SiriusXM To Launch New Lower-Priced In-Car Plan

Sirius XM is planning to launch the cheapest in-car subscription ever at only $10 a month. This music-only plan will also include streaming services. reports SeekingAlpha.com.

Sirius is already offering a discounted $17-a-month Music Showcase plan which includes a limited in-car content offering, targeted at younger audiences. Why would the company start offering an even cheaper alternative to an already discounted offer?

SeekingAlpha first heard about these plans on September 11, during the interview with Jennifer Witz at the Goldman Sachs investor conference. The share price of Sirius XM is down 17% after the announcement. The markets are also clearly asking the same question.

Jennifer Witz

Sirius XM has been struggling to gain traction with younger user cohorts as the conversion rates decline. By further lowering the entry-level price, Sirius hopes to retain younger customers, but average revenue per user will come under pressure.

Sirius hopes to grow the subscriber base and increase the revenue pool, even as the average revenue per subscriber potentially declines. Subscriber numbers have been stagnant as of late, however, and management seems to think that pricing is the issue.

A significant price reduction for the in-car satellite product is a bald bet on the price sensitivity of the core customer base as well as the attractiveness of Sirius' proprietary content. There are risks involved, no doubt.

The launch of the new music-only in-car subscription plan was announced by the CEO of Sirius XM during an investor conference, and the company has yet to release an official announcement. The details are limited as of now. On the other hand, the markets have already reacted to the news.

To avoid confusion, late last year, Sirius XM has already launched a streaming-only subscription plan for $10 per month. These subscribers can only access the service through their mobile phones or other streaming devices.

This new announcement relates to a different plan entirely. For the same $10 a month, subscribers will now be able to listen in-car via their satellite receiver. The in-car satellite is the premium service generating the highest ARPU for Sirius.

As Jennifer Witz explained this: So in December, we launched streaming only at $9.99, which is a really compelling price point, and we've been looking for a better entry price entry price point for the car side of the business as well. And so we are going to start rolling out a $9.99 price point for MPAR, which is music only. It does include streaming.

The CEO has also acknowledged that there is a large population of car owners to whom the service offered by Sirius is not essential. These customers are a lot more price-sensitive by definition.

The management also seems to think of this low-price subscription strategy as an additional funnel for capturing loyal full-service and high ARPU customers.