Sirius XM Hops on the Free Way

If you are driving one of the tens of millions of cars out there with inactive satellite radio receivers, Sirius XM Radio (NASDAQ: SIRI  ) wants to give you a treat. It's turning on those receivers, making 60 channels available for free through June 2.

The preview channels are mostly its popular commercial-free music stations, but there is also a handful of sports, entertainment, and talk content to convey a real taste of what's available on premium radio. 

To be fair, this isn't exactly news. Sirius XM kicked off the preview on May 20. This also isn't the first time that the media giant turns dormant receivers on for two weeks. It ran this promotional stunt four months ago. Shorter previews have been common in previous years.

It's easy to see why Sirius XM is going this route. Just like the chicken joint at the mall food court is handing over samples on toothpicks to woo hungry patrons with a full meal, Sirius XM wants to give you a taste of what's on the menu.

More than half of the cars out there with satellite radio receivers installed are inactive, and that's a ratio that's going to continue to shrink. It's not that Sirius XM is doing anything wrong. It's just simple math. More than 10 million cars will be sold with Sirius or XM receivers in this country this year, but Sirius XM expects to close out the year with 1.25 million more subscribers than it had when 2014 began. 

Where did the other 8.75 million drivers go? Well, it's not as simple as that. For starters, just 42% of buyers of new cars stick around as paying subscribers after their free trials run out. You also have the churn of existing drivers. Every month, we see an average of 1.9% of self-pay subscribers cancel their plans. The 1.25 million figure is net additions. The gross additions sum is naturally substantially higher before it's offset by folks nixing their service. Making matters even more complicated, the 1.25 million in net additions also includes folks buying used cars, where Sirius XM has been ramping up its marketing efforts. 

It works in the end. There have been just three quarters since Sirius and XM completed their merger in 2008 that Sirius XM has posted a sequential dip in subscribers. In short, Sirius XM knows what it's doing. If it's dangling free tunes and talk radio on a toothpick from now through next Monday, it's because it has worked in the past. Rock on, Sirius XM.

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  • Report this Comment On May 29, 2014, at 10:16 AM, Varchild2008 wrote:

    Perhaps Sirius XM should start selling toothpicks....and chicken!

  • Report this Comment On May 29, 2014, at 3:19 PM, chris100000 wrote:

    Perhaps you should offer an opinion related to trading or the article instead of being a funny guy.

  • Report this Comment On May 29, 2014, at 11:14 PM, ara1029 wrote:

    ....*TRYING* to be a funny guy.

  • Report this Comment On May 30, 2014, at 11:03 AM, OldsDr wrote:

    I don’t understand why they can't work with rental car companies to offer free Sirius on every rental. Obviously the rental companies need to make money on the deal too, but it just seems like a whole group of people that could be advertised to while on vacation or doing business. Especially the vacationers, since they most likely have the disposable income to pay for a subscription when they get home.

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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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