On the surface, Sirius XM Radio (NASDAQ:SIRI) reported some nice earnings this week, beating estimates by a penny with revenues in line. Subscribers increased 7% year-over-year to 21.4 million. The other good news is that churn still is very low, at 1.9%. In other words, people who become Sirius subscribers stay subscribed. The churn rate is similar to another great media service — DirecTV (NASDAQ:DTV). Sirius even reaffirmed many important aspects in its guidance, such as $400 million in free cash flow for 2011 and $700 million for 2012.

But numbers alone don’t always tell the whole story. The real story for Sirius is it doesn’t seem interested in innovating or moving forward. The problem is that as great a service as Sirius is, and as sustainable as its business model is, it isn’t bothering to give subscribers a reason to stay, or to sign up. It’s almost as if Sirius doesn’t want to try to compete with Pandora (NYSE:P).

Sirius recently released its 2.0 product, called “Lynx,” and it got no media attention whatsoever. More to the point, it offers no compelling reason to become a subscriber. In today’s entertainment space, you must innovate to stay competitive. Think about all the new products and innovations constantly coming out of Apple (NASDAQ:AAPL). Speaking of which, Sirius’ mobile app’s functionality, and even its online offerings, are weak. We are no longer in the age of the typewriter, yet Sirius behaves like we are.

Sirius also has some serious marketing problems. Take a walk around your city, or drive around it for awhile. Next time you are in an airport, look around. Watch television. How often do you see advertisements for Sirius? Not very often. How can a company expect to become a powerhouse if it doesn’t advertise?

Sirius has a great opportunity. Its demographics skew toward upscale audiences that have a lot of disposable income. This is the demographic that ad sales folk just adore. It’s also the demographic that advertisers themselves view as the Holy Grail. The problem is that, other than these folks buying expensive cars that include Sirius capabilities, the company isn’t really monetizing them. One of the great advantages of Sirius for the consumer is the lack of advertising on its programming. On the other hand, it is advertising that helps Pandora, because it uses geographically targeted ads. Still, people who have Pandora are fanatical about it. Sirius needs to learn that more advertising won’t necessarily doom its service.

There’s also an uncomfortable truth about subscriber services, and we’ve seen it occur with Netflix (NASDAQ:NFLX) and, in the last quarter, DirecTV. The latter had been adding subscribers at a robust rate for many years. All of a sudden, last quarter, it stalled. Netflix, of course, has been battling subscriber loss since its summer of debacles. The thing about subscriber services is eventually growth slows, and possibly even reverses. If Sirius doesn’t do something — like advertise and innovate — it is setting itself up for trouble.

Sirius stock hasn’t gone anywhere. Or rather, it has — but within a tight range that makes it ideal for trading. As a long-term investment, however, SIRI just doesn’t make much sense.

As of this writing, Lawrence Meyers did not own a position in any of the aforementioned stocks.