Report: SiriusXM Faces Slowing Growth

Two of the most important metrics in measuring the performance of satellite radio provider Sirius XM could soon go out the window, and according to The Motley Fool, it may not be a bad thing if they do.

Subscriber growth and average revenue per user, or ARPU, have been two significant markers in Sirius XM's progress. The two go hand-in-hand. But one avenue the company is considering could force investors to rethink how they view the numbers – and how they assess the company's health.

John-Erik Koslosky at The Fool reports subscriptions account for 85% of the company's revenue. Ads, which generate the lion's share of revenue for terrestrial radio operators and streaming competitors like Pandora Radio and Spotify, generate just 2% of revenue at Sirius.

But with Sirius approaching 26 million subscribers, new subscriptions face inevitable slowing growth. Subscriptions last year grew at 5%.

If growth in subscribers tails off, growth in ARPU must pick up. Sirius has been able to increase ARPU on a pretty consistent basis. For the first quarter, it stood at $12.18 a month, up from $12.05 in the first quarter of 2013. Going back to 2009, ARPU stood at just $10.95.

As it stands, only one in five of Sirius' subscribers have multi-radio households.

"And therein, I think, lies the great opportunity," CFO David Frear told analysts at the Bank of America Merrill Lynch Global Telecom and Media Conference.

Some 80% of Sirius subscribers have two or more cars – and most likely have two or more drivers.

"So, I think we have a great opportunity to take that 20% number on multi-radio households toward the 80% over time," Frear said.

To get there, however, Sirius would likely offer discounts on the subscriptions each household adds. This is a trade-off. To convert these now-and-again listeners to paying customers, it will be willing to take them on at a discount rate, which will drive down ARPU.

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