Over the years, Sirius and XM both have had special pricing for Family Plan (second) subscriptions. For $6.99 per month, the second subscription allows users to get satellite radio in another car, or in their home. XM had gotten the Family plan to a point where it represented between 20% and 25% of their subscriber base. Sirius had been hovering around the 13% threshold.

In the past, XM had been very aggressive in pursuing the Family Plan subscribers, and it made great sense. While the ARPU was lower, it was an easy sell, because the subscriber obviously already was in love with the concept of satellite radio. XM's earlier push made sense because they were getting a lot of in dash OEM subscriptions, where Sirius was behind the curve in the OEM channel, and thus many Sirius subscribers had retail units which could easily be transported from car to home.

Now the Sirius brand has enough OEM channel subscribers to make marketing the Family Plan more viable, and it would appear that this is exactly what they are doing. Lately I have heard a concerted push on Family Plan subscriptions on various Sirius channels. The company is offering special pricing to existing subscribers, and structuring the deal so as to lock in both the original and second subscription for a specified length of time. At this point I would estimate that Sirius XM Radio is at 18% for the Family Plan.

Getting the blended company (Sirius XM Radio) to the 25% Family Plan threshold is important. The more often a subscriber can listen to your product, the more loyal they will become. Simply stated, 2 subscriptions at an ARPU of $10 is better than 1 at $12.95 with a revenue share attached. If Sirius XM radio were already at a 25% threshold, they would effectively have over 1,300,000 more subscribers than they currently do. That would represent over $9,000,000 more in revenue to the company that is not hindered by revenue share agreements. Yes, there will be a SAC impact, and the cheaper plan is not friendly to the ARPU metric, but it would be a benefit to churn, and the metric that matters most...the bottom line.

While everyone is anxious to see some synergies play out, and everyone wants to see wonderful promotions that put satellite radio in the news, there are still existing opportunities within the company to improve the revenue and cash flow without a huge investment. Given Mel Karmazin's statements on getting to $400 in synergies, and getting to Positive cash flow, efforts in areas such as the Family Plan are where we will see the biggest impact. The Family Plan is not as sexy as a new wearable, or A-La-Carte programming, but it could well be these types of activities that deliver the most reward for the smallest capital investment.

I would suggest watching this line item in the future. With XM, the magic number appeared to be 25% of the base, and I would imagine that is the initial goal of the company. At over $9,000,000 per month, the Family Plan subscription is something well worth chasing.

Position - Long SIRI