Why SiriusXM Pivoted Away From Its Streaming App
Only a year after the launch of the app, which failed to take off with its intended audience, the company decided to re-emphasize its strong suit: in-car listening.
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A year ago, SiriusXM launched a new streaming app filled with original and licensed content from its satellite radio service and set the price at $9.99 — far below the roughly $16 average monthly revenue it takes in per satellite subscriber. The hope was that a relatively affordable price and an improved app would help SiriusXM reach younger consumers and expand beyond its core in-car satellite radio listeners.
The new app was “just the beginning,” CEO Jennifer Witz said at the time, adding that SiriusXM would “continue to iterate and develop our product offerings throughout the next year and beyond as we strive to deliver our subscribers the best listening experience on the go, in the car, and wherever they choose to tune in.” The company’s satellite radio business was built on vehicles. If you buy a new or used car, you’ll likely get a free SiriusXM trial that’s extremely effective at convincing people to subscribe once their trial is over. The new streaming app was intended to attract people who would listen outside of the car.
But selling the radio experience in a smartphone app didn’t go well. As it turns out, the streaming app hasn’t produced a good return on marketing spending, Witz said on Tuesday (Dec. 10). Appearing at the UBS Global Media and Communications Conference, the executive cited “slow progress” in turning free trials into long-term retention. As a result, SiriusXM has already cut back its marketing spend on the app and expects to have fewer streaming trials — and thus fewer subscribers — in the future. That was a worse assessment than what Witz delivered on SiriusXM’s Aug. 2 earnings call. At that time, when asked about conversion rates for the app, Witz said they had been “challenged” but maintained positivity, adding that there had been some “positive results” with first-time trial adopters and that the company was “confident” it could attract “a different audience” that will be “incremental” to the existing car-based business.
Now, after its underwhelming experiment with the app, SiriusXM will, in Witz’s words, be “leaning into our strengths.” In other words, the company is putting its focus back on satellite radio and the in-automobile listening experience. In alignment with that strategy, the company also announced the departure of Joseph Inzerillo, the chief product and technology officer who played an instrumental role in the app’s launch.
For all the strengths of the app — curated stations, celebrity musician stations, a smorgasbord of audio programming — the company gave up its competitive advantage when it tried to compete outside of satellite radio and the automobile. After all, the company is the lone satellite radio operator and, given the cost and complexity of launching satellites into orbit, has the market to itself. But when leaving the safety of satellite, it’s hard to beat Spotify, Apple Music, YouTube and Amazon Music at their own game. These are streaming-native platforms built for consumers’ desire for interactivity, while SiriusXM’s app attempts to fit a one-way satellite radio experience into a two-way, interactive medium. In the end, paid radio turned out to be a tough sell to a generation that has grown up on on-demand streaming.
So, SiriusXM is going to focus on what it does best, and in-car listening gives the company a huge audience to work with. It currently has 33 million subscribers and, according to MusicWatch’s Russ Crupnick, reaches 65 million total listeners. In an email to Billboard, radio consultant Andy Meadows said he believes “SiriusXM is better suited to compete for those coveted in-car listeners so [Tuesday’s announcement] makes sense from that standpoint.” Crupnick also sees in-car listening as a point of strength for SiriusXM, pointing to the uniqueness of the SiriusXM product as a distinct advantage. “The ease of use, breadth of content, and curation position them as far superior to terrestrial radio, and in a different place than music streaming or podcasts,” he says.
Building on in-car satellite listening, the SiriusXM streaming app will become more of a complementary product. “There is real opportunity with 360L,” said Witz on Tuesday, referring to the company’s in-car platform that serves as a dual satellite radio/streaming product. Because 360L includes streaming, it allows SiriusXM to serve personalized — a.k.a. more lucrative — ads and provide more targeted — a.k.a. more expensive — ads for advertisers. Of the app, she said it can provide data that helps SiriusXM determine spends on programming that resonates with listeners, given that satellite receivers are a one-way technology that doesn’t provide granular insights into listening behaviors. Similar to 360L, the app can also provide targeted advertisements.
For customers, bundling satellite and streaming costs as low as $25 per month. That’s about double the cost of an individual Spotify subscription, but SiriusXM subscribers can withstand the price. According to Witz, platinum satellite subscriptions, which cost upward of $29 per month, account for “about a third” of the current subscriber base. And providing the best of satellite and streaming will help SiriusXM compete with a “newer breed of streaming products” on Americans’ car dashes, says Meadows. “Anything SiriusXM, and traditional radio for that matter, can do to look, sound and function better across all devices is in their best interest long term.”
