February Auto Sales Should Excite Sirius XM Investors
While the headlines of a SAAR over 15 million is certainly something to celebrate for Sirius XM (NASDAQ:SIRI) investors, it is the actual numbers that really matter, and February delivered with vehicle sales of about 1,151,000 units, an impressive jump from the 992,000 we saw last year, and also an impressive leap over the 914,000 we saw just a month ago. Let’s not run and celebrate a 15 million SAAR, instead let’s celebrate the first two months of the year already averaging well above the magic 1 million sales mark that allows the satellite radio provider to produce decent numbers.
While this news is certainly great, we are also beginning to see the reasons for Sirius XM’s low subscriber guidance coming to fruition. Earlier this month I wrote a piece about the mix of subscribers and why it may impact Sirius XM’s subscriber picture. The article, titled Deeper Color On Sirius XM’s Subscriber Picture offers up a very reasonable explanation as to why, despite higher car sales this year, the company is guiding to fewer net subscriber additions. I would recommend that you take a few minutes to read that article before finishing this one.
Okay. Now that you are well versed in how Sirius XM counts subscribers we can move onto what is happening in the auto sector and how it impacts Sirius XM. As the Asian automakers continue to recover from last years disaster in Japan, they will essentially have to take market share and/or absolute sales from somewhere. What I see happening is that the “Trailing” category, which includes several Asian automakers, is gaining in market share and sales at the expense of the “Point-of-Sale” category.
Last year the “Trailing” category had sales of about 310,000. This year they boosted those sales to 362,000. That is an impressive 15% gain. Meanwhile the “Point-of-Sale” category went from 2011 sales of 330,000 to 349,000. This is a much more humble 5% gain.
The trade off here may not be obvious, but I will spell it out. Every satellite radio equipped car manufactured in the “Point-of-sale” category delivers a subscriber for at least 3 months. Every satellite radio equipped car in the “Trailing” category only becomes a subscriber if the consumer elects to become a self paying subscriber. In other words, GM produces 100% subscribers some of which will fall off the rolls, while Toyota produces no subscribers unless the consumer elects to keep the service.
In the GM deal, even if you do not want or listen to Sirius XM you are counted as a subscriber for at least 3 months. In the Toyota deal this is not the case. Thus, if the “Trailing” category is gaining ground, then another category must suffer.
The bottom line here is that auto sales are indeed good, but the mix is what is presenting at least part of the challenge when it comes to subscriber numbers. Most expect that the company will beat their guidance of 1.3 million. The question is, by how much. Certainly the early information on February auto sales give cause for a positive outlook.
Consulting the sales chart tells us the beginnings of how 2012 will begin to unfold. One thing that is certain, production will need to ramp up to meet demand. Better production bodes well for Sirius XM across the board, but it is partners like Ford and Chrysler that deliver the longest term churn-proof subscribers. Seeing sales figures for those companies could be an indication that production could ramp up more.
Ford has already announced that they are raising second quarter production by 3% to 730,000 vehicles. Ford still has decent inventory and has kept Q1 production steady at 675,000 units. Chrysler’s January Production increased by some 45,000 units over last year. Should the sales pace at Chrysler continue to climb, their contribution of 1 year subscribers could deliver a healthy boost even with the “Trailing” subscribers gaining share.
The bottom line is so far things in 2012 are looking good.
The problem is that you have published this type of analysis before and have been dead wrong with the predicted outcome against actual results.
I would veture to say that your take on my analysis is the thing that is “dead wrong”. Perhaps you can shed light on where I was dead wrong. Don’t be afraid to be very specific as I will indeed be in my response
I agree with Arthur.
You are entitled to that, so the challenge is open for you as well. What did you feel I was wrong about?
You said SIRI might not meet 2011 Q4 new car sale numbers.
I would highly suggest you read again because I never said they would meet you for subs. I did say they would have challenges and that used car sales in retention efforts would have to be a major player as well as auto sales above 1,150,000.
The problem is is people take what others say at heart without reading themselves
Ha ha.. Fuzzy got you Spencer
Just stopped in to kick the tires..see nothing changed here..
Stick with real finance sites..
