Image source: Sirius XM Radio.
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Satellite radio is still going strong, as Sirius XM Radio (NASDAQ: SIRI)announced another strong quarter. The top dog in premium radio would go on to top the 31 million subscriber mark shortly after the period came to a close, and it also declared its first quarterly dividend.
Sirius XM hosted an earnings call for analysts on Thursday morning, and management had some interesting things to say. Let's check out some of the noteworthy nuggets.
Letting automakers call shotgun
Our relationships with the OEMs (original equipment manufacturers) has yielded benefits on both sides. Not only do we generate a ton of cash flow, but the strength of our model also rewards the OEMs with aggregate payments of approximately $1 billion per year. No other service in the car provide such a financial benefit to the OEMs.
Sirius XM is saying that it shells out $1 billion to car manufacturers every year for installing Sirius or XM receivers in their vehicles. This is a pretty big deal, and it helps illustrate why Sirius XM will be fine in this era of connected cars.
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Automakers have meaty incentives to promote Sirius XM's availability in their cars. This gives satellite radio an edge, even as car manufacturers make it easier to access free or nearly free streaming options.
Used cars are new opportunities
While conversion of new car buyers remains our largest acquisition channel, it accounted for only 48% of all self-pay gross additions this quarter. Conversions of used car buyers continues to grow rapidly, accounting for 25% of self-pay additions in the quarter, and we expect this figure to grow for many years to come.Including our win-back and direct-to-self-pay marketing efforts, total used car additions were 34% of our self-pay adds in the quarter.
Getting its receivers into new cars is going to continue to be a juicy part of the Sirius XM's customer acquisition strategy, and with a record 76% of all new cars coming with a Sirius XM receiver already installed, it's easy to see why that's the case. However, used-car additions continue to grow in the double digits.
Sirius XM has done a good job of finding ways to incentivize used-car dealers to assist it in the introductions. Sirius XM is also getting better at encouraging ex-subscribers to give satellite radio subscriptions another shot, and that often happens in secondhand cars.
We are also getting that in a position where we can begin to have more conversations with Howard, himself, and clearly we will launch our video service with Howard, there's no question there. I hope I have more to say about this in the next couple months, but you should assume it is sometime next year.
One of the interesting morsels in Howard Stern's latest contract renewal was that it would also include video. We're still waiting on that, but Sirius XM is now pointing at 2017 for the launch of video. It remains to be seen if video can be a game changer for Sirius XM, but it could make its flagship service either more sticky or arm it with offerings that could justify higher premiums.
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