The Sirius XM Radio app has been on iTunes for a couple of weeks now, and recently passed the 1 million download mark. This makes the satellite radio app one of the most popular downloads overall, and the number one music service download.
The success of the long awaited app is good news for consumers, and a mixed bag for investors. Simply stated, there is no detail available as to who exactly is downloading the app, and what the mix of existing vs. new listeners is. We simply do not have the kind of detail needed to asses the value of 1 million downloads, and with various scenarios at play, the milestone could mean anything from good news financially, to a break even proposition.
- Existing subscribers that download the app add nothing to the subscriber rolls, but may add to the bottom line. If they were not previously paying for the $3 Internet feed, the company gets a bit more revenue out of that subscriber. If they were already an Internet subscriber, then the financial benefit to the company is nothing.
- New listeners that download the app are not counted as subs, and as yet, the company has not supplied a conversion rate. If a new listener subscribes, the company is looking at a minimum of $12.95 per month and a new subscriber. If the promotional subscriber does not subscribe, it does not impact churn. A successful Internet conversion rate is typically no more than 5%. As you can see, even with 1 million downloads, it will be a challenge to garner new subscribers.
One hurdle faced by Sirius XM Radio is the short length of the promotional trial. Listeners only get one week to test drive the service, and functionally, that is not a lot of time. With services such as Pandora and Slacker offering free music, it is not hard to imagine someone trying Sirius XM for a week, but reverting back to the free service apps offered on iTunes. Sirius XM has distinct advantages and disadvantages when compared to the free services out there. In my opinion, a week does not give the consumer enough time to really learn the advantages offered by Sirius XM.
The pace of downloads is impressive, but 1 million downloads with no data to break down is virtually worthless to investors. The company needs to provide some clarity in those numbers, improve the app, and branch out with apps for Blackberry, the Palm Pre, etc. Time will tell.
Position - Long Sirius XM, No Position Apple