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How SiriusXM Is Beating the Subscriber Paradox & Scoring a Better Return Than Streaming Services

Yet satellite radio -- launched before iTunes revolutionized how music is purchased -- continues to thrive as streaming services flourish. SiriusXM's 2019 earnings report, which dropped Tuesday…

Whether music or podcasts, on-demand listening is the greatest change to recorded music in the last decade. Yet satellite radio — launched before iTunes revolutionized how music is purchased — continues to thrive as streaming services flourish. SiriusXM’s 2019 earnings report, which dropped Tuesday, shows that the satellite radio service added 1 million subscribers and grossed $7.8 billion of revenue over the year.

The highlight of that vital subscriber growth is SiriusXM finished 2019 with a shade under 30 million self-pay subscribers in the United States, marking a 3.5% gain to 1.06 million subscribers, plus another 4.9 million not paid by the listener (such as the familiar three-months-for-free SiriusXM deal for car buyers). 

These figures — which the company first announced on Jan. 7 — barely beat previous guidance of “approaching 1 million” by roughly 100,000. It reinforced the notion that SiriusXM can add satellite service subscribers at a time when streaming is driving the music industry. (Spotify has about 34 million subscribers in North America.) Investors, having ingested the news of subscriber growth a month earlier, barely reacted and shares were even two days later.

Key Takeaways:

1) SiriusXM added more than 1 million self-pay satellite subscribers to almost 30 million total in 2019.

2) ARPU grew for both SiriusXM and Pandora in 2019: from $13.34 to $13.82 at SiriusXM (driven in part by a high fee for music royalties) and $6.53 to $6.61 at Pandora.

3) SiriusXM expects revenue to reach $8.1 billion and adjusted EBITDA of $2.5 billion in 2020. 

On the back of the Pandora acquisition, SiriusXM’s revenue increased 35% to $7.8 billion in 2019 from $5.8 billion the year prior. The comparison is not apples-to-apples, though, so the financials include adjusted numbers for making a clean comparison. Pro-forma reporting creates a hypothetical scenario in which the Pandora deal closed Jan. 1, 2019 (it actually closed a month later on Feb. 1, 2019). In that equation, had the combined company existed in both 2018 and 2019, revenue would have grown 8%, not 35%. Still, a high single digit is excellent for two mature companies.


SiriusXM’s average revenue per user (ARPU) grew for both companies in 2019. From $13.34 to $13.82 at SiriusXM, which comes from increases in the U. S. Music Royalty Fee (yes, SiriusXM tacks on a fee to pay for music royalties), increases in self-pay revenue and higher advertising revenue. Pandora’s ARPU rose $6.53 to $6.61. For context, Spotify’s 2019 ARPU was $5.12 and fell 5% year-over-year. 

Looking to the year ahead, Sirius repeated 2020 guidance that was first offered on Jan. 7, predicting an additional 900,000 self-pay subscribers; revenue of $8.1 billion, adjusted EBITDA of $2.5 billion; and free cash flow — which counts money a company has left over after operating costs and spending on property, equipment and acquisitions and is arguably the truest measure of a company’s performance — of $1.7 billion, up from $1.165 billion in 2019. 

SiriusXM wanted Pandora mainly for its advertising business, not the subscription service that lags behind satellite radio. But like the satellite product, Pandora Premium is gaining subscribers — up 4% to 251,000 in 2019 — even as the service’s free listeners dropped 9.6% to 63.5 million. Although Pandora Premium gets little attention, the premium service, priced at $10 per month and available only in the United States, gained a modest $49 million from new subscribers and closed the year at 6.2 million subscribers worth $527 million. At the same time, advertising revenue was $1.2 billion from 13.4 billion listening hours — both all-time highs. 


While SiriusXM’s quiet growth gets drowned out by noise about Spotify and now streaming video in 2019 and 2020, Greg Maffei, CEO of Liberty Media, owner of 71% of SiriusXM shares, called audio — not video — “a more attractive space where we are spending our time and dollars” in an interview with Billboard in January. The 2019 earnings release suggests he may be right.