Analysis: In battle for the car, Sirius faces fight from Pandora

Thu Jan 10, 2013 5:41pm EST
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By Jennifer Saba and Liana B. Baker

NEW YORK (Reuters) - Sirius XM Radio Inc's grip on drivers is under an increasing threat as the availability of Internet connections in more cars is helping Pandora Media Inc counter some of its rival's big selling points.

In a sign of how important drivers are to the two companies, each of their top executives made the trek to Las Vegas this week to court automakers at the annual Consumer Electronics Show.

Sirius XM, which has its satellite radios in 70 percent of new vehicles, generates the vast majority of its revenue through subscriptions and derives only a fraction from advertising dollars. Streaming service Pandora is just the opposite, collecting most of its revenue from advertising and operating only a nascent subscription business.

Right now, Sirius XM is the much bigger company, with almost 24 million subscribers and more than $3 billion in annual revenue. In the third quarter, it generated average revenue of $12.14 per subscriber.

Pandora, by contrast has 60 million users, about 1 million of whom are paid subscribers, and is on track to generate $424 million in revenue this year.

But the migration of music audiences to mobile devices threatens to upend a market that Sirius current dominates. The key to both companies' futures rests on winning the battle for the listener on the go, particularly people traveling by car.

With its presence in new vehicles, Sirius XM has a first-mover advantage over Pandora. But Pandora is making a huge push to get into the car, a move that dovetails with ubiquitous wireless access that makes it easier to listen to its service.

"Internet-enabled radio in the car has already begun," Pandora Chief Executive Officer Joe Kennedy said in an interview. "It will grow as a snowball, initially small but growing exponentially."   Continued...

A Sirius Satellite Radio unit is shown installed in a private vehicle in Washington February 20, 2007. REUTERS/Jason Reed