We have closely watched the metamorphosis of satellite radio since the service went live in 2002. The notion of data signal transmission over satellite link was interesting and relevant to those who wanted a wide variety of music and other content, unfiltered and uncensored, and were willing to pay a fixed subscription fee.
Merged as a single company in 2008, SiriusXM Satellite Radio continues as a feature in most new vehicles and has approximately 25 million subscribers, including those who obtain the service at no charge on a trial basis. Those who choose not to subscribe when their free trial ends are referred to as “churn,” returning to over-the-air radio. But as more vehicles are delivered with connectivity options, are those customers switching to streaming services such as Pandora, Spotify or iHeartRadio?
SiriusXM EVP and CFO David Frear says “The majority of the churn we see … are going back to FM radio, or going back to terrestrial radio. We’re not seeing a meaningful impact that I can see on our business today from streaming. That doesn’t mean we won’t in the future, but today we just don’t see it.” Tell that to Pandora, which has nearly 77 million active listeners and is becoming a regular feature in many new cars with integrated connectivity to streaming services.
As SiriusXM’s competitive advantages evaporate and streaming services reach massive consumer adoption, one must question how the company can survive. SiriusXM’s recent acquisition of Agero’s connected vehicle services provides one possible answer. The acquisition will allow SiriusXM to offer end-to-end telematics services, including safety, security and convenience features, according to the company. This also solves the legacy issue of SiriusXM’s inability to upload information from vehicles to its satellite network, thus better positioning the company to collect in-vehicle and user data on an individual basis.
The fixed-subscription fee model could also be adjusted toward a user-based model, with bundled connected services and content delivered on a pay-as-you-go basis. This could put SiriusXM in a leader position relative to streaming services, even those that don’t require a subscription.
We firmly believe that customers will pay for value. Delivering on that value is the challenge, so we will keep watching how SiriusXM navigates their way into new connected car services in the coming years.
Source: Will Connected Cars Bring About the End of SiriusXM Satellite Radio? – The Motley Fool