SiriusXM CEO James Meyer says that Pandora will make Sirius subscribers more sticky and will overall reduce churn. Meyer indicates that Pandora’s focus on advertising revenue will also help Sirius monetize the two-thirds of auto sales free trials that don’t convert to a paying SiriusXM subscriber.

James Meyer, CEO of SiriusXM, discussed the Pandora acquisition on CNBC:

Pandora to Make Sirius Subscribers More Sticky

We’re doing a lot of work on the integration of the companies (Pandora into Sirius). I’m more excited about the opportunity of Pandora today even as I dig deeper into it because I see the opportunity and I see it in in two big areas. Number one, I see how it can benefit Sirius and by that I mean our subscribers in terms of improving our value proposition and the ability to take the $5 and $10 music plans.

In themselves, they are not very profitable, but bundling them in a way to our existing 33.7 million subscribers and giving them a better value, in the end, will make them more sticky and overall reduce churn.

We Are Not in the Music Business, We Are in the Radio Business

We’ve been a business that built our business on subscription, 96 percent of our revenue comes from a subscription and 80 to 90 percent of Pandora’s comes from advertising. The ability now to have both across that spectrum I think it’s a really important tool and I’ll tell you why. I think sometimes people get confused, we’re not in the music distribution business, we’re in the radio business. The radio business in the US is about a $24 billion business.

23 Million Real Trials This Year

This year alone we’ll run 23 million real trials. We know when you buy, we get your name and address, we speak directly with you during those trials and we’re thrilled if our yield out of those is one-third. The other two-thirds we don’t do anything about. Going forward, we’re going to worry about the third and then we’re going to worry a lot about the two-thirds and how many more of those can we monetize.

As investors think about our company a couple years from now the question they ought to ask is, quite simply, how many of these trials are coming through and in the end what percent did you monetize them at? In other words, what percent of the third, of the 23 million, are you monetizing and what’s happening to that ARPU (average revenue per user) within that as you’re monetizing them? That’s a story we understand well and then that’s what I’m going to drive.

The Popularity of Sirius is the Highest It Has Ever Been

If you fundamentally look at Sirius our listeners love to listen to us in the car. They don’t listen to us as much at home or on mobile devices. If you look at Pandora their listeners love to listen on mobile devices and in the home. The merger can certainly help both sides and Sirius and our OEM relationships can bring a whole lot to driving this business going forward.

I’ve been guiding for many years that I thought our penetration rate, meaning how many new vehicles would include factory-installed Sirius, would be about 70 percent. I think was about a year and a half ago based on input from the OEMs and obviously consumer demand, we took that up to 75 percent. Today I revised that guidance to 80 percent. I think the popularity of Sirius is the highest it has ever been and I think we have a long long time that we’ll have a great place in the vehicle.