"If I were teaching a course on investments there would be simply one valuation study after another with the students trying to identify the key variables in that particular business and evaluating how predictable they were first."
(How to teach business valuation according to Warren Buffett & Charlie Munger)
Sirius XM's subscriber count grew in a staircase fashion to a peak of 35 million in 2019. Since then, it has decreased by 2 million.
It could be that Spotify is eating Sirius XM's lunch. It could be, perhaps, an auto sales crunch. But I think that the most likely reason of all may just be a shift in focus that led to the fall.
In 2021, management set out to compete in streaming. So they shifted their spending from acquiring satellite radio subscribers to rebuilding its app and advertising to attract a younger audience. But, as management reallocated resources, a key variable for satellite radio subscriber growth waned: promotional subscribers.
When subscriber count grew in a staircase fashion, promotional subscribers averaged 17% of total subscribers. But, while management focused on streaming, promotional subscribers slumped to only 5% of total subscribers. This leads me to believe that promotional subscribers were key to Sirius XM's growth over the last couple of decades.
Now, as Sirius XM shifts its focus back on cars, I believe management will invest once again in promotional subscribers. And, out of a new batch of trialers, it's highly probable that many will convert into self-pay subscriptions.
Sirius XM is trying out new acquisition initiatives, such as ad-supported or music only plans. But if I were management, I'd narrow my focus on promotional subscribers.
Maybe, just maybe, management is returning to this type of focus. When Sirius XM announced that its 360L radio will debut in the Toyota RAV4, it mentioned that select dealerships will have the option to add three-year subscriptions to the vehicle’s purchase or lease price. Could this be the return of the classic promotional subscription once again?
For Sirius XM investors, I'd hope so.
Maybe, just maybe, management is returning to this type of focus. When Sirius XM announced that its 360L radio will debut in the Toyota RAV4, it mentioned that select dealerships will have the option to add three-year subscriptions to the vehicle’s purchase or lease price. Could this be the return of the classic promotional subscription once again?
For Sirius XM investors, I'd hope so.