SiriusXM, renowned for its commercial-free audio content in vehicles, is shifting its focus towards advertising as a strategy to enhance its revenue streams.
On Tuesday, the company unveiled its inaugural ad-supported subscription service for vehicle users, named SiriusXM Play. This new offering is priced below $7 monthly, making it more affordable compared to its traditional plans. It includes a limited amount of commercials integrated into a selection of music, sports, news, and talk programming, according to the company.
In an effort to compete effectively against other audio platforms and bolster customer retention, SiriusXM is looking to advertising as a viable model for growth and profitability. With intensifying competition in the audio entertainment sector, the introduction of a lower-cost, ad-supported service aims to convert free trial users into long-term subscribers.
This new subscription option will initially roll out on a limited basis, with expectations to reach nearly 100 million vehicles by the close of 2025. Additional details regarding the pricing structure and available plans are to be announced later this year.
Subscribers to SiriusXM Play will have access to over 130 music and talk channels at launch, with more channels set to be added over time, according to the company.
However, exclusive content such as the renowned talk show host Howard Stern, live sports commentary, and certain artist channels will remain reserved for customers who opt for ad-free experiences. SiriusXM continues to offer various commercial-free plans ranging from $9.99 to $24.98 per month.
In addition to its in-car offerings, SiriusXM operates a streaming application and owns Pandora, another music streaming service that provides its own ad-supported options.
Entering the Advertising Arena
SiriusXM has pinpointed a significant target demographic for its ad-supported tier: new car buyers who typically do not renew their SiriusXM subscriptions post-free trial, as noted by executives in a recent interview with Finance Newso.
Wayne Thorsen, the Chief Operating Officer, stated that the consideration of incorporating advertising into its car-based service has been on the agenda for some time. The company previously experimented with ad-supported models, introducing a limited free version for select vehicles in 2024 designed to retain customers exiting free trials and encourage them to transition to paid plans.
This newly launched ad-supported offering differs from both the previously mentioned free model and the main commercial-free experience, with the expectation that not a majority of current users will switch to this new plan.
“There are many users who do not convert after their trial periods. They enjoy the service, but the pricing becomes a hurdle,” Thorsen explained.
The duration of free trials provided by SiriusXM varies, with most lasting three months.
Drawing parallels, Thorsen likened SiriusXM’s situation to that of Netflix, which faced a similar challenge when it hesitated to introduce ads into its streaming platform but later experienced stagnation in subscriber growth.
As a response to such challenges, Netflix ultimately embraced an ad-supported model, which helped its shares recover after a dip in 2022 due to sluggish subscriber growth events.
Like Netflix, which has also reached a saturation point in terms of subscribers, SiriusXM is contending with competition from platforms such as Spotify and Apple Music, which provide alternative audio streaming options directly in vehicles. Although SiriusXM has owned Pandora since 2019, it aims to enhance the SiriusXM streaming-only application in recent years.
Boosting Revenue Streams
Faced with these ongoing challenges, SiriusXM is reaffirming its commitment to what it considers its core strength—its presence in the automobile market—a direction championed by CEO Jennifer Witz.
Following its separation from John Malone’s Liberty Media empire, SiriusXM laid out a revised strategic plan in December, prioritizing its in-car services alongside an increased emphasis on advertising. The company also announced Thorsen’s promotion to COO and set new financial goals for investors.
SiriusXM disclosed a strategic shift in marketing resources, eliminating efforts that target what they describe as “high-cost” streaming audiences prone to churn, and channeling those resources toward more profitable segments. Notably, in-car subscriptions constitute 90% of the company’s customer base.
“We kicked off this year with a steadfast goal of excelling in our core audience segments, leveraging our unmatched distribution in cars and unique content focused on live, exclusive, and curated shows,” Witz stated during a May investor conference. “I am confident we’re pursuing the right strategy.”
As of the first quarter, SiriusXM reported a total of 33 million subscribers, which marked a decline of 303,000 users during that quarter. The company observed a gross profit of $937 million, reflecting a 6% decrease year-over-year, with a gross margin of 59%, one percentage point lower than the previous year.
Total revenue for the latest quarter amounted to $2.07 billion, a 4% drop compared to the prior year, alongside a net income of $204 million, a decrease from $241 million. These figures encompass revenue from Pandora and other non-platform businesses. SiriusXM is scheduled to release its next earnings report on July 31.
Advertising revenue has begun to play an integral role within the company’s financial framework, with approximately $1.8 billion in total ad revenue reported for 2024. In May, the company recorded $394 million in ad revenue for the latest quarter, marking a decline from the same period the previous year, which was somewhat counterbalanced by the rise in its podcast segment.
Nevertheless, the introduction of the ad-supported plan comes at a time when the overall advertising market is facing challenges.
Recent years have posed difficulties for traditional advertising mediums, exacerbated by wider macroeconomic issues. This year saw additional complications arising from trade policies under President Donald Trump, contributing to uncertainties in corporate expenditures.
Scott Walker, SiriusXM’s chief advertising revenue officer, described the current advertising landscape as “unpredictable.”
“Our operations are susceptible to the ups and downs of the macroeconomic environment, especially with companies heavily impacted by tariff implications, particularly those relying on international supply chains,” Walker noted.