No…it appears that fuzzy doesn’t know how to read or comprehend what is written. This is a must be true with you
Trying to be objective here, Spencer, esp., since I appreciate your auto sales analysis articles and I have learned a lot from you. With that said, its a fact that SXM had “no problem” smashing the sub numbers last quarter…so, it wasn’t much of a challenge. I would suggest though, that Mel had the foresight to see the “challenges” you accurately described in you articles and had smashing success in overcoming them. More then anything else, I have learned over the years to listen to what Mel says…he most likely will deliver.
Real news today is ATT charging more for those who use the service more. That will hurt Pandora and others. Sirius is winning. Next week will be interesting. What will Malone do? He could really hammer the stock or drive it up. Good news is the business is very strong and the model is very solid. Timing of price increase not bad considering that Verizon and ATT both affectively raised prices as well. I have a feeling nothing will be announced next week. Still like the stock.
I wouldn’t consider this news. AT&T’s 3GB cap will leave the vast majority of online music listeners unaffected. 3GB would give you roughly 3,240 minutes of listening per month, while the average Pandora listener only listens for 1,080 minutes.
I am pretty sure I read earlier that 95% of AT&T’s own users will not be affected.
3,240 minutes is barely 2 hrs a day. I would argue that most car drivers and radio listeners do indeed listen to radio more. Especially when they can listen to pandora on their cellphone. Also, keep in mind, radio isnt the ONLY thing that will eat up data. Surfing the web, watching video etc takes a HUGE bite. So your numbers will obviously be even lower.
Lets face it, data will be a major issue facing radio streaming going forward. The trend for telecom companies is to charge more for it in the future while doing away with unlimited completely. Those grandfathered in with “unlimited” plans are being throttled down to try and force them to tiered plans. The writing is on the wall.
Siri will keep improving its streaming offerings…and as Mel said will add radio personalization this year…BUT they also have their Satellite delivery system which isn’t held prisoner by the telecom companies.
Those that argue that satellite delivery is archaic are DEAD wrong. It will prove extremely benificial for Siri in the future of insane data rates. The smart money is waking up to this fact. 🙂
Correct. Telcoms have pricing power. Satellite is scalable.
You can argue it but, I am giving you the stats. Pandora’s listeners listen, on average, 18 hours per month. Which btw, is up from 10 hours a month last year.
Yes, there is obviously other data being transferred besides streaming music but, there is also wi-fi just about everywhere I go so, I rarely rely on the data plan. I never come close to the 2GB limit and I stream Sirius XM all day long.
Spencer,
As you know, even laser accurate Edmumds missed quite a bit on February sales, which is so unusual. They were in the ballpark under 1.1M. The result is a surprise to those who keep ignoring the progress in economy that is doing siginficantly better. there is a good chance we will see 16M light vehicle sales in 2014.
I disagree with your point that the trailing category is having a negative impact on sub acquisition. It would if the number of cars sold were constant and the shift would be toward the trailing category. The good news is that both the leading and point of sale categories are doing very well. Even better news is that luxury brands, in particular BMW and Mercede are selling very well. Although we do not have statistics but I would presume that the take rate on luxury brands is most likely over 80%.
The bigger question remains unasnwered. “By how much would siri beat its pessimistic 2012 guidance of 1.3M new subs?” I still believe that if the OEM sales rate remains on pace of 14.5 -15MM, we may very well see between 1.7M and 2M new subs. Another big question is, “Will even these impressive numbers shut up for good the bashers and nay sayers and cheap manipulators and illiterate schemers who are trying to intimidate the SA community”.
Boomer…..
To say Sirius XM had “no problem” hitting subscriber numbers is not accurtate. In fact, it took heavy retention efforts to do what they did.
ARPU went down by 5 cents instead of up by 5 cents. That is a 10 cent swing. This caused revenue to miss street expectations.
I would say that was a big challenge. In a quarter where normal deactivations should have been 1,850,000 at a minimum, they were 1,786,000. They squeaked everything they could out of churn and cut revenue so close that it wasn’t funny.
The “smashing success” you refer to was a BMW without the seats.
There was not a should out there that was expecting ARPU to drop and revenue to cut it so close. That is exactly what I said would need to happen for SIRI to beat guidance.
VI…..
