Partnerships

Sirius XM announced today that it would offer introductory 3 month trial subscriptions of the Sirius Everything package upon the purchase of all Sirius equipped Ford and Lincoln Mercury Certified Pre-owned vehicles. The Everything package delivers more than 130 channels of premier sports, news, talk, entertainment and commercial-free music programming plus traffic and weather information… unlike the recently announced Sirius XM BlackBerry application which has a limited 120 channel line up.

I have always been a huge advocate for free trials to new customers so, it will come as no surprise that I think this is great news BUT… why do people buying a used car get a 3 month trial while new BlackBerry application users only get 7 days? I am sure some over-thinker has crunched the numbers but, you can’t in one breath tell us that you have a hugely diverse lineup of programming and then in the next breath tell us we only have 7 days to get a taste of it all!

Ford will continue to offer Sirius as a factory installed feature with a 6 month subscription of Sirius included on most new Ford and Lincoln Mercury vehicles.

Ever since Michael Jackson passed away there has been a public yearning for all things Michael and all things Jackson. From devout fans to detractors, the Michael Jackson story has been major news. This Sunday at 9:00 PM Eastern, A&E will being airing a new series called “The Jackson’s: A Family Dynasty”.

The new series will give the public access to the Jackson’s like never before. Some may feel that the family is capitalizing on the death of Michael, but regardless of your feelings about Michael, there is a sense that people want to know more for many reasons.

The A&E network is heavily advertising the series and Sirius XM is a sponsor of the premier. Some network ads are even mentioning Sirius XM as a sponsor. The show is highly anticipated by Jackson fans and the premier will likely be viewed by a wide audience.

For Sirius XM, the sponsorship move makes sense. As a company that brings more music to listeners than any other, Sirius XM is smart to hitch their brand to all things music, including this new Jackson series.

The news came in today that Sirius Traffic is available on all 2010 Mercedes Benz vehicles equipped with navigation and Sirius satellite radio. It is expected to be installed in 70% of the Mercedes Benz 2010 lineup and will be standard on the S-Class, CL-Class, CLS-Class and G-Class models.

Sirius Traffic comes pre-activated with a six month trial subscription for the higher then typical converting customers along with a six-month trial subscription of the “SIRIUS Everything” package.

For those of you who don’t know Sirius Traffic provides traffic speed and flow information to vehicles over Sirius’ network. It also provides information on traffic incidents, scheduled road closings and road construction. Since the Traffic feature is integrated with the vehicle’s navigation system, the service assists drivers in picking the quickest, safest routes based on real-time traffic conditions.

The Cash For Clunkers program has been in full swing for over a month, and as with anything, it has good and bad aspects to it. Yesterday we highlighted some concerns relating to dealers that are getting cash strapped because they are awaiting payment from the government on monies they have already given the consumer.

As the government prepares to address how the program will wind down, they have offered reassurances to dealerships stating that they will get their money. Cash flow is the issue at hand, and the OEM’s themselves are stepping in to ease the situation.

Transportation Secretary Ray Lahood stated, “We want to make sure that dealers know when we’re getting close to running out of the money that was allocated for the program.” LaHood said he recognized that “dealers are frustrated. They’re going to get their money.”

In the meantime, the auto manufacturers are not waiting for the solution, but instead providing one. Knowing that they need support of the dealer networks, companies like General Motors have begun providing cash advances to its dealers to help cover any cash flow shortfalls related to the program. GM said it will provide the advances for up to 30 days for dealers who have already completed a sale and they will be available as long as the program remains in effect. For their part, Toyota Financial Services is offering loans to dealers for up to 60 days to cover the lag between a dealership’s payment and its reimbursement. Honda, Nissan, and Ford are other big players that have also stepped up to the plate. The commitment of the OEM’s to help with the situation should help ease the burden for dealers as the government processes requests, and the program winds down.

When the announcement comes about the end of the program, we should see a virtual run on dealerships. Given the recent pace of CFC program sales, there is likely only about two or three weeks left for consumers to take advantage of up to $4,500 in rebates. Look for auto dealerships to have a very busy August.

Position – Long Sirius XM Radio

Investors in satellite radio have a strong passion for the equity, the service and the company. Over the years that passion has translated into investors seeking out any and all connections to Sirius, XM, or the merged entity we all know as Sirius XM (SIRI). These derivative relationships have led to some making investments into companies like RFMI, ST Microelectronics, and Audiovox.

