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Sirius XM Goes for a Rental

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Sirius XM Radio (NASDAQ: SIRI  ) is now hoping to turn loaners into listeners. 

Avis Budget Group  (NASDAQ: CAR  ) announced this week that the satellite radio service is now available as a premium add-on across a majority of its Avis Car Rental and Budget Car Rental fleets. More than 60% of its rentals across the country how have factory-installed satellite radio receivers. Customers no longer have to rely on portable plug-and-play receivers that the rental giant previously offered its customers. 

This is a big win for Sirius XM on the surface in terms of marketing. One would think that people that get to experience satellite radio in a rental may be more inclined to join the media darling's growing subscriber base down the line than someone who does not. The exposure is incremental.

When you consider that folks sometimes turn to rentals when their cars are being serviced or they're between cars, driving around in a loaner with Sirius XM could pay off sooner than it will with someone renting just because it's time for a vacation. Sirius XM has made a strong push to have its receivers arrive as factory-installed features in a majority of the new cars hitting the showroom. It has turned to striking deals with dealers selling pre-owned cars and service centers when they're working with cars and light trucks that already have inactive receivers. A bigger push for rentals is the next logical step, and most auto rental agencies have been offering satellite radio in some capacity for years.

The only downside to the move is that it won't come cheap. Avis Budget is charging $6.99 for the first rental day and $3.99 for every day after that. The rate is capped at $19.99 for a week or $29.95 for a longer rental. Some will argue that folks who are already paying for satellite radio shouldn't have to pay again. If cable companies are pushing for TV Everywhere, what's the harm in SatRad Everywhere? After all, in four days a subscriber will be paying more for the rental's premium audio than they do for a month of traditional Sirius XM access.

However, this may be a bigger turnoff to the drivers that aren't existing subscribers, making Sirius XM just another optional fee that they can nix to avoid paying too much for a rental. Then again, Avis Budget isn't a charity. There has to be something in it for the company to expand the platform across its fleet, and this should result in broader awareness and more tire kicking of satellite radio by renters.

It's a good move for both companies, but it's a shame that the stiff rental rate will eat into its potential usage.

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

9/1/2015 3:59 PM
CAR $42.72 Down -1.41 -3.20%
Avis Budget Group,… CAPS Rating: *
SIRI $3.76 Down -0.06 -1.44%
Sirius XM Radio CAPS Rating: ***