SiriusXM’s Connected-Car Ambitions ‘Very Acute,’ CEO Says

SiriusXM continues making “considerable progress” developing its “next-gen” connected-car platform, “and then driving our telematics business,” said Meyer in prepared remarks. SiriusXM’s agreement last week to supply telematics services to Nissan through a partnership with AT&T “moves us further along in that direction,” he said. “Our plans to provide services to connected vehicles are getting increasingly sophisticated. We are very excited about the company’s future in this area."

Supplying telematics services to Nissan is “tough work,” Meyer said in Q-and-A. “It’s not what I would call rocket science, but what it is, is it’s tough work. We are extremely engaged with them.” Telematics are “what Nissan wants us to do,” Meyer said. He thinks “a core part of our strategy is to make sure that we protect and nurture our relationships with our OEMs,” he said. SiriusXM also wants to be “a leader in the connected-car architecture as it rolls out,” he said. But the connected car and vehicle telematics are long-term projects, not “phenomena for next spring or next fall,” cautioned Meyer: “This is a 10-year kind of thing, and so we want to be a part and play a key role as that architecture and technology rolls out, so that we're able to pick and be a part of where there are potential service opportunities for us that nicely complement our audio business."

SiriusXM’s long-term policy is that “the actual plans of the OEM are up to the OEM to announce, and not up to us, and so we don’t disclose what we're doing and when we're doing it,” Meyer said. But any connected-car rollout will take “a long, long road,” he said. “This is a steady, stay at it, stay at it. And the reason is, you can never forget how long it takes the OEM to deploy new technology. It’s a long time. But I can tell you, it is a key focus that I'm driving the organization through as we move forward."

In Q2, SiriusXM continued to ride the good fortunes of rising new-car sales, said Chief Financial Officer David Frear. “Auto sales approaching 16 million again in June set a great backdrop for record quarterly performance” at SiriusXM, he said. “As auto sales reached their highest levels since November 2007,” SiriusXM installations in new cars “reached record levels in the quarter,” Frear said. Some 54.5 million vehicles on the road today have satellite radio reception capability installed, he said. Meyer said he stands by forecasts that the number will grow to 100 million vehicles by the end of 2017.

SiriusXM had nearly 716,000 net subscriber additions in Q2, the best such quarter for that metric since Q4 2007, Frear said: “Record subscriber levels produced record financial results in the quarter.” For example, average revenue per subscriber rose 2.6 percent from the same quarter a year earlier to $12.28, he said. Total revenue increased 12.2 percent to $940.1 million, marking the company’s sixth straight quarter of year-over-year, double-digit percentage revenue growth, said Frear.

In addition to its penetration through new cars, the company also has “a very-well-spelled-out cadence” of marketing SiriusXM to owners of used vehicles containing receivers that have been de-activated, Meyer said in Q-and-A. “We debate all the time about how much better we can execute that cadence. We track the life of that vehicle through that first owner very carefully, and we have a variety of marketing touches to that customer, whether they're active or they're not active.” Turning on de-activated radios for a two-week free trial is among the more effective marketing tricks SiriusXM has done, so much so that it repeats that promotion four times a year, Meyer said. “For those customers for whom we still have effective contact information, we send them an email telling them their radio’s now turned on, listen free for a couple of weeks.” Through such measures, “we harvest quite a bit” of new or returning subscribers, he said.

On talks with Fox News Channel on renewal of a carriage agreement that expires soon, Meyer is optimistic on a positive outcome, he said in Q-and-A. “I happen to listen to Fox News, so it’s a channel I certainly hope we keep on our service for a very, very long time,” Meyer said. “I think it’s fair to say it’s a valuable part of our content that we want our listeners to have. We obviously have to trade that off against the economics of having it. The agreement expires at the end of August, and I think it’s fair to assume that we're certainly in discussions with Fox to see if we can get that renewal redone, and you know, we'll see what happens."

Asked whether there’s a price Fox News would demand that would make SiriusXM “walk” away from a deal and allow the channel to go silent, Frear said: “As a theoretical matter, well, of course, there’s always a price that’s too much. But we've had a great long-term business relationship with Fox, and we're hopeful that that continues.” Meyer then chimed in to say that, “you know we like to think that we're smart. I know the people that run Fox are smart. And I'm hopeful over the next 3-4 weeks, we'll together figure out the smart thing to do.” Fox News representatives didn’t immediately comment.

Other disclosures: (1) The “early response” has been “very positive” to the rollout of “MySiriusXM,” Meyer said. The service lets Internet users “personalize many of the music and comedy channels they know and love,” he said. Meyer acknowledged to an analyst questioner that the company has promoted the service rather aggressively since its debut. “We do want to tell our subscribers that this new service is available, because we know when they use it, they really like it and value it,” Meyer said. “You certainly are seeing a push. You'll probably see us ease off for a while then push again as we update it later on.” Chief Content Officer Scott Greenstein said that “virtually every” music channel in the SiriusXM lineup is now available with the MySiriusXM feature.

(2) There will be no fallout to SiriusXM from the Russian government’s launch failure July 2 of a Proton rocket, Frear said. The launch failure “is under review and a report is expected in the next few weeks,” he said. The probe has caused the mid-August launch of the Sirius-6 satellite to be scrapped, and “a return to the flight schedule has not yet been announced,” Frear said. But SiriusXM has “plenty of in-orbit spare capacity,” and its service “won’t be affected by this delay,” he said.