Sirius XM to Capitalize on Pre-owned BMW’s
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.”
The Certified Pre-owned (CPO) market has been a segment that satellite radio investors have been eager to enter for quite some time. While several such deals have been in place for quite some time, it only made real financial sense when the CPO penetration of already equipped cars reached a certain level. With higher penetration over the past couple of years, we now will see the benefit of getting to monetize radios that might otherwise be idle.
The numbers will not be huge in terms of Q2. Going forward, what will develop is a second wave of promotional subscribers that can begin to offer balance to the subscriber metrics. The more successful CPO programs in terms of gross subscriber numbers will be from the likes of GM, Ford, Honda and Chrysler. Toyota will likely lag behind on the gross installation side because they have not had a high penetration rate on new installs. Brands such as BMW and Mercedes likely have higher conversion rates, and higher penetration rates, but their sales volume is very low when compared to auto industry staples such as the big three.
Investors should expect benefit from CPO programs to be a developing market rather than one with a big instantaneous impact.
Position – Long Sirius XM, No Position OEM’s
I hear what you are saying about the numbers for the 2Q not being huge. I think it wise not to hype the short term impact…especially since Mel himself alluded to a hit in subs for Q2.
I guess we are all wondering how bad of a hit and how will it impact the current share price? Is the decline in subs already factored in? Especially since we have hardly risen at ALL on all the little nibbles of good news in the form of upgrades that have been trickling in. Will they be enough to offset any decline in subs? If not, how far will we get beaten down this time?
So many questions.
And if….if miracle of miracles….the numbers go the other way and SURPRISE EVERYONE(a guy can dream)….will that finally light a flame under this stocks ass? Will better than expected numbers help jump start Sirius? I’m not asking for a pop to $1 right away(although nice!)…but how about we get back over .50 cents again? Sheesh! 🙂
Anyway…whatever the numbers are, if Sirius can make SOME kind of announcement…like working out the Howard/iphone app thing….or SOMETHING….then that’d be great too. A blackberry announcement. I dunno. How about a Pandora/Slacker like feature on the app???
Being a true long, I am hunkering down for NO ANNOUNCEMENT….AND a hit in the stock….with another whole quarter of agony and uncertainty. Yeah, I’m impatient….but come on….lets hear some major good news!
Having said that, I’m in this for the long haul….so I am fully cool with whatever happens. Just today I’m feeling a little frisky. 🙂
I’ve got to tell what happened to me last week:
I got an e-mail from XM customer service wanting to know if I was satisfied with my subscription. I filled out the obligatory checks(mostly 3-7’s on a scale of 10 being highly satisfied) & made a post in the comments section stating that I have been disappointed with the direction SiriusXM has taken since the acquisition and how dissatisfied I was with the decline in programming and substitiuion of superior XM channels with Sirius channels,the chatty DJ’s who add NOTHING to the most of the music channels, the unbelievable hack job they have done to the comedy channels and that I was nowhere near the supporter of SatRad that I used to be. I posted that it was doubtful that I would renew my subscription when my multi-year sub expires next year. I received a reply that a programmer would PERSONALLY call me on my telephone of record.
That’s been a week ago and I haven’t heard from one person at SiriusXM.
That my dear Mr./Ms.”frigginregan” is the main reason that SiriusXM is in the shape it is in.
Some of you (not you per se) can rationalize about what the tea leaves say all you want but the fact remains that this company has lost its credibility and is acting more like Sears & K-Mart every damn day and you see how they are doing. Since Sears acquired K-Mart,both of them are something to be proud of aren’t they? They both carry a bunch of stuff nobody is buying,their employees act like they could give a rat’s ass and forget about customer service. The last two times I went to Sears they didn’t have the items that were in the newspaper ad and the substitutions they offered were inferior. Another time I ordered an item on-line and when I went to pick it up I was informed that the item had been out of stock for a month even though I got an on-line notice to pick up the item. They had a big store full of stuff and the store was virtually empty.
I can see the same thing happening to SiriusXM.
(XM subscriber since Feb 2002 & stockholder since 2005)
I also contacted SiriusXm investor relations two weeks ago via email and provided my telephone number and have not received a response. I wrote a letter expressing my concerns about Dodge 1 year trial subscriptions expiring and the radio still plays months later and nobody from SiriusXm has contacted the individuals to subscribe. These vehicles are company leased vehicles. How many people are listening for free? My brother says his neighbor has a radio in his boat and 2 years later it still plays and he doesn’t pay.
Life Time Subscriber and sad to say shareholder.
Well-well Mr. Savery . . . what have we here little friend?
Might this give you any greater confidence in positing a CPO forecast? Hmmmm?
Quote:
Originally Posted by TSavery
The certified pre-owned channel will be some helpmut not as much as some think. There have been programs in place with certified pre-owned for quite some time. The free trial makes sense, but the take rate , logically speaking, will not be as good as with new cars.
Hey Tyler . . how ’bout modeling a CPO forecast?
Although the CPO program has been in place for quite some time . . the CPO market itself has actually been growing while the OEM channel has been shrinking . . . add to this that the units now finding their way into the CPO channel will reflect increasingly higher install rates as penetration ramped-up in each successive year . . . also, the brands targeted for CPO, many of which are luxury segment, have traditionally enjoyed a higher “take”
2007 saw 1.7mm CPO units sold; ’08 was up over that and the last few months of ’08 indicated an uptrend at an increasing rate . .
you would need a reasonable projection of the average model year currently being sold in the CPO channel (say 2006) in order to estimate the approximate install rate at that time and a forecast of annualized unit sales for ’09 (say at least 1.8mm) . . then go ahead with your take and churn calculations . . . you could go one step further and try to seasonally adjust for Q2 accuracy
can you get to 75,000-100,000 net CPO ads for the qtr without seasonally adjusting?
might not seem like huge #’s here but minimal/nominal subsidy on these is a big plus to the bottom line . . .
——————————————————————————–
p.s. just breakin your chops Tyler (lol)
. . I appreciate your caution in not getting too speculative . .
p.p.s. henceforth, anytime the term “Take-Rate” is used it MUST be reported only in correlation to a given penetration rate . . otherwise it has no context for discussion . . agreed?
. . don’t forget VW/Audi . . . I thought I read somewhere that they had a fairly high penetration rate, especially Audi