This Expected Trend Could Drive Sirius XM Sales for Years to Come

Sirius XM sales benefited from the uptick in new-car sales coming out of the recession. Now, many of those satellite-radio-equipped cars are for sale again -- this time on the used lot. Can this help to drive a new wave of subscriptions?

Jun 25, 2014 at 6:40PM

Subscription growth for Sirius XM (NASDAQ:SIRI) satellite radio service may look destined for a slowdown. There are 25.8 million subscribers already paying increasing monthly fees. Streaming competitors like Pandora, Apple's iTunes Radio, and Amazon's new Prime Music are becoming available to an increasing number of customers in connected cars.

But there's one factor that may keep Sirius sales robust in the years to come: used cars.

An increasing number of used cars on the lot have Sirius technology installed. With the used car market in the U.S. almost three times the size of the new car market, in terms of volume, that leaves plenty of opportunity. Sirius is looking to position itself to capitalize on this.

A second wave of sales
There was a lull in new vehicle sales during the recession, but sales ramped up as we moved through 2009, 2010, and 2011. A lot of those cars had satellite technology installed, and that helped drive subscription sales higher. Last quarter, vehicle penetration stood at 70%, up 3% over last year, the company reported.

What Sirius is seeing now is that a lot of the cars that were purchased new in those years are turning over and are up for sale on the used lots. As they are sold, it expects to see another wave in free trials and subsequent conversions, and each one of those used cars represents a second shot at adding a subscriber.

Here's CEO David Frear:

We have 60 million cars on the road today. It'll be 150 million in 10 years. It'll be 120 million in roughly five years. And so the prospects for long-term growth are quite strong.

Frear sees used car trials not only eclipsing new car trials, but doubling them within the next 10 years.

Trials are key
Sirius generated 2.4 million new car trials for the quarter and 1 million trials from used-car purchases. That was the best the company has done, to date, in used cars. It expects that only to increase in coming years.

"The big trick there is getting them on trials," Frear said. "So this year we've talked about the used car business growing to about 2 million gross additions from little over 1.5 million last year, so 30%-ish type growth. It's a category we expect to grow for years to come."

Letting prospective customers know they have a trial available is important in a market when so many people are already using streaming services at home and via mobile devices. Even the number of existing Sirius subscribers who stream music is high.  According to an FBR Capital Markets survey, 64% of Sirius subscribers also use Pandora. Sirius' original content and commercial-free music sell its service. But people have to hear it first.

Reaching buyers
Sirius is working with about 12,000 U.S. auto dealers in its efforts to reach used car buyers with trial offers. But with 36,000 dealers out there and many of them independent, Sirius sees a bigger opportunity in trying to reach prospective used car buyers as they research their possible purchases online, Frear said. That way, they'll go into the purchase knowing there's a free 90-day trial available to them, and all they have to do is activate it.

The company has also seen significantly better conversion rates on used car trials than it had anticipated several years ago, Frear said. Conversions were expected to come in at around 20%, but what they've seen recently are rates above 30%.

The Foolish bottom line
Used car sales present Sirius a significant opportunity to reach prospective subscribers over the next several years, as more people buy autos that have Sirius equipment already installed. The key to growth lies in reaching those buyers with trial offers. The coming quarters should provide investors some insight on the company's progress on this front. With a 30%-plus rate of conversion, the opportunity is significant.

Leaked: This coming consumer device can change everything
Imagine the multibillion-dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the-radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors. To be one of them and hop aboard this stock before it takes off, just click here.  

Note: A previous version of this article inaccurately referenced Sirius XM's new and used car trials for the quarter as dollar amounts. The Fool regrets the error.

John-Erik Koslosky has no position in any stocks mentioned. The Motley Fool recommends, Apple, and Pandora Media. The Motley Fool owns shares of, Apple, Pandora Media, and Sirius XM Radio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers