A year ago, SiriusXM launched a new streaming app filled with original and licensed content from its satellite radio service and priced it at $9.99 — well below the average monthly revenue of about $16 it receives per satellite subscriber. The hope was that a relatively affordable price and an improved app would help SiriusXM reach younger consumers and expand beyond its core in-car satellite radio listeners.
The new app was “just the beginning”, CEO Jennifer Vitch he said at the time, adding that SiriusXM will “continue to iterate and develop our product offerings over the next year and beyond as we strive to provide our subscribers with the best listening experience on the go, in the car and wherever they choose to tune in.” » The company's satellite radio business was based on vehicles. If you buy a new or used car, you'll likely get a free SiriusXM trial which is extremely effective at getting people to sign up when their trial is over. The new streaming app was meant to appeal to people who would listen outside the car.
But selling the radio experience on a smartphone app didn't go well. As it turns out, the streaming app hasn't delivered a good return on marketing spend, Witz said on Tuesday (Dec 10). Speaking at the UBS Global Media and Communications Conference, the executive reported “slow progress” in turning free trials into long-term retention. As a result, SiriusXM has already cut marketing spending on the app and expects to have fewer streaming tests — and thus fewer subscribers — going forward. That was a worse rating than Witz gave on SiriusXM's Aug. 2 earnings call. At the time, when asked about conversion rates for the app, Witz said they had been “challenged” but remained positive, adding that there had been some “positive results” with users adopting the first trial and that the company was “confident” so it could attract “a different audience” that will be “incremental” to the existing car-based business.
Now, after its underwhelming experiment with the app, SiriusXM will, in Witz's words, “lean to our strengths.” In other words, the company is refocusing on satellite radio and the in-car listening experience. In line with this strategy, the company also announced his retirement Joseph Inzerillothe head of product and technology who was instrumental in launching the app.
Despite the app's strengths—curated stations, celebrity musician stations, a smorgasbord of audio programming—the company gave up its competitive edge when it tried to compete outside of satellite radio and automotive. After all, the company is the only satellite radio operator and, given the cost and complexity of launching satellites into orbit, has the market to itself. But when you leave the security of satellite behind, it's hard to beat Spotify, Apple Music, YouTube and Amazon Music at their own game. These are native streaming platforms designed for consumers' desire for interactivity, while SiriusXM's app attempts to integrate a one-way satellite radio experience into a two-way, interactive medium. In the end, pay radio proved to be a tough sell to a generation raised on on-demand streaming.
So SiriusXM will focus on what it does best, and in-car listening gives the company a huge audience to work with. It currently has 33 million subscribers and, according to MusicWatch's Russ Krupnickreaches 65 million total listeners. In an email to Bulletin boardradio consultant Andy Meadows said he believes “SiriusXM is better suited to compete with those coveted in-car listeners, so [Tuesday’s announcement] it makes sense from that point of view.” Crupnick also sees in-car listening as a strength for SiriusXM, pointing to the uniqueness of the SiriusXM product as a distinct advantage. “The ease of use, breadth of content and curation put them far above terrestrial radio and in a different place than streaming music or podcasts,” he says.
Based on in-car satellite listening, the SiriusXM streaming app will become more of a complementary product. “There are real opportunities with the 360L,” Witz said Tuesday, referring to the company's in-car platform that doubles as a satellite radio/streaming product. Because 360L includes streaming, it allows SiriusXM to serve personalized — aka more lucrative — ads and provide more targeted — aka more expensive — ads for advertisers. About the app, he said it can provide data that helps SiriusXM determine spending on programming that resonates with listeners, since satellite receivers are a one-way technology that don't provide detailed information about listening behaviors. Similar to 360L, the app may also serve targeted advertisements.
For customers, the satellite and streaming bundle costs just $25 per month. That's about double the cost of a single Spotify subscription, but SiriusXM subscribers can afford the price. Platinum satellite subscriptions, which cost more than $29 per month, account for “about a third” of the current subscriber base, according to Witz. And providing the best satellite and streaming capabilities will help SiriusXM compete with a “newer breed of streaming products” in Americans' car dashes, Meadows says. “Anything that SiriusXM and traditional radio can do to make it look, sound and work better on all devices is in their best interest in the long run.”