Audiovox (VOXX) was an early partner of Sirius Satellite Radio and was the company that distributed some of the initial Sirius receivers. After time passed, Sirius moved in the direction of Directed Electronics as their major partner and Audiovox faded from the picture. Shortly after Sirius and XM merged, Audiovox landed the distribution contract for the company.

Today, Audiovox has ties in both the OEM and retail side of satellite radio distribution. Because of this, Audiovox may be a company that satellite radio investors want to watch. With the OEM channel seeming to be on a pace to stabilize, Audiovox could be busy with a rebound. Add to that the fact that Mel Karmazin announced that the company will release details on “new products and accessories” by the end of August and you must once again consider how Audiovox fits into the picture.

“We are also excited about some new products and accessories which we will be announcing later this month and bring to market this fall, so stay tuned for some new developments.”

Sirius XM has not been very active in the retail channel for quite some time. They released the Mirge radio, but outside of that, little has happened. Sirius XM’s latest retail offering has centered on their Internet Radio side of the business. Adding new docks that would serve to charge and iPod or iPhone while enabling a satellite radio feature, while speculative, would seem a natural solution that would solve potential problems while also adding to ARPU.

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As Sirius XM investors know, one main component of getting new subscribers is through the production and sale of cars that are equipped with satellite radio. With car sales suffering badly for a prolonged period, the issue finally caught up with Sirius XM in Q1 of 2009. It was Q1 where the company reported a decrease in subscribers of 404,000.

As the auto industry continued their struggle, and companies like Chrysler and GM went through bankruptcy, it became clear for many that until there was a substantial change in the pace at which cars were being produced and sold, that the satellite radio company would see lees promotional subscribers coming into the picture.

The Cash For Clunkers program seems like a ray of hope for many, but as with anything, their are pluses and minuses to any issue. Rather than debate the merits of the program, I will focus on what it means to satellite radio, and more specifically, satellite radio investors.

On its face, it would seem that a boost in car sales would mean that the end of the downward trend is approaching. Some have even gone so far as to say that this will mean good numbers in Q3 for satellite radio. A simple formula of 1 million cars with a satellite installation rate of 50% will add to the sub number and reverse the negative trend. Unfortunately, it is not that simple.

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BMW and Sirius XM radio announced today that all Certified Pre-owned vehicles that are equipped with Sirius radios will receive a three month trial to the “Sirius Everything” subscription. BMW will continue to offer SIRIUS as an exclusive factory-installed option on all new BMW vehicles with a one-year bundled subscription included in the price of the vehicle. SIRIUS has been available as a factory-installed option on all BMW vehicles sold in the U.S. since 2004.

As one of Sirius’s original partners, BMW has been putting out satellite radio equipped vehicles for quite some time. In addition to this fact, BMW has also been carrying a high installation rate for quite some time. This bodes well for the new deal, as many of the cars that will fall into the program will generate promotional subscribers.

In announcing the deal, BMW’s Joan Horst stated, “BMW is very excited to be partnering with SIRIUS XM Radio for this special BMW Certified Pre-Owned customer offer. The BMW Certified Pre-Owned Program is the luxury segment leader, and making SIRIUS XM Radio available for a three-month trial simply adds value to the already established value leader. The past 2 years have been especially successful for BMW new vehicle sales, and a record number of customers have embraced the SIRIUS XM experience. Consequently BMW is seeing more and more vehicles entering the Certified Pre-Owned BMW Vehicle Program with SIRIUS hardware already operational. The next logical step is to add a special program to introduce CPO buyers to the pleasure of SIRIUS XM.”

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XM Satellite Radio announced today that the ever popular Toyota Camry will now offer satellite radio as a factory installed option. The news is noteworthy in that the Camry is the best selling car in America, but tempered by slow overall auto sales, and the fact that it will be standard only on Camry’s with the premium audio package.

The program will begin with 2010 model year production, and XM anticipates that Toyota will have over 1,000,000 satellite equipped vehicles on the road by the end of 2009. In reading the press release, it may be easy for people to jump to a conclusion that Toyota will have 1,000,000 installations this year. This does not seem to be the case at all. While Toyota has been involved with SDARS for a couple of years now, the penetration rate has been quite low. On the positive side, the fact that Toyota is ramping up with the Camry bodes well for the future of the OEM channel, as other manufactures will need to follow suit to compete with what has become a very popular model line.

“The increased availability of XM services on the 2010 Camry is a testament to our relationship with Toyota,” said Jim Meyer, President, Operations and Sales, SIRIUS XM Radio. “We are thrilled that Camry buyers will now be able to experience commercial-free music from every genre, plus sports, news, talk and entertainment, as well as ‘The Best of SIRIUS.’”

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