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Karmazin Discounts iPod Impact

Newport Beach, Calif. – The
rising number of vehicles equipped at the factory with iPod/iPhone connections isn’t
cutting into satellite-radio subscriptions,


CEO Mel Karmazin told investors here at a Bank of America conference.

He also told the conference that
the first Sirius XM 2.0 radios will be available in the aftermarket in the
fourth quarter of 2011, offering subscribers “more content and more
functionality” to “provide more stickiness.”

Although he didn’t divulge
details, Karmazin likened the launch of 2.0 to cable-TV’s evolution from
offering basic service to on-demand content and pause and skip capabilities.

From the automakers, “reaction is
great,” he continued, but “it’s a question of how quickly they can get it out.”
It usually takes three years for a new technology to become a factory-installed
technology, he explained.

Referring to competition from
iPods and other portable devices in the car, Karmazin said there “has not been
any impact” on the conversion rate from trial to paid subscriptions in vehicles
with both factory-installed satellite radio and factory-installed iPod/MP3
player connections compared to new cars with only satellite radio.

He also pointed out that people
who have satellite radio in the car spend far more time listening to satellite
radio than to other content source when they’re on the move. Karmazin pointed
to an Arbitron study of consumers, conducted in October and November of 2009.
It found subscribers spend 71 percent of their time listening to satellite
radio and only 17 percent to terrestrial radio, 7 percent to CDs, and 5 percent
to such mobile devices as cellphones.

In other comments, Karmazin said:

  • the household penetration rate
    of satellite radio is about 15 percent of 110 million homes, indicating plenty
    of potential for growth;

  • 85 percent of gross adds come
    from subscriptions in new vehicles;

  • 60 percent of new cars sold in
    the U.S. are equipped with satellite radio;

  • and opportunities to reactivate
    the subscriptions of factory radios in used cars will represent a “tremendous
    opportunity” in about five years because of the growing penetration of factory-installed
    satellite radio.