Q4 2019 Earnings Call
Good morning, and welcome to Sirius XM fourth quarter 2019 results Conference call. Today's conference is being recorded a question.
Question answer session will be conducted following the presentation. If he has a question at the time. Please press star one on your telephone keypad. If at any time, you would like to remove to be removed from the Q. Please press star too I.
At this time I would like to turn the call it over to Hooper Stevens Senior Vice President Investor Relations and Finance Mr. Stephen. Please go ahead.
Thank you I know a good morning, everyone welcome to Sirius XM 19, urine drums, Caulkins cool today, Jim Bonner or Chief Executive Officer will be joint bidding for your senior Executive Vice President and Chief Financial Officer at the conclusion about prepared remarks, nudge what would be glad to take your questions. Scott groups, you know president and chief.
Clutching officer will be available as well Juncker words, Oh, president of sales marketing and operations.
Those two would be also available to the Julie portion of the cool first I'd like to remind everyone that certain statements made during the call maybe forward looking statements as the terms to ponder the private Securities Litigation Reform Act in Belgium that inside.
These are all forward looking statements are based upon management's current beliefs and expectations.
Necessarily depend upon assumptions Sidoti message that maybe incorrect or imprecise such forward looking statements are subject to risks and uncertainties that could cause actual results to differ the true for more information about these risks and uncertainties.
Sirius XM does he see problems and advise listeners should not rely on beauty on forward looking statements and disclaims any intent to obligation to update them as we begin I'd like to budget listeners that today's results include discussions about those actual results and pro forma adjusted was it.
All discussions of pro forma adjusted operating results assume that Pandora transaction closed generally first 20 gene and excluding the effects of stock based compensation in certain purchase price accounting adjustments with that I'll hand, the call Digimarc.
That's a burn good morning, Sirius XM finished 2019 with strong subscriber growth and financial performance I'm pleased to reiterate our recently entered his 2020 guidance for growth and subscribers revenue adjusted EBITDA and free cash flow the 341000.
I'll start and net additions in the fourth quarter pushed us to 1.0 sixmillion for the year our results in the fourth quarter here were powered by study and very good conversion and churn rates, which we feel great about continuing and 20 twond.
As I mentioned in the press release I'm incredibly proud that we're able to exceed our guidance and deliver our 10th consecutive year 1 million or more self pay not us not many companies out there in any industry has managed to achieve such a long and consistent track record of success.
This is a real testament to the quality of our service, but even more so to the excellent came up people we have the do their jobs relentlessly and effectively day after day.
Sirius XM over the past decade has truly become a powerhouse and audio entertainment with Pandora, we have about 100 million listeners and just as importantly, 44 million shelf 44 million paying subscribers across our businesses in North America.
We spend the time to time working with automakers on their future platforms, ensuring a strong long term position, there and helping the only other solve problems, we know where the Oems are going and entertainment and infotainment and this provides us a tremendous strategic advantage.
On March quarter by quarter, this year towards an 80% new car penetration rate.
And I couldn't be more please with the rising incorporation rate.
We have recently renewed many of our OEM deals extending automakers commitments to Sirius XM for years to calm with rising penetration rates recently to name a few we've completed Toyota Honda and Nissan more extensions or in the works because of the law.
Long term visibility of our deals we are confident aren't able fleet size will grow to more than 220 million in the years to calm.
Perhaps just as importantly, these arrangements these arrangements focused on guaranteed prominence and placement in the gosh remember the Oems share on our economics and they certainly recognize this and the added consumer satisfaction that Sirius XM and now.
Sirius XM with 360 Hell bring to their customers.
360 L is now the planet record with Oems and its distribution will continue to grow.
With many new launches coming in model year 21, our nexgen platform or distributed this year across six Oems and 13 of their brands total vehicles in operation with 360 L should reach 2 million by the end of this year and will accelerate sharply.
In the years to come through.
360, L. brings a more immersive engaging and personal lives listening experience into the vehicle by marrying satellite broadcasting with two way Internet connectivity.
We expect a superior offering of three six deal will improve conversion and churn performance what are the most exciting things about 360 L. It's out is that it's our first platform that can handle significant over the year updates. So we can evolve features.
