Sirius XM Could Be Smarter

Richard Blade was the guest star of my summer vacation, and for that I have Sirius XM Radio (Nasdaq: SIRI  ) to thank.

If you don't know him, Blade is a deejay who regularly spins '80s and early '90s tracks for Sirius' "First Wave" station. Hearing him during our recent family trip to and through portions of the Redwood National Forest brought back good memories of listening to his "flashback lunch" segments on Los Angeles radio station KROQ.

My wife and I couldn't get enough. As Depeche Mode's "Policy of Truth" crooned through the minivan speakers, Sirius XM had us.

Marketing on the cheap
Color me impressed. Sirius did exactly what other great marketers do, creating an environment where I could play with its product as much as I wanted, and in any way I desired. Sirius let me explore, in much the same way as Google does when it releases software into the digital wild. Or how Microsoft lets gamers thumb their way through Xbox games in its new retail stores.

The marketing was also subtle. A simple brochure accompanied my rental agreement. Inside I found a channel list, phone numbers, and this simple pitch: "Sirius XM is the perfect travel companion. Whether you're traveling for business or pleasure, Hertz rental cars equipped with Sirius or XM Radio provide an enjoyable experience for any journey."

Simple, on point, and delivered at what appears to be zero cost. Hertz Global Holdings (NYSE: HTZ  ) pays to have Sirius XM in its vehicles, as do the Avis and Budget operations of Avis Budget Group (NYSE: CAR  ) . All told, Sirius reported 116,056 rental subscribers as of Dec. 31, 2009.

Tuning in to a growth opportunity
Interestingly, that's a pittance compared both to Sirius' overall subscriber base (on pace to reach 19.9 million by year's end), and the number of U.S. rental cars in service (1.64 million, according to the latest data provided by Auto Rental News).

Sirius serves just 7% of the U.S. rental installed base, which means the satellite radio superstar may be less subject to the whims of Ford (NYSE: F  ) , General Motors, Chrysler, and Toyota (NYSE: TM  ) than skeptics like me have long assumed. It may even be the other way around. Nearly two-thirds of all new cars are equipped with a satellite radio, media reports say.

Drive Siriusly
There's a good reason for this: satellite radio works.

I know, I know. I'm late to the game in admitting that Sirius has a point. The truth is that it took me driving to a remote area of northern California to understand how much satellite radio outperforms terrestrial options. Everywhere our iPhones failed to pick up a signal, Sirius XM worked as advertised.

To be fair, this isn't a huge issue if you have an iPhone or iPod loaded with music. Plugging into an unused terrestrial band using any number of car kits transforms these devices into mini-radios.

Nevertheless, the point remains: Sirius XM is easy, and functions just about everywhere. Earth-bound broadband options such as WiMAX networks aren't pervasive enough to be reliable for on-the-go streaming delivery.

And that's an issue. As a society, we're getting more rather than less mobile. We spend hours commuting and use gadgets while on the road -- often to our detriment. Sirius XM could help us solve this problem by teaming with Google, Intel, or another tech supplier to create an alternative to Microsoft's Sync in which Sirius XM receivers would act as a sort of gadget hub that prevents unsafe practices, such as texting while driving.

Get into my rental car, Sirius
Of course, I can write that and enjoy an unseen chorus of nodding head, yet it won't make a bit of difference unless Sirius XM finds more ways to get its service in front of drivers.

Satellite radio is an out-of-sight, out-of-mind experience that can't differentiate itself on the Web or in a brochure. But in the car, in a remote area, it's the one indispensible service drivers can rely upon. A pervasive rental marketing strategy that exposes more drivers to Blade, Howard Stern, and Oprah could help illustrate this truism and at the same time boost revenue.

How would you market Sirius XM Radio? Sound off in the comments box below.

Intel and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Ford is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended buying Intel calls and opening a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool has a covered strangle position on Intel and owns shares of Google. The Fool is also on Twitter as @TheMotleyFool and its disclosure policy some days wishes fantasy baseball were just a fantasy.


Read/Post Comments (9) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 12, 2010, at 4:04 PM, Cool700 wrote:

    SIRIUS XM could be marketed in grocery stores. To date I have not seen this, but it would be a great place to market the SIRI radios.

  • Report this Comment On July 12, 2010, at 5:22 PM, SCWinehound wrote:

    I wonder if Sirius/XM is as buttoned down as they should be when it comes to data mining and operations. I got XM with a new vehicle nearly two years ago. Promised six months of free service, I have never paid for it, never even been asked to. But yet the service continues uninterrupted. I also have never been asked to upgrade the service. I make my living consulting with companies on such matters, and if SIRI/XM were my client, I would be digging into how many subscribers are getting a free ride, and get it remedied.

