Satellite Radio OEM installations are growing this year (afterall, it is the year of the OEM), and TWICE gives us some numbers to help support this, courtesy of Edmunds.
For the 2007 model year, satellite radio service is available in 218 vehicle models. That's up from 183 vehicle models in the 2006 model year, according to Edmunds.
For those who like to pit Sirius versus XM: model availability for each service has grown from 107 (Sirius) and 112 (XM) models in the 2006 vehicle year, to 123 (Sirius) and 117 (XM) models in the 2007 vehicle year.
Unfortunately, HD Radio appears to be making some headway as well, with availability in 51 different models from nine automakers for the 2008 model year (according to the HD Digital Radio Alliance... not Edmunds). BMW is paving the way, who started off with HD Radio factory-installed in the 6-series and 7-series Bimmers. But come March, BMW is making HD Radio available - as an option - in all of their U.S. models.
Optional equipement is great... but, standard equipement - that's where the money's at.
[TWICE]
Unfortunately, HD Radio appears to be making some headway as well, with availability in 51 different models from nine automakers for the 2008 model year (according to the HD Digital Radio Alliance... not Edmunds.
Why not have both Sat and HD radio with Ipod hook up? I have this setup in my pickup truck. Either way its goo news to see more OEM installs.
its still seems way slow--How many car models are out there total? So Sirius added a few as did XM for 2007--I know the trend is higher but its not like its a HUGE amount increase, is it? It seems like the increase for 2007 will not be that much
It may seem very slow, Gary, but it's actually faster than CD player installs. Until CD's had been out 7-8 years, most OEM's were still putting primarily cassette players in their cars.
Comparing model availability is misleading - for example, you can count each Rolls Royce model, but it has little impact as very few are sold. Clearly, XM and Sirius will sell more Chevys/Dodge cars than Rolls Royce. You have to look at which models sell more to see the impact on subs.
The big issue here is not installs, but conversion rate. As conversion rate continues to fall - from the 65% range headed towards 50% - the economics of the OEM install gets worse. Remember that each provider is paying a pretty penny for each install in the way of subsidies, bounties and loyalty payments. The SAC and CPGA for OEM is also much higher than in the retail segment. So what does this mean - with conversion headed towards 50%, it means that the effective SAC/CPGA for the OEM segment is effectively double what the numbers say. If my SAC for an OEM is $100 and my conversion rate is 50%, then really my SAC is $200. This is not reported SAC, but actual dollars out the door vs. dollars coming in.
This brings us to the heart of the matter, why is conversion rate dropping? I believe the answer is actually quite simple. As XM & Sirius expand into new models and brands, they are being installed into less expensive vehicles. 2 years ago, you could not get a Hyundai with satellite radio or a Ford Focus. Now you can. This means that people buying cars where economics are driving their decision making as oppossed to want - a Kia vs a cadillac - now have the option of SatRad. Which is great, except for the fact that people buying a specific car due to price/economics areless likely to shell out $13 a month for satellite radio. In other words, when you put a discretionary item into a higher priced vehicle, there is a much greater chance (say a 65% chance looking at previous conversion rates) that the buyer will spring for the $13 a month. When you place that same item in a lower priced vehicle, there is less of a chance (has to be less than 50% according to the current conversion rates) that the buyer will pay the monthly fee.
Excellent Point IBAND. It's not number of models that sat radio is available in. It is number of factory installs for the year. That is all that matters.
We know XM will be around 3 million factory installs.
We do not know how many Sirius factory installs will be done this year.
Miss the 8M wrote:
"This brings us to the heart of the matter, why is conversion rate dropping? I believe the answer is actually quite simple. As XM & Sirius expand into new models and brands, they are being installed into less expensive vehicles."
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That's PART of the reason. The other part is competing technologies are now having an effect as well. Think HDRadio and iPod connectors.
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"This means that people buying cars where economics are driving their decision making as oppossed to want - a Kia vs a cadillac - now have the option of SatRad. Which is great, except for the fact that people buying a specific car due to price/economics areless likely to shell out $13 a month for satellite radio. In other words, when you put a discretionary item into a higher priced vehicle, there is a much greater chance (say a 65% chance looking at previous conversion rates) that the buyer will spring for the $13 a month. When you place that same item in a lower priced vehicle, there is less of a chance (has to be less than 50% according to the current conversion rates) that the buyer will pay the monthly fee"
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The conversion rate will be higher for people with disposable income, unfortunately, iband covered that in a post above you by pointing out that FAR fewer of those cars are sold, and are in fact nearly insignificant drivers of OEM.
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My take? XM and Sirius waited FAR too long to go after OEM and either force them or beg them to make all installs factory STANDARD equipment. Now it may be too late for them to achieve a really high critical mass.
SatelliteRadioFan ... liked your comments.
My .02 is that XM is the one that really blew the OEM opportunity starting when this dysfunctional management took their eyes off the ball in 2005.
XM can't even exceed 45% installs with their premiere partner Honda after years in the business.
Dumb, sloppy or just plain inept, XM more than Sirius has squandered the opportunity. Maybe if we pay P&P a few more million a year, they'll get it ?