SiriusXM’s Telematics Revenue to Double to $200 Million by 2017

Combining Sirius’s and Agero’s telematics businesses is in “full swing” and the companies’ OEM sales staffs are selling both connected and radio services, Meyer said. Sirius also made “significant progress,” Meyer said, in developing telematics for Nissan vehicles as part of a 2012 agreement that includes an alliance with AT&T. The first Nissan vehicles with SiriusXM telematics are expected to arrive “early on” in the development of the business, SiriusXM executives have said, declining to be more specific (CD Sept 27 p17).

"Several large automotive OEMs remain uncommitted and the connected vehicles business is in its early stages,” Meyer said. The $530 million Agero acquisition brought 120-150 engineers into the SiriusXM fold and a customer list that includes Honda, Hyundai and Toyota. Agero provides location-based services through two-way wireless connectivity, including safety, maintenance, data services and remote vehicle diagnostics. Hyundai recently switched its connected services business to its own servers from those operated by Agero.

"Our development work here is a critical part of building our offensive and defensive capabilities, all with the goal of improving what we offer to our OEM customers and ultimately to our self-pay customers,” Meyer said. “Most of the players are still figuring out what they want to do and how they want to do it. This is a march, not a sprint. There is absolutely no doubt in my mind where automakers are going. Every one of them is evolving to a connected car and every one of them will offer connected vehicle services of some type."

Meanwhile, the Sirius 2.0 platform is increasingly being deployed in new vehicles, building on a base that included Chrysler’s 2013 Ram 1500 and 2013 STR Viper vehicles. SiriusXM has said it expected at least three other automakers to deploy Sirius 2.0 factory-installed radios, in bringing down installation costs and reducing subsidies.

SiriusXM’s Q1 net profit slipped to $93.9 million from $123.4 million a year earlier amid a sharp rise in revenue sharing and royalty costs to $195.4 million from $148.5 million a year earlier. SiriusXM’s Q1 revenue rose to $851.4 million from $783.3 million despite a decline in net subscriber additions to 266,799 from 452,890 a year earlier. The number of self-pay net subscriber additions decreased to 173,480 from 304,386, and those from paid promotional trials slipped to 93,319 from 148,504, the company said. Sirius had 25.8 million subscribers as of March 31, up from 24.3 million a year earlier. At quarter’s end there were 62 million vehicles in the U.S. with SiriusXM-capable radios, a number that will double within five years, Meyer said.

SiriusXM’s average revenue per user rose in the quarter to $12.18 from $12.05, while per-subscriber acquisition costs declined to $35 from $47. SiriusXM’s monthly churn declined to 1.9 percent from 2 percent a year earlier, while the conversion rate for new car to subscriptions from a free trial fell to 42 percent from 44 percent, the company said. SiriusXM service was available in 70 percent of new cars sold in Q1, down from 71 percent in the previous quarter, but up from 67 percent a year ago, company officials said. SiriusXM ended the quarter with 12,000 used car dealers selling its service, up from 11,000 in the previous quarter. About four million used vehicles were in trial with SiriusXM at quarter’s end, with conversions to subscription service running about 30 percent, SiriusXM officials said.