OnStar: Last Brand Standing?
Ten years ago, three brands stood tall in the connected car market: OnStar, SiriusXM, and Lojack.?Lojack is gone from the consumer market.?Could SiriusXM be teetering too?
Ten years ago SiriusXM had a few million subscribers but was adding new subscribers by the hundreds of thousands per quarter and raising monthly subscription rates to $14.99.?Mel Karmazin was in charge, auto sales were ramping up, and it looked like the sky was the limit.
Today, after the company’s latest earnings report, there is a different story to be told.?Karmazin and his $200M+ compensation package are long gone and so is SiriusXM’s unbridled growth.?The company’s latest financial figures tell a dismal tale – flattening subscriber growth for its core satellite service (in fact, flat since before the pandemic), and declining active users, subscribers, and revenue for the Pandora streaming service.
SiriusXM’s efforts to transition its integrated automotive solution to a streaming SiriusXM mobile app is falling short despite a television advertising campaign and ongoing efforts to build out its supporting infrastructure with a recommendation engine a la Pandora or Spotify.?It’s not clear what is ailing SiriusXM, but the illness has lingered now for three years after the company’s subscriber base peaked in 2019.
The peak was not followed by a precipitous decline, but the flagging enthusiasm for SiriusXM and its subscription-based model could easily be ascribed to:
Any one of these factors or all of them may be contributing to SiriusXM’s inability to grow.?Most ominous of all may be SiriusXM’s claim of 150M cars on U.S. roads equipped with SiriusXM hardware but not activated.?That level of indifference is hard to ignore especially in the context of SiriusXM’s relentless advertising and promotion of the service and its rock bottom $5 monthly promotional rate – far from the $14.99 rate of the early 2010’s.
To its credit, SiriusXM saw this day approaching, which explains the company’s acquisitions of both Pandora and Stitcher to pivot towards streaming content – music and podcasts with recommendation engines.?These initiatives have not been outright failures, but they have not filled the gap in revenue or subscriber or active user growth left by SiriusXM’s decline.?Not even television advertising featuring Conan O’Brien and Alice Cooper could rescue the streaming strategy.
At risk is SiriusXM’s shift to its 360L platform, already adopted by 20 OEM brands and available in 7M cars on the road.?SiriusXM’s app is available via CarPlay and Android Auto and the company is building the infrastructure – including that recommendation engine – to support non-automotive usage scenarios.?In its television commercials, SiriusXM says “no car required.”
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This car-less scenario for SiriusXM harks back to Sirius and XM’s early days as separate companies when they worked hard to market dedicated mobile devices to allow consumers to access satellite-delivered content in the home and on the go.?Those efforts and those products failed.?The outlook this time around isn’t much better – with Google and Amazon and Apple in command of the smart speaker market.
SiriusXM bought its seat at the content distribution table by subsidizing in-vehicle hardware and giving auto makers a share of subscription revenue.?The company remains profitable and the subsidies and rev shares remain in place – but growth has stalled.
In its earnings call, SiriusXM executives acknowledged abysmal conversion rates in “the low 30’s” for new cars and in “the low 20’s” for used cars.?This indifference at the point of sale could well be fatal, especially as it comes in the face of a wide range of exclusive content relationships with multiple sports leagues and high profile celebrities along with exclusive live content.
SiriusXM’s struggles echo those of anti-theft supplier Lojack.?Like SiriusXM, Lojack was once one of the most powerful brands in the connected car market – renowned for preventing vehicle thefts and/or enabling stolen vehicle recoveries thanks to its own proprietary RF network technology.
Lojack today, in the U.S., is a cellular/GPS-based solution for vehicle and asset tracking sold mainly in B2B markets, with its brand separated by subsequent acquirers from its intellectual property.?Lojack was pushed aside by the onset of universal vehicle connectivity from the likes of General Motors’ OnStar and its rivals – though its demise and departure from consumer vehicles took a couple decades.
Similarly, smartphones appear to be pushing SiriusXM aside.?As in the case of Lojack, the demise and departure may take a decade or two, but the handwriting is on the wall.
Which leaves one brand of the original three brands that once ruled the connected car industry: OnStar.?It remains to be seen how and whether OnStar can and will weather the evolution of the connected car?market.?Lojack threw in the towel in 2016 following its acquisition by CalAmp and, later, by Spireon.?SiriusXM is preparing to update its satellites with new equipment, promising extended life and enhanced service for its subscribers.?If SiriusXM were to stop and consider its options, what kind of buyer would be interested?
For its part, OnStar has always been a source of acquisition speculation particularly during the 2008-09 recession.?The likelihood of an OnStar spinout is slim to nonexistent.?More than ever before, OnStar has become an intrinsic element of GM branding.?The brand has endured where Lojack failed and SiriusXM has stumbled.?SiriusXM is in the headlights now.?Oh, dear.