The shift is to the trailing category. It is coming at the expense of the point-of-sale category. This is quite clear looking at the numbers. The market share of the trailing category is growing while the market share of point-of-sale is shrinking. Last year at this time point-of-sale was above 32%. Now they are headed down to 30%
The ramp up by Chrysler production in 2011 brought many 1 year subscribers, 55% of which will be churning out in 2012. That substantial ramp up is now slowing down. The roller coaster effect is in play and will come to fruition in 2012. The same is true for Ford, but to a much lesser extent.
Whoa! Spencer, Not true about folks not expecting an ARPU drop and close shave on Revenue. I read several places that with the heavy discounting going on, that was a distinct possibility…btw this type of discounting to retain customers is a common practice in the media industry, e.g., Cable TV has been doing this for years…always better to have some dollars then none…just sayin.
Spencer,
Are you blind? Look at your own numbers in absolute terms rather than relative ones. I repeat you were wrong before and you are wrong again. If auto sales hit 14.5 to 15MM, we will see at least the repeat of 2011 1.7M subs whatever theories you come up with. On top of that, used car market will do better and sat radio 2.0 will contribute. All these factors will balance out the price increase impact.
vi…..
Even on an absolute basis the trailing category isa taking sales away from the point of sale category. The percentages relate to the absolute and are derived from them.
I was not wrong before. In fact, the concerns I gave came to fruition. I stated what would have to happen to meet guidance, and much of it did. The company paid in ARPU to get the number.
So in your mind it takes 2 million more in auto sales to deliver the same sub number as 2011. Is that correct? (12.8 million in 2011 and 14.8 million in 2012). Think about higher churn, higher absolute deactivated, the mix, and the whole picture
Yes, it does take two million more to get tom 1.7M to 2.0M CONSERVATIVELY. It is obvious that the main reason is the price increase and an impact from gradual saturation. The churn has to go up sooner or later again for obvious reasons, including the price increase. Although we are entering the territory of big numbers, we all know that siri’s appeal is limited to certain demographics, mostly educted people and folks with means. This is why I am not saying that siri will unlikely exceed 2M even at 15M auto sales.
As the economy improves and used car market penetration becomes significant as well as 2.O becomes meaningful (if at all) in terms of growth, we can see numbers between 2.5M and 2.7M but I do not expect this before 2015. Siri is still building its BRAND and it takes time.
The car sales will include new car buyers (like me) that are due to replace and we already have SIRI. Replacements will help in the new used car market though, because they will already be radio equiped. This could be one answer to the lower adds. Any adds are a plus when you hit this level. They are on verge of being the highest sub-based business.
Spencer has been wrong before on many fronts. He is on record as stating the mobile data charge argument is old and stale. In fact, it is just beginning to play itself out. Anyone with a ounce of common sense can see that.
Jacob….
I always find it interesting when people insist on something that just is not there.
YES….I have said the data argument is tired and stale. That is because it is, and I have outlined many reasons why. My stance makes semse, while those that argued data costs would be the death knell of Pandora two years ago are looking more and more foolish by the day.
1. AT&T used to charge $30 for 2GB. Now the same cost gets you 3 GB.
2. Verizon is right now selling 4GB for the price of 2 GB.
As you can see data is getting cheaper per GB….not more expensive. In the meantime, while people have been saying that data will kill the likes of Pandora, the company is adding active users at an ever increasing rate.
3. Technology will always improve. Companies like Slacker already offer station caching, which means new content with no data use.
You can hope, pray, and sacrifice a chicken to the audio entertainment gods that data will be an issue, but all of the numbers work against that thesis
Spencer- Point 1) As is usually the case, you are in error. AT&T’s older charge was $25.00 for 2GB, now it is $30.00 for 3GB. You are typical of big business’ targeted consumer. That being uneducated and easily duped. You perceive a mandatory increase of 20%, as saving money. I’ll try to simplify the concept for you, so as you might understand…You’re hungry and decide to visit the local McDonald’s. You want your usual two cheeseburger, for two bucks. The hot young toddie, at the drive thru, tells you sorry sir, we no longer sell 2 burgers @$2, but you can buy 3 burgers @ $2.40. You say, but I can’t eat 3 burgers and I’ll have to spend 40 cents more every day for lunch. Her reply is …”but sir, your burgers are now cheaper, don’t you understand moron!!! Point 2) The Verizon plan you cite, is a simple promotion. It is not long standing. Boy, you’re really grasping at straws now. Spencer, you’d be a much more respected blogger, if you’d just suck in your pride and admit you made a mistake, once in awhile.
