Why Sirius Is Betting On Brands
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Sirius XM (NASDAQ: SIRI) is betting that America’s most popular motorsport can bring in legions of new listeners. On March 21, Sirius announced it had signed an agreement to simulcast all of NASCAR’s races live over its NASCAR Radio channel. This means that Sirius will have some of the most motorsports programming in America on its dial, including next year’s Daytona 500. Last month’s Daytona 500 attracted 36.5 million viewers, even though it was delayed for a day by rain and took several hours to complete because of a spectacular wreck. That was a 22% increase over last year. Not only does stock car racing attract a lot of TV viewers, it also brings attention in other areas. One driver, Brad Keselowski, reportedly has 150,000 fans on Twitter. Sirius is hoping to parlay this attention into a lot more listeners.
The new agreement also gives Sirius access to a huge amount of popular programming; it will broadcast every Sprint Cup, Nationwide Series, and Camping World Truck Series race through 2016. That will give Sirius the right to broadcast 91 races this year alone, and if every race is around three hours in length, that could add up to 273 hours of programming with a very loyal fan base. The NASCAR Channel will be available on Channel 90 of the XM Premier Service.
Sirius XM has wisely decided to let subscribers listen to the races on siriusxm.com and the SiriusXM Internet Radio App for smartphones. That means a NASCAR fan can listen in the car, on the phone while shopping, and even on the computer at the office on a Saturday afternoon. That can extend Sirius’s reach and NASCAR’s fan base.
The big question facing Sirius is whether popular interest in NASCAR will stay at its current level, or better yet, rise. In the last year, NASCAR has been on a roll, with its ratings rising after three years of steady decline. This rise can be probably attributed to a new generation of exciting young drivers and the hype surrounding “Go Daddy Girl” Danica Patrick. The question we have to ask here is can NASCAR’s recent success be sustained. The association suffered three years of falling ratings between 2008 and 2011. That trend has been reversed in the last year, but there are signs that NASCAR’s own management team doubts it can be sustained. The venerable racing association is reviewing its advertising policies to see if there is more it can do to attract younger fans and Hispanic fans.
NASCAR’s own marketing director, Kim Brink, told The New York Daily News that the association has not been doing enough to woo Hispanic fans. Only around nine percent of NASCAR’s fans are Hispanic, according to its own figures. Luring in Hispanic fans could be a challenge for NASCAR with its lineup of clean-cut WASP drivers. It’s only star of Spanish background is Juan Pablo Montoya, an aristocratic Colombian who used to drive Formula One races. It’s doubtful that he will have a strong appeal to the working-class Mexican and Central American audience NASCAR is after.
Even with its problems, NASCAR is definitely the kind of niche market with a huge loyal fan base that Sirius needs. Its loyal fans are willing to plop down $35 to $110 a ticket for a run-of-the-mill race like the Auto Club 500 on March 25 and shell out another $165 for a chance to tour the garage. They will also pay $55 for a chance to tour the pits and just look at a NASCAR car.
The interesting question will be whether Sirius’s NASCAR deal will lead to more subscribers for its services or not. As a number of observers have noted, much of Sirius’s listener base is composed of people who get the service free when they buy a car. A large percentage of those people simply drop the service after the free period ends and go back to listening to FM or MP3 downloads.
For example, people who have Toyota Certified Used Vehicles and Scion Certified Preowned Vehicles are currently being offered three months of free Sirius Premium programming. This deal is part of a push by Sirius to extend its reach beyond the new vehicle market. It has also reached a deal to add its programming in used vehicles sold by the Asbury Automotive Group (ABG). Whether or not used car buyers will renew their Sirius contracts is anybody’s guess.
One solution to this problem is to offer programming that you cannot find anywhere, such as the NASCAR Channel. The real attraction at the NASCAR Channel could be the lesser races, such as the Truck Series and the Nationwide that may not be broadcast on many local radio stations. Whether there’s a strong audience for the other programming on the NASCAR channel is questionable. After all, who wants to spend their time listening to former driver Tony Stewart talking about last week’s race, which is what the rest of the programming appears to be.
Since most NASCAR races are broadcast on the weekends, this deal would be a good way to attract more users for its Lynx system that allows users to stream content through home audio systems via Bluetooth. That way, at least NASCAR fans would be able to listen to the race while they’re working on the truck on Saturday afternoons.
Rush’s Problems could be Sirius’s Opportunity
A shakeup at Cumulus Media (NASDAQ: CMLS) could benefit Sirius in the long run. Media reports indicate that Cumulus is seriously considering giving talk radio giant and conservative icon Rush Limbaugh the boot from some of its stations. Limbaugh has been in hot water after calling Georgetown University law student Sandra Fluke a slut on the air. Some advertisers have threatened to drop Limbaugh because of the controversy. He’s also facing an online boycott effort.
Articles indicate that Cumulus might be thinking of dropping Limbaugh in favor of former Arkansas governor and presidential candidate Mike Hucakbee, who has a new radio show scheduled to premiere on April 9 that’s billed as less confrontational. It’s unclear whether radio listeners will warm to Huckabee’s kindler and gentler conservatism. The politician’s overt Christianity (he’s an ordained Southern Baptist Minister) could drive away some listeners as well, as could some of his centrist views on issues like welfare.
If Cumulus drops Limbaugh, who still has 20 million listeners, it could drive some listeners to Sirius. There’s no indication that Cumulus’s bigger competitors, CBS Radio (CBS) and Clear Channel Holdings (CCO), would follow its lead and boot Limbaugh. He is simply too powerful an attraction to lose in a shrinking radio market.
Cumulus is also putting a syndication deal to market Huckabee as an alternative to Rush. Such schemes have failed before, but if it works, this could be an opportunity for Sirius, particularly if diehard ditto heads are willing to follow Rush to satellite radio.
If the controversy succeeds in driving Rush off the air the way it drove Howard Stern off, Limbaugh would have to turn to satellite radio. His 20 million listeners would be a huge boon for Sirius XM. Still, it’s unclear whether Rush would make the move. After all, he reportedly makes around $50 million a year in endorsement deals related to this radio show. If he could keep that revenue and have more independence, Rush could be tempted to follow Stern’s lead. One potential stumbling block is that Clear Channel might be willing to pay millions to keep Rush on the AM dial.
One thing is clear though, Sirius needs to find a means of keeping listeners when the free subscriptions that came with their cars run out. Attracting established entertainment brands like NASCAR and Rush Limbaugh could do that for them.
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