Across the entire Philly now not just the newly produce vehicles. This provides a path to move Pandora capabilities into large volumes of cars at some point down the line.
Additionally, we expect to all of the Oems to adapt our new wideband chipset over the next few years was the first Oh, yeah actually launching later this year.
As we consolidate our broadcast platforms in the middle of the decade. This new chipset will allow us to expand our content offering and multiply the amount of data we're able to set into vehicles. This should open up new ways to monetize and grow our services.
Three six deal and wideband chipsets are the mainstay slash future of our in vehicle road map for many years to come.
Although still plenty work to do I'm pleased with our effort so far to increase listening and engagement on the Sirius XM platform outside of the car late last summer, we made streaming available at no extra charge to the vast majority of our subscriber base subscriber stay.
During the service continues to steadily grow and we know that increase subscriber engagement leads to increased retention.
Trailer Trialers are also streaming in greater numbers and we're finding that our hundred extra channels are resonating very well.
We're also continuing to build out our video library and highlight the availability of Pandora driven stations to our Sirius XM subscribers.
We are seeing steady growth and the use of our service or connected devices, such as those from Amazon and Google.
It's really never been easier to access Sirius XM wherever you are the car at home the office or on a go.
At Pandora I'm very pleased at the steps were taken to position the service for success.
In 2019 AD monetization or was very strong and I'm optimistic this can continue.
Retisert see high value in our programmatic inventory.
And we grew programmatic significantly in 2019 this matters because we can still achieved great pricing, while simultaneously, making our salesforce.
And client services more efficient.
Platform and add whereas revenue both grew incredibly in 2019 and are poised for double digit expansion this year.
Some of our recent product innovations such as the all new mobile App design with for you a landing page designed to showcase even more content and the modes feature for listeners attune stations for more discovery.
Favorites deep cuts and more have recently rolled out after extensive testing and are having a positive early impact.
In 2019, we greatly increase the amount of podcast content on the platform, including exclusive contents from Sirius XM radio shows and we continue to add more story play lists which are unique blends of podcasting in music, where artist and creators can include voice.
Tracks to curated music playlist.
In December we introduced a little raws uninterrupted and select content from Howard Stern on Pandora.
As a unified company, we're able to offer a significant amount of compelling content from Sirius XM to Pandora listeners that isn't available.
Other platforms.
We are now using pandoras own AD tech to promote new content and increasing the use of artists and discovery auto audio messages during station listening to highlight new and relevant content.
Bond with a broader rollout a 40, you Pandora listeners will be exposed to a much greater volume of exciting new content as we continue to prioritize discovery.
We think this approach is great for engagement and increases the relevance of the service.
We are also using our larger combined development resources, and new AD Tech resources to spread our progress on a variety of fronts.
Internally our approaches Benji unify our teams in a better together approach.
To give you just one example.
More than three quarters of our development resources are now being applied and a combined way that will benefit both the Sirius XM and Pandora digitally connected products over time.
We are breaking down silos and cross pollinating, the strengths of both Pandora and Sirius XM.
Because of this the Sirius XM that it's becoming more personal lives easier to use and smarter about servicing relevant content.
So listeners.
In an extension of the off platform business created by Pandora later this year, we plan to begin utilizing Pandora's AD tech to sell and serve targeted digital ads to Sirius XM streamers, when they listen to it had supported channel.
This is a great example of the countless opportunities that now exists because we have both platforms.
Our approach to programming strategy and execution has been elevated since we have acquired Pandora.
Pandora's massive audience and streaming prowess added to our growing Sirius XM subscriber base were able to attract an even higher caliber of talent and media brands.
Our creative programming agreements with Drake Marvel look bronze uninterrupted and you too or the first examples of that.
These are Mega stars and brands was enormous value in the music sports audio and entertainment worlds.
We announced the launch of a new Sirius XM channel and exclusive Pandora content from Superstars you to call due to acts radio which will debut later this year.
And we are working with major media brands and superstars not accustomed to the audio space that was a major fan bases.
We announced our deal with Marvel to create original content for Sirius XM, and Pandora, which really coming to our platforms in the coming months.
