Q3 2020 Sirius XM Holdings Inc Earnings Call
Ladies and gentlemen, John host for today's conference calls at this time, we're showing in state audience sometime to get underway. Shortly thank you for your patience jumping to remain on the line.
[music].
Good morning.
Ex <unk>.
<unk>.
[laughter].
Today's conference is being recorded a question answer session will be conducted following the presentation. If you have a question that's fine cheese crust star one on your telephone keypad, if at any time you'd like to be removed from Q piece could start to at this time I would like to turn the call over time.
Even senior Vice President Investor Relations and Finance Mr. Stevens.
Mr. Stevens. Please go ahead.
Thank you and good morning, everyone welcome to Sirius XM third quarter 2020 earnings conference call today, Jim Meyer, our Chief Executive Officer.
He joined by Jon for Woods, <unk>, President sales marketing and operations and our incoming Chief Executive Officer.
At the conclusion of our prepared remarks management will be glad to take your questions.
Scott Greenstein, our president and Chief content Officer will also be available for each year. They Fortunately cool.
First I would like to remind everyone that certain statements made during the call might be forward looking statements as the term is defined in the private Securities Litigation Reform Act. The merchandise. He thought he was that all forward looking statements are based on management's current beliefs expectations and necessarily depend upon assumptions data or nothing to may be incorrect or imprecise such forward looking statements.
[noise] are subject to risks and uncertainties that could cause actual results to differ materially for more information about those risks and uncertainties. Please view Sirius XM actually see filings.
Listeners to not rely unduly on forward looking statements and disclaim any intention or obligation to update them as we begin I would like to advise our listeners that today's results will include discussions about both actual results and pro forma adjusted results all discussions of pro forma adjusted.
Adjusted operating results assume the Pandora transaction close January 1st wondering if you exclude the effects of stock based compensation. That's your purchase price accounting adjustments I'll now hand, the call over to Jim Meyer.
Thanks, Robert Good morning, Thank you for joining our call today.
My 32nd earnings call as she all serious interest.
It is certainly bitter sweet to know this will be my last call at Sirius XM CEO its been a true honor to lead the outstanding team here.
I've enjoyed the fun and sometimes challenging conversations with you on the street sales.
They made us a stronger company.
I'm very company I'm very confident that in general for which our board has chosen the right leader for the next stage of Sirius XM squirrels.
It's also important to acknowledge that Jennifer has a deep bench of talent behind her to help people execute the company's strategy over the coming years.
Although I'm looking forward to spending more time with my wife and family next year I'm not quite out to pasture just yet.
Plenty of work to do this year to deliver on our subscriber and financial goals and I will remain on serious action sport as Vice Chairman I guess, you didn't help Jennifer and the company wherever and whenever possible.
I'm equally proud of our long term results and will remain highly invested in the company's ongoing success.
Not only do we resume our practice of providing guidance on our second quarter call, but happily during the third quarter. We've now been able to resume what I like even better increasing that died.
Positive self pay additions of 169000 in the third quarter far exceeded the expectations. We formed early during the pandemic and these results among them support our new increased 2020 self pay subscriber guidance of approximately 800000.
Sure we had already increased earlier last month.
Core subscription business is humming along with low churn a rising ARPU strengthening auto sales and it's producing the excellent revenue and cash flow you've come to expect today you also see a 46% she kept sequential increase your advertising.
During the quarter put another way.
34% decline in AD revenues in the second quarter bounced back to decline.
Only 6% in the <unk>.
And the CIRCOR [laughter] and in fact in the month of September advertising revenue actually increased year over year.
The business overall has excellent momentum going into year end.
Our new higher guidance now anticipates 2020, rather, though adjusted EBITDA and free cash flow of approximately 7.85 billion 2.475 billion and 1.6 billion respectively.
We are on track for an extraordinary year and I am very confident and this guidance.
The quality and rail and relevance of our programming is at the core of our offerings or.
Our unyielding focus on fantastic new content, New features and digital product innovation continues to attract listeners at great scale, while also solidifying our relationship in the entertainment industry.
First let me say a few words about Howard Stern.
Howard tells me he has never been happier and our relationship with Howard is very strong.
He is producing fantastic college.
And they show has never ever does better we.
We've had very productive conversations regarding a long time, we know there's agreement from my perspective, we are far along but it's never done until it's done.
I am very confident well have agreed we will have an agreement itself.
Announce shortly.
Recently, Kevin Hart resigned his exclusive already I'll deal with us as well increasing gets involved but my heavily investing in new program for its channel were also creating a new show and podcast just for Sirius XM, what he will interview top comedians our relationship.
