SiriusXM Doesn’t Expect Substantial Ad Growth Before 2024, Is Evaluating Content Plan Strategy

Georg Szalai
·5 min read

Audio entertainment giant SiriusXM, the home of Howard Stern, disclosed on Tuesday that it lost 132,000 self-pay subscribers in its satellite radio unit in the second quarter, a narrowed decline after a 347,000 loss in the first quarter, and gained 155,000 paid promotional subscribers.

CEO Jennifer Witz, during an earnings conference call, highlighted “a meaningful sequential improvement in self-pay net subscriber additions compared to the first quarter” amid an improvement in auto trial starts. She concluded that this “sets us up for continued improvements in subscriber performance and a positive back half of the year.”

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Touting nearly unchanged advertising revenue in line with expectations, Witz said that “in today’s choppy market [this] is a testament to the strength of our sales offerings.” She added: “While we are cautiously optimistic the second half will see year-over-year improvement in ad revenue, there are still many variabilities in the marketplace we will be watching closely. It appears at this time that more substantial gains in the ad market will not come before 2024.”

Witz on Tuesday also said that the firm was “evaluating” content packaging and pricing ahead of its launch of a next-generation streaming app, which is designed to attract younger, more diverse audiences. The goal was to “better appeal to each of our target segments, and in doing so continue to grow our subscriber base, revenue and profitability.” She previously described key goals of the new streaming platform as enabling “better commerce, better identity and better marketing capabilities,” in addition to a “brand-new consumer-facing experience with enhanced search recommendations and other features.”

On Tuesday, the CEO emphasized: “We are confident that our programming lineup is truly unparalleled, and now we must address price, control and discovery and provide even greater connection between experiences in car and on streaming devices to create an even [stronger] value proposition for our subscribers, and to bring new listeners into our ecosystem.” She also highlighted SiriusXM’s content updates, touting its work to capture growing demand for country and Latin music, as well as kids’ programming.

In the April-June period of 2022, SiriusXM had added 23,000 self-pay SiriusXM customers and also gained 54,000 paid promotional users. That meant that the total gain of 23,000 subscribers in the latest quarter compared with growth of 77,000 in the comparable period last year. SiriusXM said on Tuesday that its user base was unchanged when compared to June 30, 2022.

As of the end of June, Sirius’ self-pay subscriber base stood at 31.9 million, with its total users reaching just more than 34.0 million. Earlier in the year, the firm said that it expects a “modest” user drop for the full year 2023 amid economic and car industry challenges.

At its Pandora streaming business, the company added 7,000 net self-pay subscribers in the second quarter of 2023, compared with a year-ago loss of 9,000. But over the past year, the firm lost about 90,000 users. The company ended June with around 6.2 million total self-pay customers at Pandora.

SiriusXM, led by CEO Jennifer Witz, recorded second-quarter advertising revenue in the company’s Pandora and Off-Platform unit of $400 million, down slightly from $403 million in the year-ago period. Monthly active users (MAUs) at Pandora were 47.4 million in the second quarter, down from 50.5 million in the prior-year period. Total ad-supported listener hours hit 2.73 billion, down from 2.84 billion.

On Tuesday’s earnings call, Witz touted SiriusXM’s podcast ad business as having the scale and maturity to capture growth and upside in advertiser demand.

Second-quarter revenue of $2.25 billion came in virtually unchanged and slightly ahead of Wall Street expectations. Quarterly earnings of 8 cents per share also came in above analysts’ estimates. And adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 3 percent to $702 million, also providing an upside surprise. Thanks to better-than-expected second-quarter free cash flow of $323 million, the company raised its free cash flow forecast for the full year.

“SiriusXM posted a solid quarter with most key performance indicators either ahead (e.g. EBITDA, free cash flow, churn) or improving (net adds, trial funnel),” wrote Wells Fargo analyst Steven Cahall in a first reaction. “We expect the focus to be the second-half sub trends and app re-launch,” the expert summarized his investor takeaways.

SiriusXM shares rose in Tuesday pre-market trading.

“Our focus remains on reinforcing SiriusXM’s distinct and leading position in the audio entertainment industry with new curated live content and by enhancing control and discovery across our platforms,” said Witz. “We made significant advancements this quarter in building our next-generation platform and
are excited to announce a preview event to come this fall.”

Added chief financial officer Thomas Barry: “Our solid second-quarter performance and greater visibility
into full-year cash taxes and working capital leads us to increase our 2023 free cash flow outlook to $1.15 billion. We also expect to continue to see improving financial and operating performance in the second half of the year.” And he concluded: “Our team continues to focus on cost levers and operational efficiencies while reinvesting savings in enhanced technology, including our consumer app set to launch in the fall and an all-new commerce and identity platform.”

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