Please forgive the error….I was working from the top of my head.
The point is that in a “hypothetical data crunch”, companies are offering more data at a less expensive price per GB.
1. I am not a typical “big business consumer”….I happen to have an unlimited plan because I saw that there was a period of time when they would try to do away with them. Not everyone followed AT&T’s lead, and you can still get unlimited plans. Even at that I RARELY go over 2GB and I use data all of the time. The uneducated fools out there are the ones that insist that a problem for less than 5% of smartphone users translates to a problem for everyone…..FOOLS
Jacob…..You need not simplify anything. I have an unlimited plan at a steep discount. I will educate you though…..Data is getting cheaper and cell companies are allowing more of a buffer so that consumers will not go over. You want to bring up AT&T. I will bring up verizon (the LARGEST provider) that is giving 4GB for the price of 2GB. The Verizon plan I cite has been in force for 5 of the last 6 months.
There is a sucker born every minute….heck, you probably pay full price for Sirius XM even though everyone knows that you can get it cheaper
I have the same ordeal with Spencer when it comes to his pride. He must preserve his “know all” status at any cost. Ha-hah-ha. Thank youuuuuuuuuu.
Looks like data usage is taking a big toll on Pandora. Their shares are down 17% after market. Do you still own P Spencer? I stopped listening to Pandora in the car because of data usage limit.
Fuzzy….
try taking a READING COMPREHENSION CLASS.
I have NEVER owned Pandora and have stated that MANY TIMES in articles and on the radio. You simply drink way to much Kool-Aide from the other sites and are gullible enough to believe what someone else tells you…..here, let me sell you a membership!!!
i think you and Brandon think you all know too much but the fact is you all dont. I have read your article few months back on seeking alpha which said you have position in P. Why are you trying to change your stance now?
Fuzzy….
I have never owned pandora stock. You are mistaken
” My stance makes semse, while those that argued data costs would be the death knell of Pandora two years ago are looking more and more foolish by the day”
Really!!! I am afraid you are looking more and more foolish by the day stating that Pandora is a great company. Pandora has always been a joke and will remain a joke, if it is survives at all. Read its last earnings report. Significant losses today and massive projected losses tomorrow. Its business model based on ads DOES NOT and WILL NEVER WORK!!! They have to start charging. You have to be google to make money off ads.
VI…..
Have I said day after day that pandora is a great company? NOPE. In fact, I have stated MANY TIMES that I am not a huge user of Pandora, that I prefer Slacker, and have never invested in it. Let’s not let my REAL words get in the way of your argument though.
You call 47 million active users a joke. Okay….You can call it a joke.
pandora is a great company for consumers, and is on the cusp of viability as a business. I know, I know, someone said two years ago that data plans will kill Pandora. despite that the company has quadrupled in listenership. People must be so compelled by what Pandora offers that they are willing to pay a gazillion dollars in data fees….PLEASE
LOL- Spencer, basically you offer the example of your personal unlimited data plan and listening habits as defense of the IP radio business model. I would have hoped you understood anecdotal examples garner little validity, in the broad and vast consumer space. Nevertheless, I suggest you brush up on the latest developments, concerning the major broadband players. Please, allow me to educate (once again) … AT&T recently announced grandfathered “unlimited ” data plans will be throttled after just 3GB of usage. Anyone with a properly functioning mind realizes Verizon will, eventually, follow step. Furthermore, the unlimited plan from Walmart, that you’ve suggested in the past, (I think it was Bob’s broadband, right?) is of very low quality.
You say *after just* 3GB of data like its nothing. 3GB is a ton of data. Not to mention popular devices now run on wi-fi.
AT&T’s 3GB cap will leave the vast majority of online music listeners unaffected. 3GB would give you roughly 3,240 minutes of listening per month, while the average Pandora listener only listens for 1,080 minutes.
I am pretty sure I read earlier that 95% of AT&T’s own users will not be affected by the throttle.