In December as I've mentioned, we introduced content from uninterrupted the athlete empowered brand founded mile of Ron James and Maverick corridor, and a full launch will be coming soon.
These exclusive athlete music playlist and content will bring fans closer to their favorite players through music.
And around the holidays, we made a selection at Howard Stern's most compelling interviews from 2019 available for the first time.
On Pandora.
As we offer Sirius XM and Pandora listeners special listening experience.
Experiences these a lot.
Excuse me live events also have exceptional programming value.
In the days before the Super Bowl Sirius XM Pandora presented Sears, that's going on Pandora presented the chain smokers and lives and separate exclusive concerts on back to VAT knives in Miami as part of our new opening drive Super concert series.
We add ons display yet more star power live from radio ROE, We delivered an entire week of programming that mergers the worlds of sports and entertainment and extraordinary ways.
From Indent sports talk on her Sirius XM NFL radio Mad Dog Sports Radio and a special Super Bowl pop on channel to entertainment shows hosted by Kevin Heart Pit Bull, Andy Cohen, Jenny Mccarthy sway Callaway anymore.
Los Angeles called play to the special show at our New Hollywood Studios that aired live on Sirius XM spectrum channel.
In Philadelphia, we had fish play to us Leach avid fans and a rare small format concert that was broadcast nationwide.
On the bands full time channel channel.
Incidentally.
Hooper tells me that with this was one of our most sought after tickets ever among the analyst and Investor community.
HM.
Not sure what to draw from that conclusion.
And Billy Joel did a performance and culinary from our subscriber for subscribers at the for Hain a theater in Miami Beach.
In my years, a C O I can certainly say, we've never been more active than today, and creating and sourcing new content and giving our listeners so much access to great live events.
David I will speak more about act about capital allocation, but I'm extremely pleased that we were able to efficiently deploy 2.4 billion to our stockholders in 2019.
That includes the purchase of about 360 million shares at a price below six bucks plus approximately 226 million in dividends.
Despite the significant flow of capital to our stockholders, our leverage remains static or we have tremendous financial flexibility for whatever the future might bring.
Make no mistake.
We realize we have our work cut out for us in 2020.
The cars evolving consumers in their taste inevitably change.
Competition for listeners is fierce.
But we are moving rapidly as well.
In fact, I love our position right now.
We are stronger in the car than ever before we're growing quickly in the home and we now have world class Skillsets driving strong revenue engines in both subscription and have are causing and nobody and I mean, nobody has our business model.
The changes we made in 2019 were significant and position us extremely well for the future we are investing and innovating across our business focused on execution and I feel very good about our 2020 guidance with that I'll turn it over you there.
Thanks, Jim Good morning, everyone. Thanks for joining the call 2019 was another great year for Sirius XM not only do we not chart 10th consecutive year of 1 million plus self pay downs, achieving all of our financial guidance and successfully closed and Pandora acquisition, but we also returned approximately.
$2.4 billion tour SOG stockholders, while doing so.
That's closer result sole focus on the pro forma results, which combine the two companies for the full period in both years.
Auto sales ended the year 17 million just about flat with last year's 17.2 million, our preliminary told and 73% for the year, but exited the fourth quarter, 75% as penetrate ramped at several programs.
We remain confident our pen rate will move to 80% as we move through 2020, the installed base vehicles grew 11% year over year to nearly 126 million cars on the road or approximately 45% of the total cars on the road in the U.S.
The used car penetration rate was approximately 44% in 2019 up 400 basis points over the prior year and help lift self pay gross additions from the U.S channel, 38% of the total up from 35% in 2018.
Kurt trial starts continue to grow solidly up 13% accelerating from 10% growth in 2018 used car penetration rate will increase steadily over the next several years as it climbs towards the new car Penn right.
At the end of year. The total trial formal stood at 9.3 million up from $9.1 million at the end of last year.
So paying that adds answers like seven 2019 of approximately 1.1 million brought the self pay base to just a hair under 30 million.
Conversion rates and our new and used car business remains strong in churn for the year rounded down to 1.7 per cent per month.
This was flat compared to 2018 and still below the low end of our expected range is rising vehicle churn continues to be offset by improving voluntary in non picture.
Sure. It's XM ARPU in 2019 was a record $13.82 growing approximately 4% over the prior year together with 3% growth in our total subscriber base Sirius XM segment revenue for the year grew 7% to nearly $6.2 billion.
Total cost of services, excluding stock based comp at Sirius XM increased 8% to nearly 2.4 billion.
Revenue shirt royalties increased only slightly due to the 2018 settlement was soundexchange programming a contract cost increase with renewals of several content deals, including the Fox properties as well as investments and the continued expansion of our programming lineup.
Definitely we continued to show exceptional efficiency in our customer service and billing Cokes gross profit totaled 3.8 billion, increasing 7% over the prior year produced a gross margin of 62% level with 2018.
At Pandora advertising revenue grew 10% to a record $1.2 billion hiring quarter bookings strong sell through in pricing growth from the ads was platform and contributions from the Soundcloud relationship drove the strong performance.
And our premiums continue to grow reaching $80.41 for the full year, approximately 12% higher than 2018.
And maybe you and add hours trends continued with and they use down 8% to 63.5 billion and add hours down 9% to 13.4 billion.
Pandora self pay subscribers grew by 251000 net additions in the year to a total of 6.2 million paid promo subs declined to 49000 as a result and paid promotional subscription trials with a wireless carrier that were retired in the third quarter of 19.
Pandora subscription revenue was $527 million up 10% over 2018 total Pandora revenue for the year grew 10% to more than 1.7 billion.
Total products and services and parador were 2% hires and strong growth in our all platform advertising business drove revenue share across.
More than offset the elimination of the 2018 minimum royalty guarantees however, pandora's gross profit.
Jumped 28% to 624 million than 19, representing a margin of 36% approximately 500 basis points higher than 2018, as our revenue growth drop through to gross profit.
For the combined company pro forma revenue grew 8% or $573 million over 2018 to nearly $8 billion pro forma gross profit grew 9% to over 4.4 billion and adjusted EBITDA grew nearly 14% or nearly $300 million over.
2.4 billion from before year.
Adjusted EBITDA margin was 30.6% 19, growing approximately 160 basis points year over year.
We converted approximately 68% of those adjusted EBITDA and free cash flow totaling over 1.6 billion in 2019.
Full year 2019, GAAP net income of 914 million declined from 1.2 billion in the prior year period, primarily driven by acquisition and other related charges. In addition to refinancing expenses and higher depreciation and amortization costs.
The company's effective tax rate for 2019 was 23.6% compared to 17.2% in the prior year period, which was driven temporarily lower by the recognition of excess tax benefits related to share based compensation and benefit related to state research and.
Relevant credits going forward and we expect our effective tax rate will be approximately 24%.
Earnings per diluted share from 2019 on a GAAP basis was 20 cents with a fully diluted average share count of 4.62 billion shares.
For 2020, we've issued guidance, which anticipates continued growth for the company. We are projecting self pay net subscriber adds of over 900000 revenue of approximately $8.1 billion adjusted EBITDA of approximately two inherent billion and free cash flow approaching $1.7 billion for the year.
We returned nearly 2.4 billion and capital doors stockholders, our second largest you're ever we repurchased more than 364 million shares last year and paid approximately 226 million in dividends to stockholders.
Since the initiation of a stock buyback program, we have purchased more than 3 billion shares at an average price of just over $4.
At year end or debt to adjusted EBITDA was 3.2 times with the entire 1.75 billion available on our revolving credit facility in just over 100 million unfair Shanahan. This gives us ample liquidity to continue investing in our business, while returning capital to stockholders.
That operator, let's open it up for questions.
At this time, we would like to open the call for questions I would like to remind everyone in order to ask a question press star one on your telephone keypad. If at any time, you would like to be removed from the Q piece press stack to really pause for just a moment to compound into Q in April.
Yeah.
Your first question.
Hum from Spain Weinberg from Morgan Stanley. Please go ahead.
Hey, good morning, guys. Thanks for the question.
David to for you won any color on the sales and marketing and Gionee growth in the quarter, which then it was up double digits year on year.
And then second as we think about Pandora in 2020, you guys had laid out some synergy targets. When you close the deal like you raise them. Once just curious if there's more opportunity in 20 versus 19, as we think about expense trends just trying to understand how to think about pandora's growth prospects financially in 2020 now that you're.
No lapping some of the heavy lifting than last year.
And then Jim you always preach patients to us on the auto cycle.
I think you would admit threesixty I'll now is starting to get real.
Distribution on the road.
What are the you mentioned somebody's in prepared remarks, but what do you think the biggest one or two benefits to the business will be and is ending that surprised you. So far in the early roll out of this as you guys had into 2020 and 2021, when the 60 L. fleet really spikes. Thanks, Thanks a lot.
Let's start with the Alaska. Okay. So then also are 360 al and I think your observation.
It gives me confidence in my remarks got through what I meant that 360 hours now really starting to accelerate by the way I don't don't overlook also the incorporation of the wideband chipset. This is really an important step for us.
In fact.
Without it we can accomplish the consolidation of the spectrum in the middle of the decade. So I'm really pleased that both of those are now stated add that 360 hours plan a record.
With with virtually every OEM.
As you say you got to live long enough to benefit from only because the implementation takes time.
Yes, I'll give you a couple honest observations won this stuff was harder than I thought.
As we roll that out there was more.
Work to be dotting coordinating with the Oems.
How the service dovetail together and the vehicle and you know what the ending result was and frankly.
For Sirius XM Pandora in a separate area. It's the first time, we really had a mamis amount of real time data coming back and and figuring out how to accumulate that organize and use that word to I would say you know significant challenges for as we launch we've learned a lot from that and we're car.
So that we know well you know we know.
Now as a great place are really step on the gas and for the incorporation ray to begin now to climb significantly it will jump again significantly in 2021, and you know I suspect by 2022, we ought to be talking about anymore, because it will be virtually this just.
Standard way that Sirius XM is involved in cars I think two key points I want to make again is one it does allow our service frankly, it's really simple it it makes our service better it makes the listening experience in the car more compelling more engaging and both of those.
Yes, I mean, only two things higher better conversion and better.
Retention of customers, which is what we're all about the second point, though I want to reiterate again is 360 L. is our first backward compatible platform, meaning that it can iterate with the ability to from a software downloads going future going into the future.
That's a key point and that it will let us.
Upgrade.
Features that we evolve into four customers quicker and I think probably better.
<unk> down the road versus where we then for the last 10 years and as importantly.
It will allow us at some point to seamlessly energous Pandora listening into the car.
In a way that we think we'll be very helpful to subscribers David.
So then on the you know synergy targets for twice, we've overachieved on the synergies that we you know we originally identified for you, but you know as we also said earlier in the or we're going to reach report, we're not really going to be able to track them anymore, which is sort of where we are now that we've.
We have consolidated the command structures of the of the company's everything is pretty integrated now we've got multiple people who.
Our managing resources that used to be one PML or the other and to be honest trying to track the synergies from here.
Is going to be it's probably not worthwhile exercise, but but I can say with confidence that we saw what we overachieved with respect to your questions on sales and marketing DNA growth agenda growth is is predominantly related to a litigation reserve.
Other than that there wasn't much change in January and on the sales and marketing side to be honest, we were having a pretty good year and and we took the opportunity in the fourth quarter to really step on the gas and the number of areas, where you stepped on the gas with programming investments and we did the same thing with sales and Mark.
And in investments that you know I think across all products in all channels of distribution that we put we put money to work in ways that we thought were smart we think that benefited you know our you know the or see distribution with you know the on the new in home devices. We think there's a good bit of brand building done.
And then you know saw what amount of performance spending you know across all of our distribution channels. So it was grocery we thought a great time to put money to work.
Thank you. Thank you guys.
Your next question comes from Steven Cox from Wesbanco. Please go ahead.
Yes. Thank you I'm just a couple from me maybe first I think the buyback was a little lighter in the quarter I know in the past sometimes your grid has kind of gotten away a little bit on the buyback when the stock has a nice move in a short period. So I'm. Just wondering if you could maybe help us put that in context, a little bit and how you're thinking about cash deployment.
For 2020 versus 2019, and then it seems like all the K P eyes are pretty strong, but I did see that the trial funnel ticked down a little bit sequentially. I know, we've kind of unusually high in Q3 I was wondering if that tied back to the slower shipments of the pay promotional vehicles or how do we just think about the trial funnel trending.
As we go through 2020 thanks.
Sure on.
Buyback or we you know for long time, you know, we sort of step on the gas on buying back when the stock.
Falls in that ease up on it is it rises quickly sort of exactly to your point that you know if.
It can run right right through the grid no overall, you know a buying back your returning 2.4 billion in capital to shareholders is a big year for us. So we're thrilled with that we think we did well you know on a going forward, we continue to to buyback.
We continue to generate about 2 billion a year in excess capital.
And you know will you know will probably use the same methods. This year in terms of sizing the buyback that weve used in past years, we'll look for opportunities to load up on the Soc. When we think it's a good bye.
On the trial front on the year did did close slowly for some you know some automakers I wouldn't say it was really related to the paid promotional tile trials, there's always some market shift among among our manufacturers and we love all all or Trialers, but you know the used car business closed a little.
So slowly you know the interesting thing or the new car business coastal slowly the interesting thing about that was is that the automakers didn't build a lot of cars you know via the years. So actually you know inventories for our fleet of vehicles were actually lower this year than they were the year before and rich.
Sort of augurs, well for us for totaling 24 US Yeah, I think David on top of that obviously and.
Few weeks ago is able to spend a great deal of time at the consumer Electronics show was all of our Automaking partners as well as certainly at least the two biggest retailers of cars in the country. The moves good and so I will tell you had at least for me as I'm thinking about all the challenges in 2020 that.
Trial funnel right now is not there's not one on particularly concerned a little bit all right now.
Thank you.
Our next question comes from the King Echo <unk> can research. Please go ahead.
Thank you helpline and Pandora.
The AD revenue performance was good and in a very good and you're describing some of the details I'm wondering if there are any.
If you talked on the revenue and revenue emphasis in the interplay do any extent between Sirius XM and Pandora now that you had to your too.
Consider those opportunities and also a are there any other adjustments to the strategy you might have with Pandora one year later to my point out.
So let me let me jump in on data that can add any color. He chooses I'm really pleased with 2009 to answer in terms of our performance in both.
Monetization and utilization being not only what we're able to charge.
For ads, but the mix.
Of which as we were able to sell to optimize.
Higher revenue and how efficient we were to how much of our until or actual actually able to sell.
Really pleased and and frankly that just kept getting stronger during the year and our performance in the fourth quarter caused surprise me.
As strong as it was up in November and December.
You know my for me, that's a new normal now and so we're pushing the team really hard to be able to continue to deliver those results will say and but I'm really pleased with the focus.
And and and worth what we're delivering I think.
At the root or that is a couple things one being able to have programatic now available and at the end with the tools that really works well has helped our AD sales force.
Quite a bit and number two we were able to I think through I'm, just frankly haven't thing settling down as an organization and everybody getting back to doing what they know how to do where we're able to stay focused.
Deliver deliver those results on a you know I will tell you a year later now after the completion of the merger one of things on I'm really really pleased with is the digital audio AD sales force that we have at Pandora and how cable it is and what we're able to deliver where that want to play.
And that we had great results and Sirius XM as well or would add sales in the fourth quarter. So really add sales in general Jim is something you know with a lot of momentum they exiting.
2000, and twining observations on Pandora in general are I will tell you I feel a lot better I feel great and I love, The fact that we own Pandora and Pandora.
As part now Sirius XM 2019 was a challenging year for us in terms of bringing the two companies together and getting through all of the hardships and the difficulties income we're doing that I'm happy to say that the vast majority of that is behind us.
And I'm really pleased with what that sets up for for the future.
So Joe Joe said to two things to them, but you know with.
As part of bringing Pandora and we also brought in the ads was business and Pandora is growing off platform strategy and you know in the last couple of months Sirius XM as is the been able to sort of walk into that is almost like a test customer and see what what it's really like to.
Do.
You know to put a product up on the AD Tech platform, and then and then haven't sold and.
