Auto Dealers Order Factory Installed Sirius XM Because It Is Less Expensive And Consumers Benefit
This past Tuesday SiriusBuzz Radio interviewed Evan Facemeyer, Sales Director, of BettenHausen Chrysler, Dodge, and Jeep. The interview gave many SIRI investors a look into the OEM channel that typically is not offered up in mainstream media. One compelling point in the interview centered around what the penetration of satellite radio was at his dealership. His answer was quite interesting.
“I have over 350 cars in stock and in-bound. Of that I only have two that do not have satellite radio….I really wont order a car without satellite radio because it is that much of a demand…It’s getting to the point where it is simply going to become standard equipment within the next year or so….Like air conditioning is virtually a standard feature on cars sold today.”
What Evan Facemeyer indicated during the show was that consumers are looking for satellite radio more than ever, and that all cars he orders for the dealership all have satellite radio. His reasoning is simple and two fold.
1. It is less expensive for the dealer to get the factory installed satellite radio than to do the dealer installation. It is a matter of simple economics. the factory installed radio costs a dealer $192, while installing one at the dealership will cost a few hours labor, plus the cost of the radio, and then they have a factory radio without satellite that sits on the shelf.
2. Consumers are looking for the 1 year promotion on satellite radio. People have heard about it and want to give it a try. It is a selling point for Chrysler because their cars come with a one year subscription.
The simple fact that factory installed is less expensive for dealers is reason enough for greater penetration of satellite radio. Dealers will create the “pull factor” by ordering more and more cars that are satellite equipped. Early satellite radio had to “push” their product out. With consumers and dealerships increasing demand, the OEM’s will have to deliver what people want, thus increasing demand for satellite radio.
This phenomenon may be stronger with the brands such as Chrysler that offer longer promotional periods. One year of satellite radio service is a much bigger selling point than a three month promotion. Ford has been offering some two year promotions, but on average are at 6 months. GM and most others offer three months.
As investors know, the OEM channel is important to satellite radio. Mr. Facemeyer offered even better news in the interview on sales projections moving forward. While June will not offer particularly strong numbers, the industry is expecting sales to be at about 13.5 million vehicles in 2011, up from an anticipated 11.5 to 12 million in 2010. Sirius XM is hitting positive metrics on sales as low as 11,000,000 annually. Any number above that will compound the positives.
The SiriusBuzz Radio show can be heard live each Tuesday night, and all shows are archived and available for download to listen any time. This weeks show also offered the Satellite Radio Round Table, a one hour monthly show discussing satellite radio. The panel for this past weeks show included Evan Facemeyer, Dennis Costa and Demian Russian of Satellite Radio Playground. The July Satellite Radio Round Table will include Ryan Saghir of Orbitcast.
Position – Long Sirius XM Radio
Toyota dealers are finally, finally, finally ordering their cars with XM radios whether they are standard or not. Thanks for the confirmation.
The premise that this is good for sirius is very flawed.
First off, the consumer is demanding FREE satellite radio. That does nothing for the company and in fact they lose money after only collecting a discounted subscription rate and then have to pay the incentive back to the company.
Over the last 3.25 years, sirius has lost an average of 1.5 million subs per quarter, the vast majority being promo subs. With this in place, the company is only going to see marginal benefits.
The only real benefactor here is the dealers selling the cars and having FREE sat radio helps sales and increase commissions.
Note that in 2009 there were about 6.2 million gross adds in line with Mel’s prediction, but then there were 6.44 million subs, almost all promos, that dropped the sub. The loss of these subs is NEVER mentioned in any writings and is the reason the company is losing its butt and will continue to do so.
Buuba…consider this
Sirius XM pays Chrysler $150 to install.
Chrysler pays sirius $150 for sub
We are now at a wash but have a promotional sub.
Half of those become self paying of which Chrysler get 30% revenue share
Sirius XM is making revenue on those that convert as is Chrysler
The $150 simply travels back and forth again and again, and every radio that becomes self paying is the growth
Bubba you obviously don’t have any idea how the trickle effect works. New & certified = $$$$$$$$$$$$ Also just so you know this siri/xm is spreading like a disease it is everywhere!!!!!!!!!!!!!!!!!!!
If XM thinks that people are dumb and will pay what ever they ask, well they will fail. 399.00 is enought for a lifetime script. but now they are 499 plus 74.00 music rights. I did not even buy a year at 77.00 because there normal yearly rate is to high. they will need to come back to early 2010 prices before I will buy. With everyone hurting in the economy they need to help the people not try to clean out the pockets.
Six years ago I bought a new Chevy Silverado, which had factory installed XM. Last year I replaced it with a Silverado with identical features EXCEPT no XM. I had to have Best Buy install it . Why did GM cut this great feature out if it is so inexpensive to install at the factory?