Watch Out Pandora, SiriusXM Is Looking Good

Sirius radio

SiriusXM Radio Inc. (NASDAQ:SIRI) announced that it passed 25 million subscribers in the second quarter, adding 715,000 new subscribers in the quarter.

The number is a growth of 15 percent from the same period last year, beating more modest analyst expectations. This would mark the biggest growth the biggest satellite radio provider has seen since Sirius and XM merged in 2008. In line with those gains, the company has raised its expectations for total net subscriber additions from 1.4 million to 1.5 million.

A rise in new automobile sales has helped drive the growth. A free trial of SiriusXM is offered with many new car purchases in order to get people hooked on the service before they have to start paying a monthly fee.

“The new subscriber additions in the quarter have helped SiriusXM reach an exciting new milestone that reflects the popularity and reach of SiriusXM programming and services,” said Jim Meyer SiriusXM’s Chief Executive Officer. “The quarterly results bolster SiriusXM’s leadership position in a dynamic audio entertainment marketplace as we continue our trend of strong, profitable growth.”

While a rise in automobile sales might benefit the company now, Meyer has previously pointed out that the service needs to branch out into other areas so as not to be so dependent on the auto industry.

SiriusXM satellite radio competes with online radio services like Pandora Media Inc. (NYSE:P). For now, Sirius has an advantage through aligning itself so closely with the automotive industry, and getting people to pay a much higher monthly subscription fee than even Pandora’s premium service.  For 2012, Sirius XM posted $142.34 in revenue per subscriber, while Pandora posted $6.51.

But as more cars become Internet-capable, people could start switching to much-cheaper or free online streaming music services like Pandora. If Sirius expects to maintain its lead, it will have to continue to develop the unique ad-free content it’s known for, so that consumers are willing to swallow the $20 or more per month price tag.

Follow Jacqueline on Twitter @Jacqui_WSCS

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