Sirius XM Revenues: After Single-Digit Growth For 2 Years, Why Revenues Are Set To Jump >30% In 2019?

Sirius XM Radio (NASDAQ: SIRI), saw modest growth of 8.1% and 6.4% in its revenues in 2017 and 2018, respectively. However, the acquisition of Pandora Media early this year, has made Sirius the world’s largest audio entertainment company. Trefis estimates that additional subscribers and technological competence of Pandora is likely to lead to Sirius’ revenue base to increase from $5.8 billion in 2018 to $7.7 billion in 2019, marking a growth of about 33% for the year. Revenues are expected to further rise to $8.2 billion in 2020, with the cumulative addition to the revenue base being $2.4 billion in two years (2018-2020).

You can view the Trefis interactive dashboard – Sirius XM Revenues: How Does Sirius Make Money? – to better understand the segment-wise revenue performance. In addition, here  is more Trefis Media data

Pandora Acquisition

• Sirius XM completed the acquisition of Pandora for $3.5 billion in an all-stock deal in early 2019.
• With SiriusXM’s subscription-based national service of curated and exclusive content and programming, and Pandora, the largest U.S. streaming music provider with its highly personalized free ad-supported service, under one roof, the combined entity now caters to more than 100 million listeners in North America, with close to 40 million self-paying subscribers, and 75 million trial and ad-based listeners.
• This deal holds great potential for both companies as it could bolster their positions in segments where they are currently lacking.
• Pandora’s technological competence should help SiriusXM expand beyond vehicles and streamline its features like personalized recommendations.
• Concurrently, SiriusXM alliance with several automakers should accelerate Pandora’s distribution to vehicles and unlock music streaming services for automobiles.

SIRI’s Subscriber Revenue

• This includes self-pay and paid promotional subscriptions and other ancillary fees. It also includes fees charged for Pandora Plus and Pandora Premium subscriptions.
• After increasing in 2017, subscriber revenue dropped in 2018 due to a slight decrease in revenue per user.
• However, going forward, we expect segment revenue growth to be driven by growth in the subscriber base, increases in the average price charged, and the sale of additional services to subscribers, as the company is expected to reap benefits from the Pandora acquisition, in the form of a higher subscriber base.
• Subscriber revenue is expected to increase from $4.6 billion in 2018 to $5.3 billion in 2019.

SIRI’s Advertising Revenue

• It includes the sale of advertising on Sirius XM’s non-music channels, along with Pandora’s advertising revenue which is generated primarily from audio, display, and video advertising.
• Advertising revenue has increased marginally over recent years due to an increase in rates charged per spot as well as a greater number of advertising spots sold and transmitted.
• Segment revenue is expected to grow sharply from $0.2 billion in 2018 to $1.1 billion in 2019, led by acquisition benefits and more advertisers being attracted to its national platform and growing subscriber base, as the company is set to launch additional non-music channels.

SIRI’s Equipment Revenue

• It includes revenue and royalties from the sale of satellite radios, components, and accessories.
• Revenue increase over recent years was driven by an increase in royalty revenue due to transition to a new generation of chipsets.
• Future growth in segment revenue is likely to be driven by an increase in royalty revenue associated with certain new chipsets, and increase in device sales from its connected vehicle services.
• Equipment revenue is expected to increase from $155 million in 2018 to $200 million in 2019.

SIRI’s Other Revenues

• It includes the U.S. Music Royalty Fee, revenue from affiliates, content licensing fees, syndication fees, service and advisory revenue from its Canadian affiliate, connected vehicle services, and ancillary revenues.
• Other Revenue is expected to continue its rising trend due to additional revenues generated from the company’s Canadian affiliate and pick up in connected vehicle services.

SIRI’s Total Revenue

• For the full year, total revenue is expected to increase sharply by over 33% to $7.7 billion in 2019 and further by 6.5% to $8.2 billion by 2020.
• Higher revenue is likely to be driven by additional revenue from the acquisition of Pandora in early 2019, in the form of higher subscribers, increase in average revenue per subscriber, increased advertising revenue, and higher royalty rates.

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