Ron and NAV reps uninterrupted enabled us to launch content on Pandora from within the N.B., a bubble and we added the popular cat Mcafee show to Mad Dog Sports Radio channel we should.
We successfully launched our full time channel with the members of you too.
Sirius XM and Pandora have resumed life contract concerts and events of course, most of them virtual for now.
We've resumed a live broadcast of major sports, including college football the N.B.A. and MLB playoffs, and every NFL game we've.
We've also added programming that reflects the important issues in our country launching forward progress a new show focused on race Society and sports, we're covering the election on a wide number of channels and from every perspective, right left and center and on the.
Denver third many of our own channels like Potus urban field Patriot and others will go live with 24 seven coverage.
We continue to work with major media brands, who looked at Sirius XM to extend their reach an audience we.
We expanded our C N N relationship with a launch of a full time streaming channel CNN originals, which compiles some of the best documentary work of CNN and H. outlet.
Indoors, new innovative feature Bose continues to grow in popularity with user adoption, increasing 60% since last quarter lowest provides a different way to cure rate your music as we advertise during the N.B.A. playoffs was kept off mode, where the music.
Geared to the anticipation of the game.
We find that listeners who use mobile spend an average of 7% more time on Pandora then nonusers, so expect more focused around moles, including a timely Halloween party.
As you can tell there's tremendous energy and our content creation and digital product development.
Sirius XM really is a unique service, we truly believe that Oh, gosh personalities and Curations batter life matters, especially in sports and news and why we will give consumers more choices more personalization.
And more on demand content like podcasts Sirius XM subscribers will always enjoy an experience that as part to me energy and experience that is happening right now everywhere that we all can share.
With that I'm pleased to turn the call over to our next Chief Executive Officer at Sirius XM, Jennifer waits for some more color on our operations Jennifer.
Thank you again it is a privilege to have spent much of my career with an outstanding leader, who tries to team members to take big rats.
Oh big decisions and relentlessly focused on the growth of the company generally.
I haven't heard fostered an environment at Sirius XM, where expectations are high integrity is paramount and everyone from junior employees sit senior executives is expected to follow through 100% on their commitments.
I intend to continue this culture of excellence at Sirius XM and in years to come.
I joined Sirius XM nearly the same month the company games get first subscriber back in 2000 and care and leaving Viacom I wanted to join an entrepreneurial drugs company with a vision to create an entirely new industry and consumer experience.
The Brooklyn, President I've always loved music and nothing really more than a 10 day one of our exclusive subscriber events such as a special sat in a serious x. I'm sure. He added sites someone like the incredibly talented Taylor Swift.
I knew from day, one at serious that our special blend of unique and curated content would be the heart of our value proposition and we will always nurture and best stand and deliver the best possible content to our subscribers and Watson or even.
Even today when most of that they're at home because a true pleasure to P.B. unmatched opportunities, we create for our subscribers to come back with the artists and talent They love.
Scott Greenstein and his team have done an excellent job in building our content offering and we have a deep roots of talent across our organization to help support our mission to continued growth and consistent execution. We also value you insights and perspective and I'm very pleased to be welcoming show.
It's all about next week as our new Chief Financial Officer.
During the third quarter, we say dramatically if you work in Bergen opportunity than we originally modeled earlier this year.
Hey at home orders sharply reduced second quarter auto sales and the associated three month trials, yes.
Despite that the quick recovery in our conversion rate and you're pretty cold at levels that each churn of just 1.7% and strong performance in channels like Winback produced 169000, Sirius XM self pay net adds are.
Are you could scriver guidance now twice raised since we resumed guidance its summer implies that we will finish the year with self pay net addition, close to 90% of what we originally projected in January 2020, and extraordinary performance and next years environment.
[laughter] third quarter, it's our best third quarter churn in more than a decade and puts us on track to potentially have the fourth consecutive year of declining churn we've been best with solid ARPU gains of 2% in the corner and in fact that subscription component of our ARPU was closer to 3%.
Rebounding auto sales combined with rising penetration rates mean trial starts are bouncing back to which sets us up well for the fourth quarter and for next year.
Combined new and used car trial starts in the third quarter were actually up slightly year over year and for the full quarter Saar with 15 point Threemillion down 10% from the third quarter of last year. The effects on outperform these numbers given the relative strength of consumer versus fleet sales.
Binds with our rising new car penetration rate, which reached approximately 78% in the quarter up from 72% a year ago. It totally U.S. enable complete sites grew to approximately 232 million cars up 9% versus this time last year.
Strengthening and extending our OEM relationships has been one of my key goals during my time as president of the company.
