U.S. consumers purchased more new cars in March than any month in nearly six years — and that’s good news for the music business. A healthy automobile market will mean more consumers will adopt the music products and services that are now integrated in automobiles.
The auto industry sold nearly 1.5 million vehicles in March, up roughly 5% from the prior-year period and the most since the industry’s 1.6 million in May 2007. Sales rose 6% for General Motors, which has Siri integration in the Chevy Spark and Sonic. Ford sales were up 6%. SYNC is Ford’s Microsoft-powered voice recognition technology that uses metadata service Gracenote to improve search and to supply album cover art. Chrysler, up 5%, will soon allow users of its Uconnect to access mobile apps from the car’s touchscreen.
More listening to music services in the car means more revenue for the music business. Additional revenue can come from two avenues. First, better integration between app and auto will mean more subscribers to services like Spotify, which allow smartphone owners to take music into the vehicle via cached files. Second, more listening to Internet radio over broadcast radio means more money. Whereas broadcast radio lacks a performance right, digital services have a performance right that results in royalties paid for Internet radio listening.
The healthy sales month — the entire first quarter, in fact — is good news for Sirius XM (which also pays digital performance royalties). About 68% of new car radios come with a free Sirius XM trial, according to the company’s CFO, and Sirius XM ends up converting about 44% into self-paying subscribers. Not all of those roughly 450,000 eventual subscribers from first-quarter new car sales will stay with Sirius XM, however. The company constantly loses subscribers to churn and must bring in new subscribers through new auto sales and the used car market. Sirius XM has given guidance it will add 1.4 million net subscribers additions this year. With those 1.4 million, Sirius XM would end 2013 with about 25.3 million total subscribers. A strong year in auto sales aided by a recovering U.S. economy could push that number even higher.