1 More Connected Car Threat for Sirius XM

General Motors (NYSE: GM  ) is about to throw some serious weight behind the connected car revolution, and Ma Bell is calling shotgun. Starting with the 2015 Chevy Malibu that hits showrooms next month, GM will offer 4G LTE connectivity in 30 different Chevy, Buick, Cadillac, and GMC vehicles. 

GM is partnering with AT&T (NYSE: T  ) for the connectivity that was originally announced 15 months ago at the Mobile World Congress. Cars with mobile hotspots have often come with stiff pricing plans, but that won't be the case here as a result of AT&T's Mobile Share data plan. Just $10 a month will allow an AT&T customer on a Mobile Share plan to add the in-car router to the devices that can access the pool of data. 

This is a pretty big deal. GM will make sure that connected cars become more prolific with the wide rollout. AT&T will make sure that these hotspots get connected with economical plans for drivers that already have ample data to spare every month.

One company that isn't going to like this is Sirius XM Radio (NASDAQ: SIRI  ) . The satellite radio provider hasn't shied away from the inevitability of cars with wireless connectivity. In fact, Sirius XM has embraced the trend. Last year, it was CFO David Frear pointing out how its retention rate for buyers of connected cars is holding up just as well as, if not better than, the rate for drivers of cars without mobile access. 

He dismissed the threat of the GM alliance with AT&T at the time, telling conference attendees that most GM drivers aren't on AT&T. It wasn't much of an argument, but it's true. Drivers will have to pay between $30 and $50 a month for connectivity if they're not existing AT&T subscribers. 

It's not as if Sirius XM has been asleep at the wheel. It's been beefing up its online offerings with on-demand programming and personalized radio. Sirius XM sees its satellite receivers as a way to enhance Web-served audio entertainment -- and the other way around. 

Sirius XM has survived the threat so far. Despite the growing number of drivers in connected cars through in-car routers, mobile hotspots, or Bluetooth-tethered smartphones, it closed out the March quarter with a record 25.8 million subscribers. This will still be a challenge. GM hopes that its reasonably priced AT&T 4G LTE plans will help differentiate its vehicles from the competition, and it will likely invest in marketing that advantage as soon as next month.

The connected car revolution is about to put the pedal to the metal. Sirius XM will need to make sure that it can keep up.

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Comments from our Foolish Readers

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  • Report this Comment On May 14, 2014, at 9:40 AM, olesage wrote:

    Connectivity will only help Sirius. It's the only way I connect. The disadvantage is losing signals. I would love to have an AT & T connected car. I already subscribe to AT T and listen to SIRI using an FM device through my radio. I don't get why people think this would hurt SIRI. I would only help as I see it.

  • Report this Comment On May 14, 2014, at 9:45 AM, fawazmn wrote:

    Content is King..enough said

  • Report this Comment On May 14, 2014, at 10:07 AM, jojopuppyfish wrote:

    1) Content

    2) Mobile phone coverage is spotty.

    3) Data plans are expensive

  • Report this Comment On May 14, 2014, at 10:44 AM, Varchild2008 wrote:

    I think with Sirius XMs acquisition of Agero, they are keeping up just fine with Connected cars. In fact, they are miles ahead of their competition.

    Especially considering how big a flop ITunes Radio has been given that it cuts into song download sales.

    Sirius XM has already set themselves up to bwnefit greatly with the connected car revolution and their tremendous cash flow means they can make smart acquisitions in this space in the near future.

  • Report this Comment On May 14, 2014, at 10:48 AM, TheeShawn wrote:

    "He dismissed the threat of the GM alliance with AT&T at the time, telling conference attendees that most GM drivers aren't on AT&T. It wasn't much of an argument, but it's true. Drivers will have to pay between $30 and $50 a month for connectivity if they're not existing AT&T subscribers."

    Huh? Not much of an argument? But true? Way to talk out of both sides of your mouth. So AT&T subscribers will have to pony up $30-50 per month for this?? AND current AT&T customers will STILL have to pony up another $10 more per month?

    How is this a serious threat to Sirius? Just because it's another option in addition to Sirius for people to consider??

    Tell ya what, how about you tell me that some service is coming that duplicates what Sirius offers at a lower price, same convenience, same type content, no commercials, constant signal with no drop outs wherever I go.

    Do that and I'll listen, until then it's all internet smoke couched as insightful investment prose.

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