SiriusXM has been on a growth tear, adding 1.5 million subscribers a year as new car sales climbed each year.
But now auto sales have reached a pre-recession level of about 16 million a year, and growth will slow. So SiriusXM is pursuing a lower income demographic to boost sales.
“Lower income subscribers remain a very profitable segment for us,” said CEO Jim Meyer on a call with analysts Tuesday. He believes eventually the satellite radio company will end up with more new subscribers from the used car segment than from new cars.
“We’re approaching a very significant upswing in used cars in the next couple of years,” he said.
After a decade of slowly working into new cars, satellite radio factory radios are now abundant and many are laying fallow in used cars, waiting to be activated.
“There are now probably 60 million vehicles on the road with satellite radio and we expect that to double in 5 years,” Meyer said.
SiriusXM is already working with more than 11,000 used car dealers. Meyer said, “We expect the volume of those sales and trials to more than double in the next 5 years. In the next several years, sales of previously owned vehicles will exceed sales of new cars with our radios.”
SiriusXM also launched a program last summer where it offers free trial subscriptions through about 2,500 car service outlets in its Service Lane program, which it announced “has been a success.”
Of customers who enter a free trial of SiriusXM, 44 percent of new car buyers and 34 percent of used car owners convert to paying customers. But as the service is offered in more mid to lower end new cars, the 44 percent statistic may fall.
New cars sold with a satellite radio should top 11 million this year, up from 10.7 million in 2013 and about 10.5 million in 2012.
SiriusXM said it expects to add 1.25 million new subscribers in 2014.
Source: CEoutlook
