Car-based iPods Threaten Sirius Satellite Radio, XM

Apple Computer (APPL) has closed a deal with Ford (F), GM (GM), and Mazda to put iPods docks in their new vehicles, which means that up to 70% of 2007 US autos will have 'seamless iPod integration.'

This is a significant move for Apple, as GM and Ford are the #1 and #2 top-selling automakers in the U.S. GM and Mazda have reported that all of their new models will have an iPod dock, and Ford has said that most of the Ford and Lincoln Mercury cars will have the device, which will allow the driver to to use the car's controls to control the iPod while it charges automatically in the glove compartment.

Sales of iPod are expected to double by 2009, and GM sees potential in using the iPod as a marketing tool to attract younger consumers.

Jim Cramer reported on Thursday August 3rd's Stop Trading! show that Apple's iPods are also going to be installed in luxury Lexus cars: "I don't think people know how big iPod for Lexus could be," said Cramer, observing that a formal relationship between Apple and the Toyota (TM) -owned carmaker "could be a real rival to Sirius (SIRI)."

Sirius depends on the automobile industry for much of its growth business, and would face a real challenge if new car buyers consider their personal iPod, which can hold the equivalent of thousands of CDs, sufficient for their in-car entertainment. Sirius President Jim Meyer emphasized the importance of car subscriptions during the company's recent earnings conference call:

The OEM sector ... where we continued to see strong progress during the first quarter as our factory programs gained momentum. In the first quarter we added 225,343 net subscribers from our automotive OEM channel, which is a 109% increase over the net OEM subscriber additions for the first quarter of last year.
Again, we expect significant growth to continue in this sector during the year. Plus as we have previously announced, all of our exclusive OEM agreements were renewed in 2005 with long-term deals which both improve our penetration rates at each of these car companies as well as consistently improve our economics.

Sirius has made deals with Ford and Toyota in the past, and the proliferation of iPods within these cars is certain to create lively competition between Sirius and Apple.

Cramer has been advocating a merger between XM Satellite Radio (XMSR) and Sirius for several weeks; increased competition from Apple's iPod would seem to give an additional reason for such an alliance.

(Hat tip: Phil Davis)

Comments

[jbelkin:]

I think the XM/Sirius audience is ultimately limited to begin with - even if you count the radio as "free" or a little more than you would normally pay for the car audio - ultimately, you're talking about over $150 a year not including premium programming.

If you drive an hour each way for commute, there's part of your audience.

Long distance or working drivers (cabs/truck drivers) - the audience is there

But beyond that, who is there really willing to pay $15 a month for radio? Sports? Baseball is clearly the sport of radio but that audience tends to skew older and most of your older fans really live in the area - you always have free radio. Most of other people do not have free evenings to listen to baseball unless they are driving into another state. It's one of those things that sounds great but who has that much free time?

And while NASCAR & NFL are popular on TV, radio is not anyone's "other" choice if they can help it - again, unless you have to work, most of their games are usually when people are already watching the game or are too busy doing something else - and again, for the NFL, local fans have free local radio.

Music - it is great to get hundreds of commercial free stations but unless you drive to work, the ipod is much easier and you really only hear exactly what you want to hear.

That's not to say there no's business or that the ipod has to kill atellite radio but satellite radio has to look at the numbers realistically ... and there is technology that can match them coming soon so they should not get too carried with spending money ... if nationwide wifi max is launched - basically internet radio will be free (as part of your package) since anyone even YOURSELF can launch a stream and with wifi access your website or anyone as a "radio" station - we have thousands of internet radio stations already, it's just a matter of bandwidth now but soon?

2006 Aug 06 08:43 PM

[User 119809:]

I know for a fact that SIRIUS and Marc Levinson are paying off an Lexus Executive in the US to n o t support the iPod full functionality. Why else does the iPod seamlessly work in any other car - but in Lexus. Why else does Lexus in Europe has already full iPod support. Someone from Marc Levinson told me that they are paying someone from Lexus 2,000,000 to keep the iPod out - and they are doing a good job.

2007 Nov 03 11:43 PM