Sirius XM Radio (Nasdaq: SIRI) isn't just about reaching out to drivers of shiny new cars.
The satellite radio giant struck a deal with leading auto retailer AutoNation (NYSE: AN) this week, offering free three-month trial subscriptions to anyone buying a pre-owned car with a factory-installed receiver.
This isn't a new strategy. Sirius XM has been working with individual carmakers for years to make sure their showroom sales teams have incentives to promote satellite radio on secondhand cars. There is no such thing as a permanently dormant receiver to Sirius XM. Every eventual buyer of a car that just happens to have a Sirius or XM receiver is a potential subscriber.
Three months is shorter than Sirius XM typically offers new car buyers, but the media maven knows what it's doing. That's more than enough time to sample the service and see whether it's worth paying for. One would also imagine that conversion rates are lower on used cars, since many of those buyers may be either tight on money or simply out to get more bang for their buck by aiming for a better car that they would not be able to afford as a new ride.
Inking a deal with AutoNation will make the free trials standard throughout its 257 showrooms. AutoNation's presence is larger than CarMax's (NYSE: KMX) 107 superstores, though CarMax only sells used cars. AutoNation's specialty is new cars. Either way, Sirius XM has had a similar deal in place with CarMax for years.
This is a win-win-win situation. A car buyer who may not even know that a dormant satellite radio receiver came with the car can now check it out for three months without having to pay. Sirius XM has a shot at a cheaper lead than what it typically has to shell out for a new car activation, establishing direct contact with the new owner. Showrooms have a new incremental revenue stream.
Sirius XM has been growing its subscriber base at a slow yet steady pace since slipping for a few quarters during the recessionary lull of 2009. This week's AutoNation deal is unlikely to lead to an immediate windfall, but it keeps the satellite radio darling moving in the right direction.
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