Since the start of the third quarter, we completed new expanded agreement with GE and BMW.
We continue to expect fees and other OEM agreements to push our factory penetration to 80% in the next few months and even a touch beyond that in the years to come.
We have also made incorporation of Threeq Seattle are Upgradable next generation platform a focus of these agreements in order to provide the best possible consumer experience in future vehicles. The combination of satellite broadcast and screening enables us to do it goes back to the more content that is.
More personalized with a better interface and improve the efficiency and effectiveness of our marketing I'm.
I'm very pleased that Threedic Seattle has become the plan of record with every major OEM, we expect to be picky I will quickly grow to more than half of our new enabled vehicle sales in the next few years.
The long tail opportunity in used cars rises because of our success in new cars and it continues to represent a growing source of additions to the business.
This year used car penetration is up about 400 basis points to almost half of all used cars sold in America and that.
And the tail of growth in used cars like them because of our still rising new car penetration rate.
One of our sexual goals in recent years has been to improve the Sirius XM streaming offering drive out of CCAR engagement among existing subscribers and acquire screening only subscribers, who may not have a need for any car subscription I can report steady progress and traction on all three years.
These funds.
I constantly improving our streaming apps and making streaming as part of our base package for most subscribers last year, we were able to satisfy a greater need for screening while much of the country was locked down earlier. This year that was a silver lining of the pandemic.
The screen free promotion, we ran earlier this year also resonated with Gen X. and younger generation.
We recently expanded our agreement with the NFL to include additional streaming rights. This season, so that our customers would that streaming only Sirius XM premier subscription get every NFL game as well as our exclusive Sirius XM NFL radio channel. This makes our streaming only package that much more attractive.
This is just one example of how we are working to ensure that our vast content resources are thoughtfully utilized across our various direct to consumer platform.
As we look to the benefit of our fit your acquisition the closing of which we just announced on Monday, not only do we gain greater exposure to podcasting the fastest growing segment of audio entertainment. So we hope to introduce yet your podcast and their creators to a wider audience and universe of listeners through our Pandora.
And Sirius XM platforms.
And our platform only become more attractive by highlighting that fantastic content and making it easier to access.
You spoke about the quick rebound in our advertising revenue and short term considerations. Aside we're assembling a powerful suite of audio advertising products across our platforms.
Acquisitions picture and simple cats complement our leading adds back and digital audio sales capabilities adds mezz and Pandora, we now reach more than 150 million listeners across our combined properties and commercial relationships with every category of audio represented music sports.
Talk and podcast winter.
We intend to use our technology and sales capabilities combined with its tremendous multi platform reach to enable easy and efficient monetization opportunities for content creators and audience targeting opportunities for advertisers. We are the leader in North American digital audio advertising and debt position.
Only getting stronger.
We continue pursuing all of these long term goals and delivering on our increased guidance just here during an unprecedented environment for all of our employees from working at home dealing with unexpected childcare challenges and in some cases, even worrying about one's own health or the health otherwise.
Such as this year has been like no other yet day in and day out we continue our excellent performance and for that I would like to thank all of our dedicated employees.
I also want to take this moment to thank Jim for everything he has done to build the company and for his incredible leadership as our CEO over the past eight years.
With that I'll turn it back to Jim for some final remarks.
Thanks, very much Jennifer.
So Sean is starting on Monday, I'll, just make a few brief remarks on capital returns and the balance sheet.
As for suspending our share repurchases in March and buying back about a $165 million of our shares in the second quarter, we increased the pace of our share repurchases in the third quarter to 486 million.
Her September year to date capital return, including dividends totaled nearly 1.1 billion and we committed 428 million of additional capital to fund our acquisition of Sicher Shuffle Cafs that our investment in sales.
We still expect to pay no federal cash taxes, this year and a relatively small now a 2021.
We estimate capex for this year in the range of 330 million was the launch of Sirius XM seven still expected later this year and the launch of Sirius XM eight and the first half of 2021.
At the end of the third quarter, our net debt to trailing 12 month adjusted EBITDA ratio was 3.1 times and our 1.75 billion revolving credit facility was completely undrawn and fully available.
Our capital allocation of the leverage targets remain unchanged and we expect to continue our share repurchases in the final months of this year.
Jennifer and I feel excellent about to increase subscriber and financial guidance. We've given you with that operator, let's open it up for killing it.
Thank you if you wish to ask a question at this time piece press Star one on your telephone keypad, she would like to be removed from the queue. Please press star two okay.
For just a moment you know ever an opportunity to signal for questions.
And we can take our first question from Sebastiano Penske of JP Morgan.
[music].
