Sirius bets on advertising to capture new listeners

SiriusXM, the audio entertainment company that’s long been known as a commercial-free option for in-car radios, is betting on advertising to propel its business.

On Tuesday the company launched its first ad-supported subscription plan for car listening called SiriusXM Play. It’s a cheaper option than its long-standing offering and will cost less than $7 each month for in-car and streaming. It features a limited set of commercials on a subset of its music, sports, news and talk show offerings, the company said.

SiriusXM is looking to advertising in a similar way as its media counterparts in the traditional TV and streaming space in order to drive revenue and profit, and retain customers. As competition heats up, particularly with other audio options, SiriusXM is betting that a cheaper, ad-supported option will help convert more in-car free trial consumers to long-term customers.

The option will currently be available on a limited basis, but SiriusXM expects to make the package available to nearly 100 million vehicles by the end of 2025. Further details on plans and package pricing will be available later this year.

While subscribers to SiriusXM Play will initially have access to more than 130 music and talk channels, additional channels will be added over time, the company said.

The popular talk radio host Howard Stern, as well as live sports play-by-play and certain artist-led music channels will remain exclusive to ad-free customers in the car. SiriusXM offers a variety of commercial-free packages that range between $9.99 and $24.98 per month.

While SiriusXM is known for its in-car service, it also offers a streaming app and owns Pandora, another music streaming service, which has its own ad-supported plans.

SiriusXM has identified one key target audience already for its ad-supported tier: drivers who’ve recently purchased a car and don’t renew SiriusXM service after their free trial expires, executives told CNBC.

The consideration of advertising for SiriusXM’s in-car business “has been out there for quite some time,” said Chief Operating Officer Wayne Thorsen in an interview.

The company has been experimenting with advertising for SiriusXM and in 2024 began offering a free, ad-supported version with limited content to select vehicles. Thorsen said this is akin to Spotify’s free tier and is used as a way to win back customers who drop off free trials and push them toward upgraded, paid plans.

The new ad-supported plan launched on Tuesday is a different experience from both this and the main ad-free SiriusXM experience, and the company doesn’t expect a majority of its users will switch over.

“There’s a lot of people who don’t convert when they’re in our trial funnels. They like the service, and then the price comes in,” he said.

The length of SiriusXM in-car free trials varies, with the vast majority spanning three months.

“What does this mean [for SiriusXM]? I think that the example I’d probably use is Netflix. It had a very similar dilemma,” Thorsen said.

For years, Netflix balked at adding commercials to its streaming service.

“They found themselves, at least domestically in the U.S., with slowing growth. They had to find a way to embrace something that was a little bit more price-conscious,” Thorsen said.

Netflix and SiriusXM both already have a lot of subscribers, a natural limiter of growth. Netflix, for its part, has stopped reporting its quarterly subscriber growth to put the focus on its profitability and other metrics. When the company reported losses in 2022, its stock price took a hit. Since introducing an ad-supported plan and a crackdown on password sharing, however, Netflix shares soared.

Meanwhile, SiriusXM also faces competitive pressures. Namely, there’s the rise of technology that allows consumers to stream other services in their cars, such as Spotify and Apple Music. While the company has owned Pandora since 2019, it’s been focused in recent years on building out the SiriusXM streaming-only app.

In the face of these challenges, SiriusXM is leaning into what it has long considered its strength — its position in the car — spearheaded by CEO Jennifer Witz.

Months after it was split from John Malone’s Liberty Media empire, SiriusXM announced in December an updated strategic plan with the aim of focusing on its in-car radio business and a new focus on advertising. It also announced Thorsen as COO and provided investors with fresh financial targets.

SiriusXM said it would shift marketing and other resources away from what it called “high-cost” audiences in streaming, which often drop in and out of subscription plans, “to focus resources on core revenue-generating segments.” In-car subscriptions make up 90% of its customer base.

“We entered this year with a very clear focus on what we do best, which is super-serving our core audience segments with our unmatched distribution in the car and our very unique content offering focused on live, exclusive and human-curated content,” said Witz at an investor conference in May. “I am confident we’re on the right path.”

SiriusXM ended its first quarter with 33 million total subscribers, a decrease of 303,000 subscribers during the period. Gross profit for SiriusXM was $937 million, down 6% from the prior-year period, with a gross margin of 59%, 1 percentage point lower than the prior year period.

In total, SiriusXM reported $2.07 billion in quarterly revenue for its most recent quarter, a drop of 4% from the prior year, and net income of $204 million, down from $241 million. The results also includes Pandora and other off-platform business. The company’s next earnings report comes on July 31.

Advertising revenue is already playing a role in the business. SiriusXM had roughly $1.8 billion in total ad revenue in 2024. In May it reported $394 million in ad revenue for its most recent quarter, a decline from the same period in the prior year. This was partially offset by the growing podcast business.

Still, the introduction of the ad-supported subscription plan comes during a weak point for the advertising market.

The ad market across traditional media has been soft in recent years, particularly due to macroeconomic challenges. That was amplified this year due to President Donald Trump’s trade policies that threw corporate expenses into question.

Scott Walker, SiriusXM’s chief advertising revenue officer, called the current ad environment “unpredictable.”

“Our business ebbs and flows with the macroenvironment, and there’s certainly been a lot of companies that have been disrupted by tariff noise, especially those with supply chains overseas,” said Walker.