Recent news that Sirius XM has gained around 1.3 million subscribers, along with the reality that almost every new car manufactured has it as a built-in option all seems like good news for the satellite radio company, at least for now, but what happens when autonomous cars begin to encroach on their market?
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Guest post by Bobby Owsinski of Music 3.0
With news that SiriusXM added around 1.3 million new subscribers last year, things are looking up for the satellite broadcast service. Sirius now has a total of 34 million paid subscribers, and there’s hardly a new auto that doesn’t come with it as an option.
All this makes the future look pretty rosy for the platform, since once getting that free taste of satellite radio in your car, you’re fairly likely to upgrade to the paid version (I include myself in that number). And even though there are other ways to access the service, it’s built for the car and that’s where it really shines.
But what happens to those subscriber numbers down the road when autonomous vehicles become the norm? Who becomes the typical subscriber then? Will we stop buying new cars for our personal use in favor of services like Lyft and Uber? That scenario would mean that Sirius would end up selling its service to just a few fleet operators, and probably at a huge discount. Does that mean that the subscriber numbers plunge from 34 million plus down to maybe dozens?
When you look at the future in those eyes, it’s easy to see why the Sirius acquisition of Pandora (which should become official after the company’s stockholder meeting later this month) makes so much sense. First of all, Pandora already has the off-car access well in hand. It has the online infrastructure and a solid user base (although most of it is in the free tier). Sirius, on the other hand, has an excellent catalog of unique programming that might finally be enticing enough to move those free Pandora subscribers up into the paid bracket. Looks like a winner for all concerned.
One of the most interesting things about the Sirius subscription price that is often overlooked is the fact that the royalty payouts for music are a separate add-on charge outside of the monthly subscriber fee. This is currently an extra 21.4% that gets added on at the end of your subscription transaction along with any appropriate taxes. Making this an additional charge is unlike any other audio streaming service, and it means that the company essentially has an additional 21% to play with that other streaming services that absorb music royalties into their subscription fees do not (this rate is actually much higher for on-demand streaming services like Spotify).
Making the Music Royalty Fee an add-on works for Sirius in that car owners who’ve paid big money for a new auto don’t tend to see the extra 20 bucks or so as an impediment to subscribing. The question is, would this same kind of offer work for Pandora subscribers?
Regardless of how you currently view SiriusXM, the fact is that the landscape for the service will be changing in the future, first with the integration of Pandora, then with the true arrival of the autonomous vehicle (the predictions of when that might take place are all over the map right now, but it certainly won’t be in the next few years). It will be interesting to see how the company responds to both of those challenges.