Hi, Thanks for taking the question about regulation standpoint in the wall and good luck to you as you move on to the next stage of your career.
Not quite out to pasture as you said, so but just.
Just talk to just to get to.
Some of the extension that you talked about in the quarter, you know whether it be the W.G., but all ships to me 60 else.
Penetration like 80% next quarter has only been about longer term yeah, you touched on your revised 2020, so paid net adds.
Right.
Not too far off at 9% of where you started at the beginning of year.
They actually rising.
Perhaps should pick up and surely vehicle related churn continue does.
Economic activity, but putting it all together I mean, I penetration goes higher perhaps you have the economy stays doesn't go into a double dip here how should we think about 2021 self pay net adds.
What are the different pieces that you know probably out to where 2021 could shake out little to choose where 2021 22 bubbles to that.
Well first of all first like thank you very much for your kind words.
Obviously, we're not going to give you our 2021 Celtic guidance, yet, but I would expect we'll give it to your early next year, but you know I think things are shaping up certainly better than than we would've expected six months ago and.
I'll, let Jennifer commented a moment on particularly our new OEM agreements, but.
I I will tell you that for investors who were in our stock for the mid term or the long term. These older and go away on the agreements that have just been clean completed or a really strong foundation and you know.
Oh in our in our growth story.
You're right auto sales cycle up and down we can't we don't really we don't have anything to do with that but when you think about those kinds of better care penetration rates.
Lay them out over the next five years and then take the C.
The residual used cars that come behind it with the same caused the fact that it really is an outstanding.
Funnel for trials and it just I think bodes very well for growth going forward, Jennifer would you like to comment on the old rules.
Yeah. So.
Hey, we have announced a number of extensions that may play over the past seven online then one recently and really strong agreements with GE and and BMW that continued to bolster that penetration rate and like we said we are confident in hitting the 80% Kim.
The next few months, it's always subject to new model. Your release says I like we now have line of sight to even seeing that 80% pick up into next year and of course, then increasing number of those vehicles will be equipped with 360 al I see that we are on track.
After you hit the 1.4 million yen enabled vehicles Mezz threesixty out by the end of this year and we've said that we expect that to triple going into next year and you know of course today I mentioned back in terms of the percentage of our naval New car sales we expect.
Kids see at least 50% of them 360, l. capable in the next few years. So that will just continue to expand and you get to the relationship we have with the Oems has never been stronger and the new technologies were putting into these cars would be area and he has got incredible flexible.
Okay in terms of the nature of the content that we can distribute me there with unlimited bandwidth as well as you know more personalized capabilities more interactive features and so I think we're really well positioned and yeah that will continue to be a tailwind for us going into next year.
Okay and separately.
Jonathan you spend some time on the digital assets, which I'm sure. It has compiled whether it be with Pandora.
Speech to cherish because acquisitions, Jim I think I'd, reaching feel topic as you talked about getting that business up to about $2 billion over the next several years or 20% of the larger overall business. One of the biggest pieces you can get to that level would be to kind of go right or where you see us.
You know maybe low hanging fruit over the next several years, yes, they could.
So well.
Walk through what I would say there obviously are you know three or four key pieces and all comment on them.
I'll give you the good and the bad Okay, and I'll start with the negative which is we still continue to battle that declining listener base at ER and our Pandora listener base with that said it is still by far the largest listener base in the U.S. market.
And we're working really hard work really hard on on that problem, but offsetting that is we have seen increased listening bye bye increased engagement by the listeners that or within the Pandora.
On which helps our listening hours and we're also I think you know really I'm looking at.
Investments in content and.
Ways to bring certain types of really innovative things we've done in Sirius XM over to the Pandora platform to help with the earnings decline.
Another point that I think is a good tailwind for us.
Is that our monetization per unit of that I won't get into the specifics of the different types of that Hooper can get into water. If you like but but when you average all those out you're seeing increased monetization per unit and that is also.
Good tailwind going forward.
Our.
Relationships with Soundcloud has worked out great for us.
In terms of it bolstering our advertising.
Our advertising revenue by being they're there Asia to for all of their advertising sales in the U.S.
We're obviously out working on more of those type arrangements.
And and I think you'll see shortly.
In fact, Jennifer announced her new organization.
That will be in place at the beginning.
Beginning of the year and within that she has combined.
All of our advertising sales under one organization, where I really do believe one plus one is going to cause is going to end up giving us more of them too. So this was an area both of us are quite focused on.
It's an area I believe is fertile for growth by the way the AD technology area. I think is is an area that we're we're we're spending.
We're spending quite a bit.
Quite a bit of time right now, making sure we really understand what the right players there, but there's no doubt in my mind, but.
