Sirius XM Gaining Foothold in Push for Automotive Connectivity, CEO Says
Sirius XM’s recent telematics agreement with Nissan and its Internet protocol-based personal radio project give the satellite radio operator a foothold in the automotive industry’s push to make Internet connectivity broadly available in vehicles, Sirius XM executives said Tuesday on the company’s earnings call.
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Sirius XM’s personal radio project, MySXM, launched as a public beta test two weeks ago to the company’s Internet streaming desktop subscribers, but the timing for a full rollout hasn’t been set, the company has said. MySXM allows subscribers to create their own online playlists from Sirius XM channels personalized to their “own tastes and moods,” Sirius CEO James Meyer said. MySXM will be available, along with on-demand offerings, across Android- and iOS-based smartphones and tablets and will “eventually make its way into the automobile seamlessly as well,” Meyer said. Sirius XM’s standalone Internet streaming service carries a $14.49 monthly fee or an additional $3.50 on top of the standard automotive subscription. A significant number of Sirius XM subscribers also get the streaming service, the company has said, without being more specific.
Sirius XM unveiled its telematics pact with Nissan in September. The companies have said they're working to add services like roadside assistance and automatic crash notification. Sirius XM hasn’t said when Nissan may begin deploying the services or when the agreement might start generating revenue for Sirius XM. The telematics development strengthens Sirius XM’s “relationships” with automakers in addition to broadening its base of in-vehicle technology, Meyer said. While all features of the “connected car” haven’t been “fleshed out yet,” Sirius XM is gaining a position in the discussions, Meyer said. Sirius XM should also benefit from a recent agreement to expand its penetration in Toyota vehicles during the next two to three years, Sirius XM has said.
"I think every automaker now is either planning or is putting in place how they intend to deal with their architecture in 2017 and beyond vis-a-vis the connected car,” Meyer said. “We think that it is important that we participate in those discussions. I am not exactly sure what business we ultimately need to be in. That’s why we are working with other OEMs to try and deliver to them what they may want. What’s important to me is that we ensure in this next generation, and by that I mean in the 2017 and beyond time frame, that when the car has two paths into it” with IP and satellite, “that we've figured out how to best monetize that."
As of Feb. 1, Sirius XM increased to $1.81 from $1.42 the monthly royalty fee it charges basic subscribers to reflect a Copyright Royalty Board decision in December (CD Dec 18 p8) that imposed slight music royalty increases through 2017, Chief Financial Officer David Frear said. Sirius XM had paid 8 percent of annual revenue as a royalty to Sound Exchange, which represents music companies and musicians.
Sirius XM has forecast gaining 1.4 million net subscriber additions this year, after gaining 2 million in 2012. It ended the year with Sirius XM service available in 67 percent of new cars, a penetration rate that’s expected to remain stable for the next five years, the company said. Sirius XM ended 2012 installed in 50 million registered vehicles or 20 percent of the total in the U.S., up from 40 million a year earlier, the company said. It added 529,000 self-pay subscribers in Q4, to end the year with 23.9 million. As part of its push into used cars, Sirius XM added slightly more than 1 million gross subscribers in 2012 and is targeting 1.5 million this year, the company said. Sirius XM service is available through 8,000 used car dealers, including CarMax, AutoNation and Penske. The business generated by re-acquiring subscriptions in used cars containing previously installed radios is “immensely profitable” and “certainly as good as” new cars, Frear said.
Sirius XM’s Q4 net income grew to $156.2 million from $71.3 million a year earlier as revenue rose to $892.4 million from $783.7 million. Subscriber revenue rose to $774.4 million from $672.4 million, while advertising revenue increased to $22.4 million from $20 million. Equipment sales slipped slightly to $22.27 million from $22.65 million. Subscriber acquisition costs grew to $126.6 million from $116.7 million and Q4 monthly churn narrowed slightly to 1.8 percent from 1.9 percent a year earlier. It was the Sirius XM’s best churn performance since Q3 of 2008, the company said.