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Sirius XM Goes to College and Doesn't Flunk Out

By Rick Munarriz – Sep 1, 2019 at 9:00AM

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The satellite radio provider's discounted $4-per-month streaming package for university students makes sense.

Satellite radio is now a lot cheaper for college students, as long as it doesn't go through their car receivers. Sirius XM Holdings (SIRI 1.88%) introduced the Student Premier package two weeks ago, giving college-verified kids access to the premium streaming option with all of its talk and commercial-free music channels. Typically $12.99 a month, this package is going to college kids for just $4 a month.

The 69% markdown may seem extreme, but it makes perfect sense, because Sirius XM's streaming service has never been as popular as the receiver-based satellite platform that accounts for the lion's share of its 34.3 million subscribers. Sirius XM hasn't had a problem winning over drivers to its premium-priced satellite radio service, but it's more challenging outside the car, where it competes with lots of free and less expensive streaming options for audio entertainment. If there's any surprise here it's that Sirius XM didn't roll out this discounted college program even sooner.

Sirius app running on a smartphone and tablet.

Image source: Sirius XM Holdings.

Making the grade

Making this discount available to college students is significant, and it has nothing to do with expressing sympathy over heavy student loans or relieving fears of a looming recession as they prepare to enter the job market. Quite simply, Sirius XM is offering a Happy Meal price for its streaming service because that's what's required to stand out with young consumers.

Companies want to nail down future customers who are likely have more disposable income in the future. Why do you think banks and credit card companies have such an active presence on campus? Woo a college student, and you might have a well-to-do customer for the next 50 to 60 years. 

Plus, there's no shame in cutting a deal for college and university students. Premium streaming leaders Spotify and Apple Music already have discounted plans on campus. Students have access to promotional pricing on everything from tech hardware to software. Even Amazon Prime is available at a 50% discount for college students. 

In the short term, young listeners may not be as lucrative as older drivers, but Sirius XM ultimately just wants to find ways to expand its audience -- which is growing, but at a decelerating rate.  There is a risk of blurring the value proposition of a Sirius XM subscription, but the bottom line is that Sirius XM is raising its hand in the auditorium. It wants to be heard.

Rick Munarriz owns shares of Sirius XM Radio. The Motley Fool recommends Sirius XM Radio. The Motley Fool has a disclosure policy.

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