That there that there is a play there and all of those I certainly don't believe going that's a $2 billion is a holistic.
Yeah, Jim if I could I just would add on that right. I think you got the backyard really three pieces right. We've added simple cast hosting and analytics tool you know primarily for podcast or into our ads with platform, which already has a leading AD insertion order to buy.
Platform and combined with that math and sales force, we have and which we've had for a 10 plus years under John Trimble, you know, we have a field platform to be able to offer and continue to position ourselves as a leading digital attie audio.
Ill add sales and last one for any media brands. So it's that combination of technology and sales capabilities that really positions us well in the state.
Thank you.
Next question please.
Next question from Jeff secure like Ernest piece of Bank of America Securities. Please go ahead.
Oh. Thank you have a couple of questions first on getting enough strong churn has been of course [noise] excuse me for a number of years.
How do you balance continued subscriber growth ex.
Extremely low churn surprisingly low birth is raising ARPU laden crisis.
Jennifer do you want to take that one or you want me to comment first why don't you start off.
Sure.
No we have a long history as you know and balancing.
Right, Yeah overall revenue growth between subscriber growth.
And and that is how we look at it and in terms of overall revenue growth and yeah. We have I think a lot of opportunity to continue to relook at our packaging structure.
And yeah, we have expanded consumer demand both at the high end and the low end skill to capture.
And can we continue to look at that and modify it right to your point churn has really never been lower and it's been I think a real bright spot I over the last several months, we just see every component of churn.
And you know it.
In terms of its positive contribution night on the voluntary side I mean are we continue to execute across the board and the teams are doing a great job. Even you know obviously, especially earlier this year, when we struggled with and call center operations and staffing.
Okay and on the non pay side it.
Yeah. It's.
Really surprising even as as we've alluded to is how low are on non pay churn as especially on credit card and debit card entry rate and we do believe that take or pay for that that is really tied to a lower consumer spending and higher savings level. So [laughter].
That's right turns around time getting some feedback on the phone and on the vehicle sales side <unk> and <unk>.
Churn related to that and the other related areas, we see trials I ROE and rebound we've started to see an increase there and but it's still down year over year and so you know all three components of churn has been right just exceptional and yeah. We we don't see a change materially.
Got you know Weve said that we expect to be right around or something like that or sad and and to me balance that obviously when I you know that the pricing structure, we have in place and I expect to continue to do that.
No I wouldn't necessarily probably it.
It's a great question, because it's one that we debate quite often as you can imagine not debate, but just.
Discuss quite often and I will tell you my conclusion is.
Is that based on the churn rates that we're seeing.
And based on.
That's going on right now it has been going on there.
The agenda for reference for instance, and packaging work.
As you project out over the next three to five years, there's no doubt in my mind that we can continue to grow self pay subscribers and continue to grow ARPU at the same time.
Great and then just.
Just like I was talking about.
Ive two other topics one is content one is advertising.
On content like you brought up Howard Stern. So hopefully it started game I'm can you give us some color on what you're looking for for the next contract in terms of length of contracts and maybe the kind of the terms. The last one included the library I think 12 years does that get extended for another 12 or.
He just move out that's contract and can you give us an update on the Drake relationship like how will that evolve what what should we expect.
I've been EPS every month, it's called <unk>. So any question you asked is there number one.
But I'm only going to answer part of it right now all Tech Howard and then I'll ask Scott to comment on right.
On the power discussions I'd, rather wait for some of those specifics until the deal is done but I can tell you that you know where we are the discussions today. We have we have a set of economics that power seems happy with and I'm happy with.
Obviously, we've got to get the deal completed and it would be a you know a a certainly a long long term around.
Arrangement is what we contemplate but stay tuned there and hopefully we'll have more to say here.
I'm pretty sure Scott can you comment on drugs. Please [laughter]. So a couple of things so like most orders trade wars that far into the lease.
Oh the channel in some of the things, we're going to do a series of Pandora.
Lisa this out.
You know I think quite anything else than any other orders you look good.
The landscape in corn and everything else, we want to get the sharp, but you feel better.
Your audience will respond to music and as everybody knows he's saying other than a couple of sales would you work with us or probably be quite quite Oh, I think you know momentarily, though and I certainly don't want to speak for him, but we're in regular contact with him and his management team and we have the most for US that's already built.
We're in discussions on some marketing ideas and.
We're really confident that as soon as he announces.
The release date of this album try to anticipate.
They don't be too much older.
I don't think any anything they go past early first quarter, we'll be ready to go with it and I think we're going to have some really interesting content not only are you any channel, which will certainly have improved on it but they'll be basic indoor or is the platelets category.
