SiriusXM CEO Sees SXM17 Platform as Reducing ‘Friction’ of Subscribing
SiriusXM, through the fledgling SXM17 interactive platform it’s developing with the major carmakers (see 1504280044), is “fully embracing the connectivity that is coming to vehicles,” CEO Jim Meyer said on a Thursday earnings call. In future connected cars using SXM17, “we will be able to offer even more new services to consumers, from nonlinear content like on-demand shows and personalized music, to interactive program guides, with personalized recommendations,” Meyer said.
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Meyer also sees “simplified in-car, on-screen account management” through SXM17 as reducing the “friction associated with subscribing to our service,” he said. “No matter what we do to innovate with SiriusXM, we will always remember that ease of use is paramount.” His goal for the SiriusXM team “is a simple one -- you're never going to need an instruction manual to operate your SiriusXM radio, that I promise you,” Meyer said.
Moving toward a two-way, interactive, connected world through SXM17 also “will help us better understand and serve our customers,” said Meyer. “We couldn't be more thrilled with the progress we're making on our SXM17 platform and the reception we're getting from the focus groups who've tried this new platform and the OEMs who are eager to deploy it," he said. "We are very confident that these investments in our long-term platform are the right course, and we are also encouraged by early research highlighting our performance in connected vehicles.”
Consumer demand for SiriusXM’s “differentiated bundle in cars” remains strong, “even as technology platforms evolve,” Meyer said. Recent research on consumer listening trends in the car “reminds us once again that terrestrial radio is the 800-pound gorilla in the room and by far our largest competition,” he said. Most consumers who reject subscribing to SiriusXM at the end of their 90-day trial “do so for the simple reason that they don't want to pay for radio,” he said. “When trialers don't convert to self-pay or subscribers churn, research shows that they're overwhelmingly turning to free ad-supported terrestrial radio.”
Meyer doesn't see SiriusXM as "locked in a zero-sum battle with streaming players,” he said. “Like a proverbial ice cube melting in Alaska, terrestrial radio isn't going anywhere quickly. It will remain a massive, slow-moving, yet still widely used incumbent that we at SiriusXM and streaming entrants can continue growing against for years and years to come. We have a huge opportunity here to tap this potential and provide a better bundle of radio to those who are willing to pay.”
SiriusXM’s long-term goal is to see the SXM17 platform installed in every vehicle that can receive satellite radio, Meyer said in Q&A. He estimated that 75 percent of the new cars sold in the U.S. in Q1 had SiriusXM capability. “That's going to take quite a long time to accomplish,” he said of SXM17's 75 percent penetration target. Meantime, the company is doing “extensive user testing” on SXM17, he said. “The size of our focus groups has expanded,” as has the number of vehicles “that we now have equipped with this product” for the purposes of “real-time testing,” he said: “We're right where we want to be.”
The company is “not ready yet” to discuss specific SXM17 rollout plans through the major automotive OEMs because the car companies are “very guarded of their own product plans,” Meyer said. “We'll have more to say about that later on this year,” he said. “But what I will guarantee you is that the trajectory of where we're going with SXM17 is moving along, frankly, right at the pace that I want to see it.”
One of SXM17's biggest “benefits” will be eliminating the “technical hurdles of our satellite technology platform” by changing the company’s relationship with its customers “from one-way to two-way” interactivity, Meyer said. “And with that two-way, it allows us to do all of those things that you can think about,” including interactive music and on-demand services, he said. For customers, SXM17 also will make it “much easier to deal with us,” he said: “And we're not that far from one button to renew.” Meyer declined to comment when one questioner asked whether SiriusXM plans “any logical streamed version of SXM17.” SiriusXM will have “more to say about it later in the year,” he said.
SiriusXM can’t yet “quantify” how SXM17's convenience features might reduce subscriber churn, Chief Financial Officer David Frear said in Q&A. “We'll have to wait and see as product gets in the marketplace.” From a corporate standpoint, SiriusXM also expects “to be able to lower costs through it,” Frear said. Being able to use a “one-button push to effectively convert from your trial into a subscription means that we're deflecting calls away from the call center,” he said. “And so I think there are benefits in churn conversion and more efficient operations in terms of on-boarding customers.” Frear also sees “every major OEM” as being “very engaged with us” on SXM17, he said. “They are excited about it and want to see us get it into their vehicles as quickly as possible.”