I have to admit that I'm I'm pretty surprised at how simple that approach. It is I think it augurs well for the growth of the on platform business, you know and digital audio there are an awful lot of audio providers out there, who simply aren't big enough for the AD agencies and the and the direct advertisers.
To bother to hook into their platforms. There's just no digital scale, but you know with what you saw what the sound close relationship with Pandora and then with what the ads was tech stack brings to the to the party.
Smaller players like the Sirius XM huh.
Plus plug into that AD tech can be integrated with Pandora cell system, and then sold as additional audience reach giving us an opportunity to monetize that we honestly never really could have done on her own I think we'll be able to play that story out for a lot of other customers. So it was really happy to see that the probably the other thing.
On the strategy side is that we're just learning what it really means to have reached out to more than 100 million people and if you include the sound kind of club platform, you're really looking at 140 million people in North America, and that's really kind of opened up the box for Scott's team and what they could do from a programming perspective, Jim talk.
Good good about it in his in his comments, but I think that's and that's an area that we're also going to see a lot of an unexpected benefits as you know people in the industry as are thinking just opens up is what can be done with our platform.
Okay and one other thing you mentioned the wide then and chipset and Wonder I was wondering beyond the transition assisted provides does it increases the likelihood of having some spectrum you might want to monetize.
Two years from now once you get to that point, where the and serious next I'm platforms are completely merged.
So what I would say Jim as we began playing for this you know more than five years ago in terms of beginning to.
Put in place the tech investment to create this chipset, which has now been delivered and will began rolling out later this year.
Very clearly what that chipset does for US is provide us I think the best way to say it is with a awful lot of optionality in the middle as a decade, how that Optionality plays out and you know where where goes.
I'm not ready to comment on right now, but I will tell you. It does provide us the ability to significantly increase our offering to customers. If that's how we choose to use it.
Okay. Thanks very much.
Next question comes from Jesse Tiny tiny from Bank of America Securities. Please go ahead.
Okay. Thank you know on a couple of question.
I'm, sorry could you frame the podcast opportunity long term will you use the team, particularly at Salesforce for that business doesn't seem like there are a lot of incremental cost.
And then secondly.
Can you talk about the benefit if you could that come from the audit couponing.
Yes, that's right could you too, but now you would be worked for to the really interesting area is there room beyond the uninterrupted and can you talk a little bit at that have used truck could be guardian nothing.
Do you pay TV revenues here, what's the incentive for them.
Okay. So so just let me make a couple of comments first.
<unk>.
Your observation as 100% right and that is where there are opportunities to.
Sell digital audio advertising, we will maximize those across the salesforce that we have and yes, I agree with you, though should be scalable and we'll take advantage of that.
I I, you know I really like or some of that's going on I think.
David hinted at some other things we can do it in that space to scale, it further and and.
I know for me, it's a whole new world It and we're certainly I think.
Learning quickly what opportunities are there. So I think your observations I can't really correct number two I will start with a general observation and and I always believe that we're going to have two brands here serious X seven Pandora doll.
I don't see necessarily you know.
And at least certainly in the mid term, where those whatever crossing though kind of one brand. However, I will tell you the thing that surprise me. The most of the last year is how well they dovetail together and how well the consumer except that so you know you see it in almost all of our events, particularly.
Even in the last couple of weeks down in Miami, how most of our events have been cobranded.
Across both Sirius XM, and Pandora and frankly at least the talent that we brought in loves it and they love They love the size of that but you know, they're able to be up exposed to a platform of that size and frankly.
That they're able to be.
Brought forward in a way that can be monetized in more.
You know than just subscription and includes advertising how exactly how all those deals or work going forward I'm not sure is clear.
And we'll probably evolve but I can tell you we don't do a deal I'll, let Scott comment and while we don't do a deal with any talent today, where we don't think about how does it work on both of our platforms and how does it work with both of our brands in a way that we can optimize it so Scott yes. So today.
Thanks, Jessica versus will cover podcasting briefly and then the uninterrupted in new York's content on podcasting, one other things we've always done.
At Sears and ultimately will continue at Pandora is Curations I think that's what we do well and I think if ever there was a type of or what do you go product that needs duration right now it's podcasting due to the volume of it and sort of the lack of ability to find everything that might be for you.