Some other things that are that the surprise people would send the right.
So the right technology Pandora, they're working on meeting Tomorrow ideas, we have looked good so we're pretty excited over that ER and you know the artist.
The artist channel, it's always going to be something that we focus on but this is going to be I think one of the more equal cheese deal together.
Right, it's like a different category and then my last question I guess for Jonathan but it's it's maybe get your point on advertising what do you view as your biggest competition and digital audio and then B what was the driver of advertising in September.
Where it was modestly positive and see that continuing into the fourth.
So let me take this one first and foremost I think we have multiple.
Competitors and I think it's not Josh Josh.
You know just audio dollars for instance, Ah I I've had the pleasure of going on a couple of sales calls with our digital audio sales force including to.
Proctor and Gamble and I've learned that the way they manage their media is quite sophisticated and and across several channels, which say, let's compete with each other.
As a as a Alice for hours. So clearly, though we target also was in our space in particular, we see quite a bit obviously from my heart, we see quite a bit from Sparta five and all that I'm happy to say were.
Doing quite well and both of those both of those.
Areas I think the.
The reason why I included the comment about September in my remarks is exactly.
Well, if you know what you picked up by a.
Believes that the fourth quarter, we should continue to see that kinda.
That kinda momentum its early still obviously, we're still got you know.
Nine weeks left in the quarter.
And Ah you know October.
The first couple of days in November does that political advertising in it which will drop off rapidly after.
After but when you when you said you take those things out and you look at what's going on right now is in the AD market at least for US is quite robust right now and I'll be disappointed if if if we're not able to you know to keep it flat or up slightly versus.
Yes.
[music].
Great. Thank you.
We can now take our next question from things can turn of Morgan Stanley. Please go ahead.
Thank you Jim Congrats on retirement I'm sure, we'll Miss you more than you were with us, but please do I stay in touch and [laughter] stopped by the Liberty Investor day, or whatever you up whatever you can.
So both of you have been at the company for a long time have seen a lot of investment cycles. I was wondering if you could help us think about the next kind of three to five years on that front as one of the things that.
So attractive about the business. It's just you got these.
You've got these locked in a music cost.
And you are able to maintain like 60% gross margins are the satellite business I think that's been true for like eight years, but in the markets can.
But if the market's concerned, particularly around Spotify Apple others, you know pouring money into the space beyond music that the cost of doing business is going up obviously, we've been talking about Howard and Drake on this call. So just wondering what for you guys said.
You see things are changing in that would that lens in terms of the amount of capital and sort of the cost of content beyond music and Ah and I'd love to hear that you know from from Jennifer and Scott as well just from their perspective, as they look forward and and dealing with the artist community and the.
The talk community and and whether or not you think the business is going to go through a period of of heavier investment than we've seen in the past.
Oh, sorry, I I don't think the competitions anymore sense today that this event for the last 10 years.
And so I I see a whole lot more of what.
What we've seen in the past so I I don't you know I don't really.
Really sense and I'll, let Scott Scott can comment on this in a moment, but I don't I don't.
I don't see that as ratcheted up.
As much as I read and many of the you know many of the <unk>.
Reports that I see.
Wow.
There's always a bad a high demand for extraordinary content.
We're committed on our platforms offer extraordinary content and all have we'll we'll continue to do that but you know I'll bet on our track record every day because we.
We've got a proven track record of how we've been able to manage delivering extraordinary content within what I would call acceptable cost parameters and believe me, both Scott and I and Jennifer was with US then to you know back in the and the mid you know the midterm.
Thousands to know exactly what it means to overpay for Tata So clearly we've we've.
We you know, we bought and paid for that lesson, but I I think there's so much content out there that frankly I think.
I think the problem is still is the same which is you know there's so much extraordinary content. How do you filter through that content. How do you decide what to that caused that you're really going to bet on and then the biggest problem is how do you get that content front and center for the users so experiences to find out.
Well, you know, whether they really like it or not and I think.
I think we're spending a lot of time on on that particular iteration, making sure we get better and better at that so I'm not as worried perhaps is does.
The comments indicate I would like to comment on one other thing and then just my last call I can freewheel, a little more I'm sure Hoopers checking here, but you know I think.
Yes, everything frankly, there's a little.
A little over done and I don't mean by that but I don't think streaming is Uh huh.
Heck, we're going you know, we're betting huge on streaming as well as the technology, Okay, but if you go back and look at what's happened over the last four or five years and look at how much the download business has dropped.
Being offset by the streaming business. The net net of those two has grown but probably.
