Sirius XM Radio Inc (SIRI) Is a Used-Car Salesman

Page 1 of 2

Sirius XM Radio Inc (SIRI)Sirius XM Radio Inc (NASDAQ:SIRI) sees the future of used cars, and there will be more lemonade than lemons.

The satellite radio giant’s CFO spoke at Piper Jaffray Technology, Media and Telecommunications Conference yesterday, and David Frear is encouraged by the potential of secondhand cars.

It remains an untapped market for the company, especially as more and more used cars hit the market with preinstalled Sirius or XM receivers.

There are 50 million cars with satellite radios at the moment, and more than half of those receivers are dormant. In 10 years, Frear sees 150 million vehicles out there with receivers. There’s a big opportunity here for Sirius XM Radio Inc (NASDAQ:SIRI) to grow its reach, especially as cars get passed along.

Data suggests that just 30% of automobile transactions are for new cars. Sirius XM Radio Inc (NASDAQ:SIRI) has a strong presence in the new-car market, but that’s just 15 million of the 50 million cars that are being exchanged every year. Sirius XM Radio Inc (NASDAQ:SIRI) has teamed up with its auto partners to offer free trials to buyers of certified pre-owned cars, but that’s just a 5% sliver of the market.

Sirius XM is starting to get aggressive.

Back in November, Sirius XM Radio Inc (NASDAQ:SIRI) announced a deal with Automatic Data Processing (NASDAQ:ADP) subsidiary Digital Motorworks to reach out to more used-car showrooms. The partnership allows the more than 7,000 dealerships doing business with Digital Motorworks to offer car buyers three free months of Sirius XM Radio Inc (NASDAQ:SIRI) service.

Sirius XM has a lot to gain through this deal with ADP’s data intermediary. Unlike new cars where Sirius XM has to subsidize the receiver, acquisition costs for subscribers buying used cars with receivers already installed is substantially less.

One might imagine that used-car buyers are less reluctant to pay for satellite radio, but Frear argues that those who convert do stick around. There is no difference in the churn rate between subscribers in new cars and old cars. There is naturally a higher churn rate for those paying month by month instead of annually — and one can argue that used-car buyers are more likely to be living month by month — but generally the churn levels are the same for new and used cars.

Data can be surprising that way.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!