SiriusXM's Fastest-Growing Revenue Stream Might Surprise You

Among the more noteworthy numbers from SiriusXM Holdings' latest quarter was its revenue from subscriptions, which grew 11% over the prior year.

With that number topping analysts' estimates, John-Erik Koslosky at The Motley Fool, writes it was easy to overlook another revenue stream for the satellite radio company -- and one that's growing at a considerably faster rate than subscriptions: advertising.

Scott Greenstein

That's right. The satellite radio service whose ad-free programming was once its biggest appeal to many subscribers is now raking in more than $100 million in advertising revenue annually. And while ads make up a small share of SiriusXM's overall revenue, we can expect it to keep growing.

Last summer, Sirius XM's chief content officer, Scott Greenstein, said he believed the satellite radio platform had indeed "matured as a true alternative vehicle for advertisers."

"It wasn't always seen that way, and it now is," Greenstein added. "So, we're optimistic about it."

Growth picked up immediately after. And while it's tailed off from its peak of 31% in the third quarter last year, it's still coming in in the high teens to low 20s.

What allowed for the growth of advertising on Sirius was the company's push to expand beyond music -- and continue stretching out into different types of programming.

David Frear

Sports, news, entertainment, talk, and live events all provide opportunities for advertising.

In growing its ad revenue at such a rapid rate, Sirius is bucking the overall trend in radio advertising. Advertising across the industry is mostly flat and expected to remain so in the future.

SiriusXM is not growing ad revenue as fast as leading streaming service Pandora Media, where ads were bringing in 23% more money than a year ago.

At a recent telecom conference, Sirius CFO David Frear told analysts that he sees advertising growing "faster than the national average radio market for the foreseeable future."

Frear went on to say that the company also sees advertising growing faster than its subscription numbers. That's more telling, especially with subscription revenue now growing in the low double digits.