Sirius XM Radio is gaining a larger presence in the used car market with each passing quarter. Ever since the first satellite radio equipped cars began rolling off of the GM assembly lines years ago, investors in this sector knew that the day would come that satellite radio equipped used cars would become a meaningful contributor to the subscriber numbers.

The difficulty most investors have is in trying to quantify exactly what the size of the satellite used car market is, or how to quantify how many of those cars will turn into subscriptions for Sirius XM Radio . This can be a difficult task, and there is no real way for anyone outside the company to put a solid number on it. We ca derive some data points, but without exact numbers, the information is subjective. Even as subjective as it is, there are points of interest that offer investors something quite positive.

CarMax is a nationwide company that sells used cars. The wonderful thing about the Internet is that it allows consumes to gather a wide range of information in a relatively short period of time. A search of the CarMax site on May 17, 2010 reveals that the company has 25,579 used vehicles in their inventory. Enter the keyword "satellite radio" and we learn that out of those 25,579 used cars, 8,846 are already equipped with satellite radio equipment. That translates to a meaningful number. Almost 35% of the used cars in the CarMax are satellite equipped.

Another website that offers information on used cars is Vehix. This site deals with a massive inventory of 224,303 used cars. Of the full inventory, 67,367 of them are labeled as equipped with satellite radio. That equates to a 30% penetration rate. While this penetration rate is not as high as Carmax, it is not far off either, and perhaps it is safe to say that about 1/3 of desirable used cars out there are potential satellite radio subscriptions.

This is now getting to the point where the used car market is making a meaningful, if not measurable contribution to Sirius XM. Certainly I would imagine that the "take rate" in the used car market is not at the 45% to 50% levels we see with new cars, but that can change. Now that the pool of equipped used cars is large enough, it begins to make sence for Sirius XM to begin a marketing campaign to target those cars beyond the current deals that exist with CarMax and CPO programs. The company has to be cautious and measure how to proceed. Their best solution in my opinion would be a direct campaign to the consumer. This avoids having to deal with pay-outs to a massive network of dealers and will save the company money. I would like to see Sirius XM advertise a three month promotion for any satellite equipped car starting in the top 10 satellite radio markets. This would allow Sirius XM to test out and determine the best strategy going forward.

The process will not happen overnight, but each passing quarter delivers with it more and more potential in the used car arena.

Position - Long Sirius XM Radio