Acquiring New Subscribers Is Going To Get More Expensive For Sirius XM
Sirius XM’s subscriber growth has slowed more recently, but it still remains healthy at close to 2 million new subscribers every year. As the company’s penetration in the new car market has become more saturate, it has turned to the used car market for the next wave of subscriber growth. While breaking into the used car market isn’t easy, due to its unstructured nature, Sirius XM has seen notable success with second hand car deals.
While healthy subscriber additions for the company are apparent, what’s easily missed is the resources Sirius XM pours into acquiring new subscribers. For instance, the company spends a significant amount on sales and marketing and subscriber acquisition to draw user attention and convince them to pay for its services. This is a tough task considering the availability of a number of free music streaming services. Moreover, there are inherent difficulties in gaining traction in the used car market, which will be the main source of new subscribers for Sirius XM going forward. We believe that the company will have to increase its subscriber acquisition dollars spent per new subscriber going forward.
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The chart above indicates that for the past three years, the spending has somewhat come down, which is mainly due to the fact that subscriber additions were still running due to moderate growth in new car sales and marginal improvement in the new vehicle penetration rate. However, Sirius XM is now aggressively pushing into the used car market realizing that growth through the new car market is plateauing, which essentially means that subscriber acquisition will become more expensive, at least in the near term.
Have more questions about Sirius XM? See the links below:
- What’s Sirius XM’s Revenue & Earnings Breakdown In Terms Of Revenue Sources?
- What’s Sirius XM Fundamental Value Based On Expected 2016 Results?
- How Has Sirius XM’s Revenue Composition Changed In The Last Five Years?
- By What Percentage Can Sirius XM’s Revenues Grow Over The Next Three Years?
- By How Much Can Sirius XM’s Subscription Gross Margins Expand By 2020?
- How Much Revenues Can New Sirius XM Subscribers Add By 2020?
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