricing power. If you want to see it in practice, just go to a concert arena or NFL football game and stand in line for a beer — expect to pay far more than you would outside the stadium.

I know what you’re thinking: that could never happen today. But there are more than a few case studies suggesting otherwise.

— Microsoft’s (Bill Gates) Windows PC operating system
— Oracle’s (Larry Ellison) database management software
— Google’s (Larry Page) internet search engine

While not true monopolies — Google only controls 90% of its market — these powerful leaders dominate their respective fields and have quashed (or acquired) many who threatened to chip away at their customer base.

They’ve also done okay for shareholders over the years.

Of course, there is an army of federal anti-trust regulators whose job is to prevent any one business from wielding too much power. They will block mergers if necessary and levy fines for violations. Still, there are exceptions to any rule – and I’m not just referring to public utilities.

Union Pacific (NYSE: UNP) operates 32,000 miles of mainline railroad track, much of which is protected by “right of way” grants that block would-be competitors. These special permits give the company a legal freight transportation monopoly over many key corridors in the western half of the U.S.

Elsewhere, general aviation airport authorities award only a single operating license/contract for on-site fueling, cleaning, parking and other services. This concessionaire, known as a fixed base operator (FBO), is the only game in town for flights in and out of these facilities.

Then there’s Intuitive Surgical (NSDQ: ISRG), which has few large-scale competitors in the manufacture of robotic-assisted surgical tools. Tens of thousands of surgeons are trained to use the firm’s flagship Da Vinci systems, which have been installed in more than 10,000 hospitals and used in 16 million successful procedures.

The latest Da Vinci models run about $2 million apiece. Not cheap, but mere pocket change compared to deploying a communications satellite into space. They can easily cost $200 million each. That doesn’t include programming costs. Howard Stern alone is reportedly under contract for $120 million per year.

These financial deterrents haven’t just limited competition — but shut it out altogether. This industry has one lone player, which helps explain its bountiful 10-figure annual free cash flow (FCF) figure.

If you haven’t guessed, I’m talking about Sirius XM (NSDQ: SIRI).

Beyond AM and FM, there is XM. So went the marketing slogan for the world’s first satellite service, which launched in September 2001. Rival Sirius entered the picture just a few months later. And for a while, the two went to war for subscribers.

They called a truce in 2007 and decided to join forces. The proposed merger met with intense scrutiny from the Department of Justice, which ultimately gave the union its blessing (with a few caveats). Those details were hammered out; the paperwork was signed; and the deal officially closed, resulting in the company we know today.

SiriusXM may provide the only radio programming beamed from geostationary satellites orbiting 22,000 miles above the Earth, but that doesn’t mean there are no other outlets for media consumption. You can still tune into terrestrial radio stations in just about every major city. Streaming services like Spotify are popular with the younger Gen-Z crowd. Some prefer to create Apple iTunes playlists. And internet podcasts are available on countless devices.

Still, SiriusXM is a one-of-a-kind service with a massive following and some daunting competitive advantages. Shortly after the merger, the company had 18 million paying subscribers. It has since nearly doubled in size to 33 million (although the numbers are a bit off their peak).

And there are key allies funneling in potential new customers daily. I’m talking about Ford, General Motors, Toyota, Lexus and other leading automakers. Most new car and truck models are equipped with receivers and free (or prepaid) 3-month trial offers. Of course, not all will choose to renew after that initial 90 days – but thousands do.

SiriusXM offers a bewildering array of content. Sure, music, in just about every conceivable genre from bluegrass to classical to heavy metal. But there is also news, political talk, comedy, and a wide array of sports. You can catch the home or visitor’s radio feed for major league baseball games. And it’s the exclusive provider of live coverage of every NFL football game.

There are over 400 commercial-free channels available on several different subscription tiers. You can listen to music anywhere. But subscribers appreciate the curated content that just can’t be found anywhere else.

Town Hall artist interviews and performances. Rare concert replays. And exclusive shows, such as Tom Petty’s Buried Treasure and the Margaritaville Jimmy Buffett buffet. Those of a certain age can also reminisce with their favorite on-air radio personalities. I’m partial to original 80’s MTV veejay Alan Hunter and KROQ legend Richard Blade.

In terms of ad-free listening time, SiriusXM is the No. 1 player with a 21% share of the market, followed by Spotify at 20%, YouTube at 15%, Apple at 8%, and Amazon at 5%. The rest of the field is highly fragmented and up for grabs.

SiriusXM plans are affordable, with promotional packages starting at just $5 monthly. But those fees add up, generating $1.6 billion in revenue last quarter. Advertising (thanks to the acquisition of Pandora) brought in another $500+ million.

Management is making an active push into the streaming market with a plethora of online (not satellite) channels and on-demand podcast content, appealing to customers who don’t spend much time in their cars. Sirius has barely tapped into this $7 billion addressable market.

As it stands, total revenues are expected to top $8.5 billion this year, from which it will pocket $2.6 billion in EBITDA. That’s a healthy margin north of 30%. And a good chunk of those profits will be returned via dividends, with distributions having risen steadily since they became a regular fixture in 2017.

The stock is well off previous highs in the $60s, a dip reflecting some slippage in key metrics. The company shed 445,000 self-pay subscribers in 2023 and another 296,000 last year. But that bleeding has since been largely stanched. It added 149,000 in the fourth quarter of 2024 and saw a 16% reduction in first quarter 2025 attrition, with average revenues per user (ARPU) stabilizing.

Looking ahead, SiriusXM has just undergone a branding makeover, while introducing new products to broaden its reach with the under-penetrated younger demographic. That includes targeted new entertainment options like the TikTok channel.

Meanwhile, even with sluggish revenues, the business remains solidly profitable. In fact, management is still aiming for $1.5 billion in free cash flows in 2025, quite a punch for a mid-cap business valued at just $8 billion. And with satellite maintenance expenditures on the decline, I expect to see meaningful growth in this department over the next few years.

Satellite spending is expected to be cut in half from $260 million in 2024 to $95 million in 2026, and then taper off to near nothing by 2028. That will leave more cash on the table for dividends, as well as continued stock buybacks – which, incidentally, have already reduced the share count by almost half.

But don’t just take it from me. SiriusXM has another bullish fan in Warren Buffett. At a cautious time when Berkshire Hathaway (NYSE: BRK-B) has been a net stock seller, team Buffett has made an exception for SIRI, accumulating a massive stake of 120 million shares. That’s about 35% of the outstanding stock, making Berkshire the top shareholder.