So I think you think of vertically integrated channels and podcasting coming that very well maybe organized sometimes the way we didnt music.
And other things so that that's number one number two given most of the audio.
Space in podcasting, he's coming out of scratch, meaning they started from just inception or their based out of Algorithmically generated companies a lot of the bigger talent that are signing with us for podcasting in other reasons are with us for audio production came.
Abilities and what we've done over the last you know more than a decade of producing high quality audio content and as you go up to the line in terms of an artist and brand or anybody else. They want to make sure you audio comes out in the quality and integrity they want.
Oh, no uninterrupted I'm, particularly excited about that in general, but also the precedent of where it can go I mean for the last more than 50 years, the intersection of sports and music in American culture, It's pretty firmly intersected and the idea that these athletes now have bigger social media.
Following three most media companies and their obviously very I'm interested in user entered passionate about it we're starting to see some really good traction not only with rounds played with that are coming over on Pandora, but many other athletes.
Almost every two weeks, there's another group of athletes coming over.
From that deal that are putting platelets together ultimately our June said Ah you know it will evolve into a serious benefit as we will launch an uninterrupted radio channel when Drake and you to launch they will have channels and play this component so bad formula as we mentioned before we'll continue to hit pretty excited about them.
So I just want to this thinking I'm I want to make one more comment on podcasting or that is you know I clearly understand.
Podcasting I also believe podcasts and we'll we'll certainly be a a relevant part of audio entertainment going forward and so you should assume we're acutely focused on that as an entertainment.
Audio entertainment medium however.
We're going to show what we believe is the proper amount of discipline in that space and.
No said there number two.
We believe that space is probably going to be at least our direction gotta be dominated by brands and by major names and Cal and so I think that's what you're gonna see you're going to see a lot more that from us as opposed to what I would call, perhaps the Santa Monica flea market approach, which is how big.
Can I make it and how much stuff can I have in an environment, where nobody can find what they want and and it's difficult to you know to really be satisfied remember we've always believed in spoken word as part of the audio entertainment experience has been part of our culture and our offering for the first day.
Well, we introduced our service and you should expect nothing less than that from us going forward.
Great. Thank you.
Oh, we remain calm and Nick and final question from Saxon Palmer.
Right.
Please go ahead.
Okay, great. Thanks for taking the question.
Based on the revenue in the South based on guidance you guys issued back in January and assuming relatively stable trend that than many other revenue lined it seems like the guidance assumes you know a deceleration in satellite radio ARPU growth for 2020, and this just seems a bit at odds with some of the price hikes you did for the service back in November.
On the select and all access brands I can you talk about what is driving a disconnect there or maybe we just need to go back and rethink some or assumptions for the other revenue lines.
Sure. It's you know when when we did the what drove the ARPU increases and in 29 team.
Was the increase in our music royalty fee that you know we did right at the beginning of the year or maybe the end of 18 in that rolls through all of our plans.
The price increase that that went through in.
In the late fall.
Only hit some of the plans and so while we're going to have a ARPU growth that shows because it doesn't hit as many plants, it's just a little bit less of a tailwind and we hadn't 19.
And you know overtime I think the last couple of yours or ARPU growth is sort of been above the long term mean that that we've been getting people to go even for a number of years that you should you should expect to see sort of inflation like increases in ARPU and I think if you look back over the last decades, we've averaged out to about two and Uh huh.
<unk> percent per year. So you you just seemed a little bit of a mean reversion this year.
Got it and then one more if I could die theres been some reporting to you guys had been testing some cross selling my nose to either existing curious are existing Pandora users for the other service.
Can you talk about any early learnings from this testing and when it maybe make sense to bundle curious in Pandora as one offering.
You know that's that's something that you know, we'll look at overtime you know it.
No I don't think you should think of it is being sort of a key pillar of strategy I mean, the audio market in the United States is pretty saturated at this point, you know with well over 200 million people streaming and you know.
Certainly the streaming companies are fully distributed were fully distributed and affirming the radio is fully distributed so it should tariffs the sort of different things you're really looking for nishu interest.
Got it thank you very much payment.
Excellent thanks, and thanks, everybody for participating on today's call will close you soon.
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