SiriusXM220

SiriusXM’s investment could not have come a better time. As the company faces continued weakness in the auto industry where new car sales have driven the growth of its satellite radio service, it has been able to make up some of the gap with podcasting. The company said it had $95 million of podcasting and off-platform ad revenue during the first quarter, an increase of 42% from a year ago in what is typically a slower quarter for advertising.

“We see a lot of great tailwinds in podcasting,” said SiriusXM CEO Jennifer Witz. During a conference call with analysts Thursday, she explained the company is taking a “multitrack” approach to podcasting, with a combination of content deals and advertising agreements that allow its SXM Media ad sales unit to sell more podcast inventory. 

“It’s our experience that great podcasts can also make great content on SiriusXM,” said Witz. Examples of that include the recently-launched Freakonomics Radio Network, the first streaming channel to be dedicated to a podcast, and the new live call-in show “Open Lines on Faction,” in which the hosts of the horror comedy podcast Last Podcast on the Left talk directly with listeners about a paranormal topic of their choice. “We’re also seeing more content creators turning to podcasting to expand their brand, and they’re partnering with us to scale their audio presence,” Witz said.

When it comes to deciding whether to build a podcast or acquire an existing show, Scott Greenstein, SiriusXM’s President and Chief Content Officer, said when opportunities pop up they examine them to see where a show fits into their plans. “The goal is to look at the blend of things that will make an impact immediately, and others that we can grow,” he said. 

Slow Car Sales A Drag On Q1

Overall, SiriusXM reported first quarter revenue grew six percent from a year ago to $2.19 billion. “SiriusXM reported solid first quarter growth in both subscription and advertising revenue,” said CEO Jennifer Witz. “Audio in America is thriving, and so is SiriusXM.”

Despite soaring inflation and subscription fatigue, SiriusXM said it had a still-low churn rate of 1.6%. It also had a nine percent in average revenue per user, reaching a new all-time high. “Overall, the first quarter marked a great start to the year, even as SiriusXM's near-term subscriber growth remains limited by supply constraints in the automotive industry,” said Witz. 

Even as car sales remain weak due to supply chain constraints, and few indications they will anytime soon, SiriusXM's hardware was incorporated into approximately 83% of new vehicles sold in the U.S. during the first quarter. That was up two points from a year ago. And the company says nearly 146 vehicles now have satellite radio installed in their dashboards.

The numbers show most are not activated, however. SiriusXM says its self-pay subscriber total decreased modestly by 25,000 during the first quarter, and paid promotional subscribers decreased by 54,000. Total subscribers declined slightly to 34 million as of March 31. Executives said they still believe SiriusXM will add a half million new self-paying subscribers this year.

“With all of this uncertainty in the general economic environment, consumer demand for both new and used vehicles and our service, is healthy,” said Witz. “We continue to retain subscribers with an excellent monthly churn rate.” She told analysts that there has been a “steady uptick” in satellite radio trials, and in the long-term she thinks that will remain the biggest part of their business.

SiriusXM had $383 million in ad revenue during the first quarter, while subscriber revenue totaled $1.7 billion. For the first quarter, the company said that podcasts and its Pandora app had $336 million in advertising revenue, an eight percent increase from last year -- and a new first quarter ad revenue record. 

Even as podcasting grows, Pandora user numbers show no signs of a turnaround so far. It had 50.6 million monthly active users during Q1, a drop from 55.9 million a year ago. And total Pandora listening hours were 2.68 billion in the first quarter of 2022, down from 2.87 billion in the 2021 period. There was some good news, however. Self-pay subscribers to the Pandora Plus and Pandora Premium services increased by 4,000 in the first quarter of 2022 to end the period flat with a year ago at 6.3 million.

SiriusXM says its sales and marketing costs jumped 28% to $259 million during the first quarter, in part due to a multi-media national ad campaign promoting SiriusXM which was launched in late 2021. “We have doubled-down on brand marketing to position ourselves to younger audiences and out of car streaming -- and to drive digital acquisitions,” said Witz. “We continue to believe building a digital acquisition model is the right thing for the business long-term.”

If Wall Street didn’t like all of the financial results, there was a sweetener to the SiriusXM story. The company returned $1.3 billion to stockholders through regular and special dividends and common stock repurchases during Q1. CFO Sean Sullivan says that their low debt level also allowed the company to refinance $500 million in outstanding debt earlier this month at a more favorable interest rate.