SiriusXM has lost a half-million customers to its flagship satellite radio product over the last 27 months, and is struggling to grow both its customer base and its revenue for what is still a cornerstone product for the company.
The figure is based on a review of SiriusXM’s financial disclosures by The Desk, which included the company’s latest earnings report that was released this week.
On Tuesday, SiriusXM revealed its flagship satellite and streaming radio service has 34 million subscribers, which helped the company earn $1.725 billion in direct revenue during the three-month period that ended June 30. The figure was 75 percent of SiriusXM’s overall earnings of $2.25 billion during the quarter.
SiriusXM’s other products, which include streaming audio service Pandora and podcast platform Stitcher, brought in $400 million in advertising revenue and $128 million in subscription income last quarter.
In a statement, SiriusXM CEO Jennifer Witz said the company was “pleased to report continued progress toward reaching our financial and operating goals this year,” and said its sole focus was “reinforcing SiriusXM’s distinct and leading position in the audio entertainment industry with new curated live content and by enhancing control and discovery across our platforms.”
SiriusXM charges between $5 and $24 a month for access to its news, talk, sports and commercial-free music channels. Its lower-priced tiers are typically offered to customers who are willing to stream SiriusXM programming, while higher-priced tiers offer access to SiriusXM content online and via satellite.
The company’s advertised subscription fees do not include taxes or a music royalty surcharge that helps SiriusXM offset the cost of broadcasting recorded and live music. Those fees can drive up the cost by several more dollars, and apply equally to streaming and satellite radio packages.
The average streaming customer pays around $11 a month before taxes and fees, while the typical satellite customer pays around $18 a month, according to a SiriusXM employee who asked to remain unnamed because they were not authorized to speak on behalf of the company.
On Tuesday, Witz said the company is looking to adjust its streaming and satellite prices as it prepares to relaunch its connected audio platform. The platform will roll out through updated apps for phones, tablets, TVs and other connected devices later this year, and the price adjustment is expected early next year.
“We feel really good about the business model, both on the streaming side and on the in-car side,” Witz told investors during a conference call on Tuesday. “We expect to, probably, add more subscribers on the streaming side as we move forward, as we see more growth there.”
But convincing people to pay for radio has been a tough sell over the last several years: While the company isn’t losing subscribers at a fast rate, it isn’t growing its customer base, either.
SiriusXM has reported a net positive growth in customers just once during its last nine financial quarters, with the company reporting 34.2 million overall subscribers during Q2 2022. The figure was about 200,000 customers higher compared to the previous quarter.
For the most part, SiriusXM has reported negative or flat net additions, suggesting the premium radio market may have peaked in the United States.
Things have been somewhat better on the financial side, but not by much. Since Q2 2021, SiriusXM has seen its subscriber revenue grow by 5.5 percent, spurred in large part by the company reconfiguring its streaming and satellite radio packages and prices.
The latest price hike happened in March, when SiriusXM announced it was adjusting the cost of its satellite radio tiers by $1 to $2. Another price increase is expected next year, shortly after SiriusXM debuts its new streaming platform.
For years, SiriusXM has offered some of its tenured customers a special discount if they threaten to end their subscription. The rate is typically priced lower than SiriusXM’s advertised prices, and was intended to help reduce subscriber churn.
Last year, Witz suggested the days of cutting long-time customers a deal were about to end, because higher rates were ultimately better for the company’s financials. She also said the company’s investments in next-generation connected technology, including the development of its 360L platform, justified higher fees.
“With 360L, which is going to have significantly more capacity to be able to provide more content and features to customers that enhances the value, I think it gives us more opportunity to perhaps raise rates going forward,” Witz said.
At the same conference, Witz also affirmed that investments in streaming would help the company break its long-time reliance on the automotive industry. For years, SiriusXM gave out generous free trials to new car buyers, with the hope that they liked the service enough to subscribe. As more cars come equipped with connected infotainment systems, SiriusXM is but one of hundreds of options competing for the attention and business of drivers and passengers.
“We are continuing to invest in, and I continue to think, [digital] is going to be a bigger portion of our subscriptions going forward,” Witz predicted. “It’s going to make us less reliant on the auto industry.”
On Tuesday, Witz revealed SiriusXM is already seeing some proof that its focus on streaming is paying off, though she declined to say how many streaming-only customers the company has.
“That helps give us confidence that when we launch this new platform, which will give us even more capabilities to improve both of those pieces of the equation, that will continue to see upside in our streaming net adds,” Witz said.
