Telematics as Big SiriusXM Revenue Driver Won’t Happen Until 2017, CEO Says

The $530 million all-cash Agero acquisition, (CD Aug 16 p16) which is expected to close by late October, brings 120-150 engineers into the SiriusXM fold and a customer list that includes Honda, Hyundai and Toyota, Meyer said. SiriusXM earlier this year signed a deal with AT&T to provide telematics services to Nissan vehicles, building on its earlier agreement with the automaker. Agero provides location-based services through two-way wireless connectivity including safety, security, maintenance, data services and remote vehicle diagnostics.

The first of the Nissan vehicles with SiriusXM telematics will likely arrive “early on” in the growth of the SiriusXM telematics business, Meyer said, declining to be more specific. The agreement with AT&T includes a range of services, including emergency support, stolen vehicle tracking and roadside assistance. Meyer declined to say how much revenue telematics could generate for SiriusXM, saying the company is at the “very beginning” of developing its technology portfolio in that area.

"We're very committed to this space,” said Meyer, vowing that that SiriusXM will increase its intellectual-property spending to support telematics. The Agero acquisition “gives us an advantage” and potentially speeds the SiriusXM telematics foray because Agero was already “headed down the path” of technology development, he said. “There is no question this is where the automakers are going to be going,” Meyer said. “When you combine Nissan” with Agero’s automaker customers, “we will be by far the leader” in telematics and “you have to be very patient and get in early. We want to be part of how that market evolves without taking our eye off the core business."

Meyer said the Sirius 2.0 platform has been deployed in Chrysler’s 2013 Ram 1500 and 2013 STR Viper vehicles and will be rolled out with other automakers “more and more” this year and into 2014. SiriusXM has said it expected at least three other automakers to deploy Sirius 2.0 factory-installed radios. “The rollout is right on target,” Meyer said. The 2.0 platform debuted in 2011 in standalone SiriusXM receivers and has since expanded. The platform also is part of SiriusXM’s efforts to further tailor its programming mix to reach specific audiences, the company has said. For example, a Spanish-language service, with a $5.99 monthly fee, will debut in October, enabled through a firmware upgrade, Meyer said.

SiriusXM also is “pleased with where we are so far” with MySiriusXM, but “we could be doing a better job,” Meyer said. MySiriusXM, launched in April, allows subscribers to customize channels in more than 100 different variations. It’s available to the service’s Internet streaming desktop PC subscribers, who pay $3.50 a month in addition to their $14.99 monthly fee for in-car service. Meyer wouldn’t say what percentage of his company’s 25 million subscribers have signed on for MySiriusXM.

Sirius will increase its push in the used-vehicle market, moving from the 11,000 dealers currently marketing the service to individuals selling their vehicles, Meyer said. SiriusXM remains “on track” to gain 1.5 million subscribers this year from the used-vehicle channel, Meyer said. In the U.S., Sirius XM is installed in 67 percent of new vehicles and 12.5 percent of all new and used vehicles, Meyer said. SiriusXM’s penetration could increase to 15-20 percent in the next few years, he said. SiriusXM has no major programming agreements up for renewal until late 2015, when Major League Baseball and Howard Stern come due, Meyer said. It recently reached a new pact with Fox News Channel. SiriusXM has an exclusive agreement with Stern and will seek to “keep it that way,” Meyer said.