At least if you believe some of the research that I see particularly I'm staring at some last night from Edison. That's just just came out not not as big as you think and yet.
Free radio.
Still continues to be low larger share of the <unk>.
Oh, the audio market and I think what that means to me is there still a whole lot more room.
For us to be able to take share and frankly for for Spotify and others as well because I think the way we're gonna take share from those guys is by offering a better product and you know to me when you look at the audio landscape the risk.
The riskier equation for me is certainly tourist terrestrial radio so I'll start let me turn to you for comment on content.
Sure.
So first you know when you think of the two pillars that.
That they what we do work its duration and then you know individual town in brands and things like that so as Jim alluded to deterioration in factor in a content war.
You know he's on the sidelines to appoint meaning people are gonna always respond to individual talent brands that matter to them, but at some point do facets of which were at the point now both in music and talk.
And talk to Detroit. The point is duration is going to be you know overwhelmingly the most important thing from that basket of of items and when you look at the tools, we have the ability to cure rate, obviously music, but not only now we would fit your granddaughter jury podcasts and other things that are.
You know a unique feet of what you like in those areas plus your your music C. I think that's really important as to the cost and the you know where that's going there's always been bidding wars, you know terrestrial against himself serious against them in the early days, but there's more competition out you know.
He is always a factor as we know what town, but production skills.
Freedom of expression and other things or a lot of things that go into the factors and you know as as Jim alluded to also we don't generally lose too many situations, where we find the AMEA.
Medium on on price and other things, but generally those other factors really do matter I know they can be discounted.
But they look at our track record they look at the brands. They look at the artist that work with US and you know that comes into play there.
There will always be something you want to bet on consistently at the company that only certain talent blowing away, whether powder Drake or others, but for all of those that also puts it on the brand and our content production that allows us to get a lot of people that want to be part of that environment, and that's that combination and blended.
He has done as well so far and I think it'll be smart about what we bet big and what we don't frankly, which is as important but you know what the better one is what you know better and we feel pretty good about at least right now nothing has changed that would cause us to be concerned that this is a new level of bidding.
Something else.
Good just wanted to follow ups that's fair.
That's very helpful. You guys have made some interesting bets on the podcasting side I'm wondering when you look at simple cash plus stitcher or do you now have more to offer the content creator community on the podcasting. If I go back to this conversation on content for us does that add to something to you.
Your offering or am I thinking about it maybe out to lunch no that I didn't actually I didn't actually want to go one level deeper, but I'm glad you brought that up so for instance, I was on a conversation with the I would say a major store the other day and what attracted there more most was the flexibility.
Welcome to the monetization second, but the flexibility if something it's possible they could do a radio show if your schedules got very busy.
If you go to sales trend do you know podcasting, if they want to flex that sort of history about also in music. They could do play with the Pandora So they're looking at a spectrum as something now that keeps it.
Lifestyles of artists musicians creators whatever you want Cork in any book and in many cases, we're okay mixing all the buckets, but much more importantly back to the cockpit work on which is.
We'll monetization and in some cases three levels I mean, we could have something on ucaas on serious.
You know six or take it why there's a pot gets worse stop with an interim window.
Sure I have it sold there so well cost in some cases they go up what we'll want to bet. We now have much much better monetization tools.
Jennifer and I did not have a you know five years ago. So I'm actually excited about the stitching together that you alluded to is of course.
Got it thank you guys.
We can now take our next question now into cash from Maxim. Please go ahead [laughter].
But if you listen to them. So it's worked well for us.
For the jury is something structurally different.
No bugs with Jim It's Joe its footwear, so traders working with the device usage or do you think you need to do anything differently from here or the other.
Secondly, what do you see as the biggest growth opportunities from here, what's the biggest threat from here. Thank you.
Go ahead, John I I I didn't yeah, I didn't I didn't catch your name I'm, sorry, but I guess in terms of things changing landscape I mean, we are doing something differently.
You know we have an incredible position in the car with distribution and three you could see Oh, yes opens up just a lot of new opportunity for us and just say the volume of content. We can deliver but also how personalized we can make it for the customer. So in terms of recommendation right back to you know what Scott and Jim are tracking it.
Route duration is key and being able to serve fad and lights content for the right customer is critical and in the car that's yeah challenging without something like 360 out where we can take the data. We're getting that's just why customers are listening to you and that's what those I thought a recommendation that's all.
And that way that provides us with more opportunities to convert trialers and Mccain are our customers and so I think we already are doing something different and that will continue to you know well, obviously I'm confident that their vehicles on the road over time.
And what was the second part of your question.
Just what's the biggest growth opportunity from your biggest threats, which piece of the yes.
