Sirius XM Wants to Fix Your Car

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Sirius XM Radio  (NASDAQ: SIRI  )  now has more than 25 million subscribers to its premium radio service, but there are more than 50 million Sirius or XM receivers out there. Simple math tells us that roughly half of the factory-installed receivers are dormant, and Sirius XM wants to change that.

The satellite radio provider introduced Service Lane this morning, a new dealership program that offers customers with inactive receivers two free months of Sirius XM when they have work down on their cars at participating service centers.

It's a smart move. You never know what may sway a potential customer, and with more than 25 million dashboard paperweights, any gains will be incremental. A dormant receiver is like an empty hotel room, and even if Sirius XM has to shell out commissions to the dealerships, it will be worth it.

The program is similar to the deal Sirius XM now has in place with more 10,000 dealerships to give buyers of pre-owned cars with existing receivers three free months of service.

Will this be as successful as that program? No.

Sirius XM has always been an easy sell in new cars, but even there a little more than half of the buyers don't stick around after the free trials end. The take rate isn't materially different on used cars. This will be different because folks hitting up the service department with inactive receivers are probably well aware of the platform's presence. They have simply chosen not to subscriber or have canceled their plan. Dangling two free months of access won't convert at the same rate as new- and used-car buyers.

However, Sirius XM's content has evolved over the years. Some may have nixed the service years ago, and getting a fresh taste may change their opinions. It's a win-win-win. Customers get two free months of a service that they didn't used to have. Dealership service departments have a new way to generate money. More importantly, Sirius XM stands to gain new accounts with its very scalable model.

After all, it's not just about the radio anymore at Sirius XM. It has made headway in telematics lately, and subscriber connections it will make now will be even more valuable in the future.

Drivers may dread repairs and costly maintenance schedule visits, but it's music to Sirius XM now.

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9/23/2016 4:00 PM
SIRI $4.21 Down +0.00 +0.00%
Sirius XM Radio CAPS Rating: **