Charles- You raise some good points. Firstly, 3GB would not be nearly enough for me, personally. This reinforces my assertion that personal anecdotal references serve no real purpose. (Spencer is very fond of bringing up his habits as proof.) Secondly, I am not aware of WI-FI accessibility while commuting in an automobile. Please, share if I am mistaken. Lastly and most importantly, my contention is completely based on the fact that IP radio will ultimately be more expensive than satellite based radio, once data charges are factored in. This doesn’t even take into consideration, facts such as, one is paying for commercials or additional sub charges, if one opts for a commercial free experience. I feel this is important for people to fully understand, because most all products and services are judged on quality and cost. It is my opinion, under this criterion, Siri will be (is) the clear winner.
1. You can get mobile internet in your car but, that was never my point.
2. My point is that, based on ATT’s & Pandora’s numbers, most users are easily satisfied by by 3GB of data and that can probably be attributed to users being on wi-fi a lot of the time. If end users are on wi-fi when they are not on the road, that leaves them the full 3GB to chew up while they are.
I’m not arguing any other points about Pandora or it’s business model, I am just saying based on the facts we are given, users are not affected by 3GB caps.
Yes, Spencer I do call 47M active users a joke because they do not bring the company enough to even break even. This is like pouring water into a bucket with a hole. You keep doing it without ever filling it up. To make any meaningful income Pandora needs to start charging whenever it is possible.
I am literally shocked by this fascination of and drive after quantity. What about the quality of the company? What about the soundness of its business model. It is like building a skyscarper without a foundation. 125M subs, 74M registered. Could Mr. Kennedy tell his investors at what level of customers he will start making money. 60M registered, maybe 80M registered or is it 100M registered, or maybe never.
This was exactly the same game when sirius and xm where separate companies. At least one of them or maybe both were clearly heading in the direction of bankruptcy. The solution was merger. After they merged, it was 100% clear that they would get profitable very soon, and they did. Now it is 100% obvious to anyone who wants to open eyes that sirius xm will be mega profitable within the next twelve months. This is definitely not the case with p. There is ZERO transparency as to its chances to become meaningfully profitable under the existing business model.
Pandora will have to shift to a sub based model like all the other internet radio companies have been doing…and which Sirius has always been. Siri has the viable business model. It has the content. It has the delivery system…YES Satellites are not archaic no matter what bashers say. Data limits WILL have a profound affect on radio streaming, and phone coverage can be spotty while on the road. Siri is sitting pretty and will have over a BILLION in FCF this year. Plus they will be adding a “radio personalization” feature this year as per Mel which will mean Siri will truly do it all. Meanwhile none of the internet radio companies can ever touch Siri’s content.
The market may be blah this week because of Greece and fear of war with Iran….but Siri should get a nice bounce from Pandora’s sickening fall. It is becoming clearer and clearer to Wall Street & investors, that Siri is profitable, has the best content, and has the BEST business model in Radio! 🙂
Well Said GreenMeanie! Best comment within this article.
Don’t worry, i am sure Spence will figure out a way to state that Pandora is now an opportunity.
Ohh wait, today’s SA article is already stating that. Damn, i am just not quick enough.
Green….
I have stated many times that Pandora needs to up their subscription side of the model. They do not have it figured out the way Slacker does, but they will get there at some point
Spencer- Your back pedaling efforts are pitiful. Trust me in that once you rid yourself of the pride filled know it all existence, your quality of life will greatly improve. You might want to start by admitting you made a mistake, once in awhile. You do make more than most of us, but that’s largely due to your obvious need to be first all the time and validation from others. Chill out, maybe open the good book, get a grip.
Jacob….
Preaching to me! Lmao….wake up!
Validation? I could not care less. I do not write cheer leading puff stuff to make people feel good about their investments.
Spencer- You’ve just proven my point, with your own words. Afterall, who could tell the big, bad, know it all Spencer Osbourne he is wrong as many times as he is right. I suggest you study up on the difference between fact and opinion. It is quite evident you are of the belief, if you vehemently express your opinion, it becomes fact. Wrong, again.
I have no problem being wrong. I doubt highly i am wrong as much as you claim, but then again if you were to try to be specific you likely would not have examples…thus, you resort to a broad brush strategy to hide
Spencer- With this latest reply, everything comes together. You, obviously, have a drinking problem. Get some help, before you fall even farther than you have.