So, let's say, we still have growth in our core products that I'm curious like them in the car and outside of the car and you continue to invest in our streaming offering and like we talked about earlier on the call I think we have opportunities there is no small.
But we have not.
I built that out of the car streaming standalone business, yet to where I think it can grow and theyll continue to T.I. I make improvements to our apps and content their eye on that.
On the Sirius XM side, and then you know we talked a lot about I our AD sales platform and I think there is still more to come there I know, we haven't quantified that for you yet.
But I also feel like that's kind of the the second part of our future growth.
Great. Thank you very much.
I just want to add two more comments number one I'm I'm not as you think about the business.
Longer term I'm not concerned at all about our acquisition engines.
I'm not concerned period of a as I said earlier I believe we have studied growth.
Ahead of us, but if you asked what would keep you awake at night.
[noise] or what would you worry about it's not going to be on the acquisition side, there's going to be on the retention side, which is why we spend so much time and so much effort on those things, but that's that's where I believe you know.
So if you're going to see a competitive threat, that's where it's going to be.
The other comment I'd like to I'd like to comment on is I believe that.
We now understand the streaming business.
Wade better than we understood it before we acquired yeah.
Pandora and and we understand very well how the free business works, we understand how the premium business works, we understand where the consumers are going and how they behave and we understand what kind of investment and technology. It takes to be.
You know to be to deliver the right products to be competitive there now that we now that we've absorbed all of that I think it's fair to say that.
That.
As you look out over the coming years, you should expect us to up our game in the distribution area.
And then the streaming.
And the streaming area, we have the right content, we have the right brands nobody knows how to idle thing work with distribution partners better than we do we've been reluctant to up that game until we better understood.
How those economics work that was OCO, we understand that now and so if you talk about things that we might do differently. I think you might see more effort from us in that area going forward.
Thank you Jim I take it.
I take it back you will see more effort from us in that area.
[laughter].
We will take our next and final question from Steve Kahane funds Famco. Please go ahead.
Thanks. Thanks for the question. This morning, maybe first just on a penetration and conversion I think BMW Toyota are the biggest drivers of the increase in penetration and if that's right. My guess is Toyota is probably a bit of a drag on conversion, but BMW it might be a tailwind. So can maybe you just think Ah.
Help us think through conversion to as we get this increase in penetration over the next couple of years and then Jennifer I wanted to ask you a a kind of big strategic question. So to me it makes sense, how all the digital platforms work for the content creators and for the advertising community, but I'm curious how you think about the consumer price.
Position because now you've got stitcher, you've got Soundcloud, you've got Pandora, it's a lot of different things and I'm. Just wondering if a few years from now for driving in the car or we can be able to use all that in one integrated service or do you expect to kind of keep these as separate pieces on the board for the consumer thanks.
Jennifer I think both of those questions blog.
Sure all right. Thanks for the question, Steve So on that penetration and converge and yeah. We had we didn't announce obviously that Toyota and will be ramping through 100% and that is that is going on now and so you're right that you will see that driving up the penetration towards the 80% and beyond and.
I'm not sure exactly where BMW is right now, but I, but there will be obviously some offsets there between the different brands overall, we absolutely expect our conversion rates to stay in the high Thirtys on the new car side like we've seen we had balances higher penetration rate.
Dies off and put pressure on the conversion rate like you've seen before overall, we're bringing clearly more subscribers into the platform. So it's the right thing for the business, but we also have you know other tailwinds I in conversion rates to help offset that won't be how those dynamics work out as we go into.
Next year, and hopefully continue to see increases in penetration rate, but I feel comfortable with our our REIT conversion rates in the high Thirtys sales and then to your strategic question I know I'll be honest, we're still working through I, how can bring pandora into the car and he has been.
This is where Pandora sanction I in Vietnam. So you could see all implementation and we plan to continue to do that to provide more value to you. Our in car subscribers and you know the Pandora brand means a lot. There you know it yet I think our our customer base and users understand that capability.
You bet. It rains and you know there are opportunities for us to explore and about a free offering in the car and you know we are our notch and looking to do that in the near term what test something I'd say, our main focus for Pandora is scale in mobile and there.
You know usage growing in the car through Carplay and Android auto.
You would see with other streaming services say, yes, there are opportunities that we have you know we're not ready to talk about them now and that meant that our products and our apps I to consider ways to bring your capex down and Pandora it closer together and well be able to talk about that more going into next year.
Thanks, everybody.
Thank you Steve. Thank you everybody for participating and we'll speak to you early next year.
Thank you bye bye thank you.
Okay.
And [noise].
[noise].