  • Report this Comment On July 12, 2010, at 5:46 PM, imatron wrote:

    Dear Gentlemen:

    The individual who wrote in on 7/12/10, and thinks he is receving satellite service for free is mistaken. He should check his credit card statement,and I believe he wii see a monthly charge for XM or $ 14.93. Thank you

  • Report this Comment On July 12, 2010, at 6:13 PM, gfbjohn wrote:

    I've had friends tout SiriXM, and just this past weekend rented a car equipped with it. Very cool service, and what the article doesn't mention is that lumped in among stuff you know on your station of choice are those occasional gems you didn't know you'd like and so would not have been aware of to download and listen to from your iP* gizmo.

  • Report this Comment On July 12, 2010, at 6:53 PM, Fredlee009 wrote:

    Ahhhh, a free promo trial offer with every new and soon used car sold is a decent way to promote the product no? What an a dumb article. With journalists like this working for the Fool who needs enemies.

    Sirius XM has the greatest way to show off their product. Please choose another profession Tim, your work is excrutiatingly painful to read. I will no longer be bothering.

  • Report this Comment On July 12, 2010, at 8:27 PM, NealBarkett wrote:

    Tim, I like your article, your honest about being late to the game but that is the good news. Once you discovered it, you enjoyed it enough to write about it.

    How would I market Satellite Radio? As I have written numerous times on other sites (even tough I have a feeling it's falling upon deaf ears), I would add a couple more tiers of lower cost formatting. The reasons are many but I will touch on just a few. I think by adding a lower cost tiers (with a limited content) you would draw in the under 25 crowd (less discretionary money to spend) that would not only add more revenue but also bring in brand loyalty so as they move up the food chain they hopefully would move to a higher tiered subscription. I would also add a free "very limited" offering that has a format that is sponsor based to entice more people to get some type of experience, exposure and knowledge of this great product. But the twist is this, you offer the lower tiers only to the radios that are presently not in use (used cars and after market radios no longer being utilized). Why? Because there are over 19 million current subscribers and well over 20 million idle radios (most of which sit idle in used cars etc). Best of all the SAC cost has been written off already so there is a very minimal cost to Sirius Xm to promote this marketing strategy and everything to gain. Including, competing w/ free terrestrial radio and internet radio.It would also make Sirius Xm more of an iconic brand that more & more people would feel left out if not a fan or subscriber. To some this seems ludicrous, but this is thinking outside the box and as the idle radios keep growing every day it's not a good biz model to not put these radios to work for the company. If I'm not mistaken 20 million radios at an average SAC cost of say $70.00 equals "1.4 BILLION DOLLARS"! So just let the dust settle on them, no big deal.

  • Report this Comment On July 12, 2010, at 8:44 PM, jayde24k wrote:

    Sirius needs to secure Howard Stern for another contract and offer him on iPhone without adding more expense to subscriber/listener. I think that would secure the loyal listeners who are not able to access him on computer or vehicle.

  • Report this Comment On July 12, 2010, at 9:13 PM, TMFMileHigh wrote:

    Hello Fredlee009,

    Thanks for writing.

    >>Ahhhh, a free promo trial offer with every new and soon used car sold is a decent way to promote the product no?

    Of course it is. The trouble is this adds nothing to the conversation, which is about the possibilities afforded Sirius XM in markets outside new and used car sales.

    I'd love to hear whatever original comments you have to contribute in this area.

    Thanks again for writing and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On July 12, 2010, at 9:52 PM, doggrobber13 wrote:

    Satellite radio is great... Big football fan here and I can listen to any and every game anywhere. also a biggie for me is the daily nfl oriented shows. Football, pro and college, is the only reason I got Sirius. But thats me.

    The strength of satellite is its ability so serve not only the masses with the mass musics,but the niche market for people like me who have little interest in tunes. talk shows,politics,news programs,uh.....and of course the artist and genre dedicated shows. There is something for everyone.

    enough of the sell... disclosure: bought 4000@.15,sold 3000 at .55(darn, but needed the cash),still hold 1000.

    What would I do to market Sirius? - Mass produce a cheap simple model and give them away. Free. Include one month access to unlimited programming. Everyone likes free and once their hooked and there is something to hook everyone, upgrades and subscriptions follow. I also think that cost tiers is a good business bet.

    A Sirius in every pocket, seriously. (sorry but couldn't help it)

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