New cars are already big business for satellite radio SiriusXM Canada, but CEO Mark Redmond is targeting millions of vehicles already on the road whose owners are listening to the radio for free.
“There’s still probably 15-million plus vehicles on the road that do not have any kind of satellite radio in them,” Redmond said.
“Those are the customers and vehicles that are a huge opportunity for us,” he said, adding there’s also growth in the used-car market.
SiriusXM Canada recently achieved two million subscribers and Redmond believes consumers will pay to listen to commercial-free music as well as sports, news, talk and entertainment, despite free online and traditional radio choices.
“I think we’re past the hurdle of convincing anybody that people will pay for it,” he said of the $14.99 monthly fee. “It’s a matter of just showing them there’s a better alternative to what they’ve traditionally been listening to.”
Redmond compares it with 200-channel satellite and cable TV universe that consumers now willingly pay for and “can’t live without.”
By comparison, Astral‘s The Movie Network has almost two million subscribers and Astral is also the country’s largest radio company with 83 radio stations in 50 Canadian markets. Netflix‘s online movie and TV service has more than one million Canadian subscribers.
Satellite radio companies XM Canada and Sirius Canada, which were competitors, merged officially last June in a deal valued at about $520 million and included $130 million in long-term debt.
Parent company Canadian Satellite Radio Holdings now operates as SiriusXM Canada.
“We can take our marketing efforts and instead of targeting one another, we’re targeting the bigger opportunities of how do we get more terrestrial radio listeners listening to our content.”
Redmond said the service is integrated in new vehicles though agreements with Canada’s automobile manufacturers, adding that satellite radio will be put in about 800,000 to 900,000 new cars manufactured this year in Canada.
The company has deals with a number of automakers, including GM, Volkswagen, Chrysler, Ford, Mazda, Honda, BMW, Subaru and Porsche.
But not all car owners opt to pay for the service once the trial period is over.
Strong auto sales will help SiriusXM with steady growth, he said.
However, the fragile economy may shake consumer confidence. New vehicle sales in Canada were largely flat in September compared with a year ago, with a total 134,544 sold compared with 135,098 a year earlier, according to data compiled by DesRosiers Automotive.
SiriusXM Canada is also looking to smartphones, tablets and consumer electronics for growth.
“The other big part of our business is the ability to tap into wireless devices.”
Redmond said the company has $200 million in annual revenues and expects to have $20 million in synergies from the recent merger. He said there were some staff cuts as a result of the merger and the combined company has 140 employees.
RBC Capital Markets analyst Drew McReynolds said auto sales remain an important “swing factor” for the company because they’re shaped by consumer confidence, but he added the “pre-owned” market could represent an attractive growth opportunity.
He estimated about 40% or so of customers will keep the satellite radio service by end of fiscal 2013.
