This week’s Q4 earnings call for Sirius XM provided a snapshot of company financials and projections, as these calls always do, and some color around company strategy and aspirations.
Sirius XM is mostly known as a subscription audio company, but is also part of the digital audio advertising ecosystem, and CEO James E. Meyer spoke to successes in that realm:
“Advertising revenue totaled $33 million in the fourth quarter, up nearly 20% year-over-year to a quarterly record due to higher per spot pricing and a higher sell-through of available inventory. This brings our full year advertising revenue growth to just over 21%, an acceleration of growth from 13% in 2014. Advertisers are drawn to new talk channels like FOX Headline News 24/7, and celebrity hosts like Howard, Jenny McCarthy and Stephen K. Bannon. We have reached a scale that can’t be ignored in the ad community and our paid subscribers tend to be more highly engaged than typical free listeners.”
Howard Stern was a topic of interest in Q4, as the talk star inked a new five-year deal with Sirius, and that deal includes some kind of yet-unspecified video content.
“I was pretty deliberate on my remarks [earlier in the call about Stern video] not to give you a lot of detail, because we’re still working on the detail. But when we’re ready, you’ll be the first to know. I’m pretty excited about it. And for sure, it will include allowing our subscribers to access the video feed live of The Howard Stern Show. And we know from talking to a lot of our subscribers, that’s something they would like. And furthermore, many of them would like access to the library that goes back many, many, many years. Obviously, the creative experience for how this will be presented to customers will be curated and controlled by Howard. And we’re in the process of working with him to make sure his vision is exactly what we want.”
Howard is at the top of his game, and I am very pleased he will be with us exclusively for many years to come. He will continue to host his radio show for at least the next five years. –James E. Meyer, CEO
The Copyright Royalty Board (CRB) came up in the Q&A portion of the call. The CRB released webcaster music licensing rates for non-interactive services. One investor on the call asked whether the clarification of Pandora’s costs going forward might make it an attractive acquisition target for Sirius XM. James E. Meyer answered:
“The webcaster decision cost went down for us. They went up for our free competitors. I’m still mystified as to why, as a subscription service, we should pay more for spinning the same song that one of the free services that doesn’t monetize as well pays. But, look, the decision is what it is on the margin, it’s a plus for us, it’s a negative for the webcasters. We continue to look at everything. The CRB decision late last year doesn’t really have any impact on those things. But you should assume we continue to look at everything.”
Sirius investor calls always have a car focus, naturally, and this call dove into connected cars. Sirius XM is developing a technology specification called SiriusXM17, which will provide two-way data communication in cars. SiriusXM17 is conceived as an advantage to listeners, who will get a more personalized music experience if they have the uplink to customize it (Think of Pandora-style personalization), and certainly advantageous to Sirius which can learn more about audience behavior.
Here is what Meyer said about that initiative:
“For those of you who don’t know, SiriusXM17 is our next-generation platform for audio services that combines the benefit of satellite radio with two-way LTE connectivity in future cars. It enables the seamless mixing and matching of satellite and IP-delivered content. It allows us to obtain usage data from the radio in the car and let the users have a more personalized experience, including search and recommendations. All of this will make our world-class content more discoverable and accessible in the car while maintaining ease of use. Today, we’re doing significant in-field user testing and working with the engineering teams at various OEMs to implement SiriusXM17.”
Building this system won’t be quick, Meyer explained:
“Believe me, we know better than anyone the changes in the OEM world take a long, long time and to build up meaningful numbers in the fleet of enabled vehicles for SiriusXM17 will take many years. But we are extremely pleased with the progress of SXM17 and excited to better understand our customers by having a return path from future cars.”
Meyer had a prediction about the evolution of factory-installed Internet connectivity in cars:
“The connected vehicle transition is already well underway. And that transition is clear. I am confident that most vehicles built at the end of this decade will include embedded-LTE modems.”