Wrong yet again with your outlandish assumptions. I rarely drink, and never use drugs. I would suggest you seek out some help. Clearly you do not like my opinions, so why nit just change the channel?
Spencer- Maybe we’ll talk when you sober up. (denial is the first sign of alcoholism) Don’t delete your posts, until morning, then read them for yourself.
Jacob….
I do not delete my posts. It was a simple case of big thumbs and a small cell phone. You will kindly notice that the typos all consist of letters that sit directly next to the correct ones.
Now, since you want to be a FUCKING ASSHOLE and accuse me of drinking and alcoholism I will share something with you so you can stop making assumptions that are well off base.
20 years ago my 18 year old brother was killed as a result of drunk driving. I take alcohol consumption VERY SERIOUSLY. I will have a few drinks on a social occasion, but do not drink regularly, nor do I use any drugs. I stated that quite nicely and you wanted to go down the road of being a sophomoric ASSHOLE. So before you go down the “alcohol” path any further I would ask that you consider that fact, and understand that I lost my only brother in the twilight of his teen years.
Go read another site ASSHOLE
Relax. Ignore stupidity. You provide food for thought. I might not agree but I consider it valuable. Keep it going.
Spencer, I am really sorry about your tragedy but it does not give you any right or reason to be say what you have just said. Or you want to be in Rush’s steps.?
You were clearly losing the argument and Jacob made it very clear to you and to me as well. Nevertheless you kept doing what you always do – denying obvious facts when you are mistaken.
I am afraid you may lose respect of your readers because few will be taking you seriously.
VI….
I have every right in the world to say what I said. and I will not step away from that. The guy is an asshole, and carries an agenda…..just as many of his couter-parts do. He is in a probably in a chatroom now with 12 other losers who get assigned to bash away any other site that writes about satellite radio. Notice how this article is about Auto Sales and people want to bring Pandora into the discussion. They are insignificant idiots with an agenda. I have had to “deal” with these scums of the earth for a few years now. They are the weakest minded people you will ever come across. At sum point I just call them out for what they are. If you do not like it then you are free to leave as well. It will not impact me one iota.
I was only losing the “argument” in the minds of kool-aide drinking people.
The FACTS say that Pandora is signing up MILLIONS UPON MILLIONS of people despite the fact that EVERY PERSON that buys a smartphone KNOWS there are data costs.
Data plans are not killing Pandora, they turned into a viable business.
I had one kool-aide drinking SIRI cult member argue that data is going to kill Pandora, and that Sirius XM has the answer in Mel’s promised personalization service. Does this kool aide drinker even realize that any SIRI personalized radio is going to be on the NET and not on the satellite? Nope….They simply trudge along in their oblivious stupor because somehow they feel that the very data plans they say will kill pandora will not impact Sirius XM at all. Reminds me of XM fans that slammed Opie & Anthony as second runs when they thought Sirius was going to sign them. Right after XM signed them they celebrated the signing and began to say that Opie & Anthony are the best.
If I lose respect of kool-aide drinking cult members I do not care. There is another site where they can go to to sing cub-by-ya together and pat each other on the back.
Opie and Anthony the true pioneers of Satellite radio.
Spencer, i agree with you 100% the people who dismiss pandora do so at there own peril.
I have owned Siri in one form or another since Karmazin became ceo, and for the most part i have been extremely dissappointed in his running of the company. Topped off with the disaterous deal he made with Malone.
I really don’t believe most people really understand the havoc and destruction this deal has done to the SIRIXM shareholders value.
Having been a newbie to the markets some 8 years ago with SIRI being my first investment i to was looking blindly at siri.
Having said all that i do like Pandora, and i think Karmazin and his stand against an add related based option is dead wrong, (but with malone owning %40 of the co. does it really matter)Pandora had there ipo less then a year ago, and i believe within 2 years they will be turning a profit,there eating a little up front getting there product out there for huge gains in the long run.
It is taking SIRIXM close to a year (after churn)to get approximatly 1 million subs, and APPLE sells 1 million i-pads in a day, prolly for the same cost as a life time sub. for SIRI.