Sirius XM Family Plan Subscriptions Are Well Worth Chasing

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 of 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 (SIRI) 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

Comments

[Jerrold Wil...:]

The family plan for XM has been a good deal. I have had it for a few years now. I even got a few of my friends on my plan that would never have payed the full 12.95 on their own, but didnt mind paying 6.99. (well i charged them an even $100.00 per year to help offset my $12.95 fee). When the new pricing plans come out, I hope they still have the family plan option. For example, if I get the rumured "best of both worlds" plan for 16.95; can I then get the add-on radios for 6.99 and have those radios be best of both wolds also? I hope the company allows this because many may think 16.95 is too much for radio; but if they can spread the cost over 2 - 5 radios it will be a great deal. Sure the ARPU would be lower but I feel the company should go after a loyal larger base of customers rather than short term higher ARPU.

2008 Aug 25 09:13 AM

[Edster:]

I am sure that CEO Mel and his crew will work things out that will benefit not only subscribers but the investors in the Sirius/XM stock. We may yet see some positive movement in the stock price towards the end of the year. Patience in my opinion will be rewarding to all who continue to remain optomistic and give the company the benefit of the doubt.

2008 Aug 25 09:58 AM

[Bababooie:]

Tyler,
Your wrote-
"That would represent over $9,000,000 more in revenue to the company that is not hindered by revenue share agreements. "

What are the details on the revenue sharing. I tried to do some researching on the "Details", but came up short. I see this as a possible avenue of long term drop in expense due to single player market status. When does the Telematics contract expire?

2008 Aug 25 11:11 AM

[fullflaps:]

Um, I do not think the model allows you to give the family plan to your friends and charge them for it, there is always someone who scams the system.

2008 Aug 25 12:48 PM

[Jerrold Wil...:]

Well, I dont consider it scamming the system. If I have a friend on my family shared cell phone plan, is that scamming the system also? If that is the case, they can ask for birth certificatates and a detailed family tree if it is that serious. Bottom line is I had a plan with 4 radios on it. I think the comany wouldnt mind if others did the same. The more radios the better. Do they really care if it is my friend or brother? Either way they are getting extra revenue that they woudnt get. As far as charging them for service, what am I Santa Clause, you want "pay radio", you have to pay for it. I wasnt making a profit, I just leveled the cost off so instead of me paying $12.95 while others payed 6.99. They paid about 8.00 a month. In the end we all averaged about paying 8.00 per month. That's $32.00 per month on my bill. If that is scamming the system. Sirius wished they had a lot more scammers like me. I've had service for over 3 years like that.

2008 Aug 25 01:54 PM

[stonecgi:]

I also have a few friends on my account. Sirius is the winner because they have extra revenue and it didnt cost them anything. I did all the work of promoting it.
In my case I just charge them annually after Sirius charges my credit card. Everybody is a winner so I don't look at it as a scam.

2008 Aug 25 03:03 PM