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SiriusXM probably isn’t the first name that comes to mind when you think about subscription content, yet it’s one of the most successful companies in that category.

The U.S. satellite radio provider has been able to buck the negative trends faced by other content providers. Chief among those is the rising price of content: What’s striking about SiriusXM is just how low its content costs are. Spotify, the largest subscription-music provider, pays well over 80% of its revenue in royalties and other content costs; cable operators pay more than half their revenue for programming. But SiriusXM spends less than 30% of revenue on programming and royalties combined.

sources: Company Reporting, jackdaw research Analysis

Another challenge is the need to provide original content in order to maintain or increase subscriber share. SiriusXM has always done this, offering up Howard Stern, Opie and Anthony, and exclusive sports channels. But even as it’s made these investments — including a recent new deal with Stern — it has kept total costs down by rapidly growing its subscriber base. Key to that has been leveraging car manufacturers, which account for almost half of SiriusXM’s new customers. Some 40% of buyers of cars that come with free trials become paying customers after the trial ends.

SiriusXM is also seeing increased advertising revenue, with year-on-year gains of 10%-20% over the past few years, a faster rate of growth than its subscription revenue. (However, advertising represents only about 3% of the company’s total revenue.)

What, then, enables SiriusXM to buck the trends? It’s hard to dispute the fact that the company’s cheaper costs have roots in its monopoly position. But that’s a somewhat lazy explanation — both Sirius and XM were doing well independently before they merged, despite strong competition between them.

sources: Company Reporting, jackdaw research Analysis

The real reason is that SiriusXM has hit a Netflix-like sweet spot in terms of its price and package. Its average revenue per user, at $12.80, is in the same ballpark as what Netflix charges, and many users arguably spend more time in their cars than they do streaming content on Netflix.

Of course, SiriusXM has less direct competition than Netflix has, but there are other options for in-car entertainment: free content in the form of traditional radio and podcasts, and paid content like audio books and subscription music. Other companies could one day provide subscription infotainment. And in the longer term, there’s the prospect of self-driving cars, which could lead to demand for more visual content.

But for now, SiriusXM looks to be motoring along just fine.

Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.

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