Today, Sirius announced a partnership with Volkswagen - Audi to be the exclusive Satellite radio provider in all of their vehicles.
Audi Signs Exclusive Agreement With SIRIUS Satellite Radio
NEW YORK and AUBURN HILLS, Mich., March 17, 2006 /PRNewswire-FirstCall via COMTEX News Network/ — SIRIUS Satellite Radio (Nasdaq: SIRI) and Audi of America, Inc. today announced that Audi will offer SIRIUS as its exclusive satellite radio provider for Audi vehicles sold in the U.S., beginning with model year 2007 through 2012.
“We decided that the Audi customer demographic fit more closely with the type of content that SIRIUS provides,” said Wolfgang Hoffmann, head of Audi Product Management. “We believe that SIRIUS will continue to grow and create programming that our Audi customers will desire.”
Today, the installation rate of satellite radio in Audi models is approximately 50%.
“We are very pleased that Audi will be offering SIRIUS exclusively, beginning with the 2007 model year,” said Mel Karmazin, CEO of SIRIUS. “We have had an excellent relationship with Audi as a non-exclusive partner during the past few years, and we are very pleased that they have decided to increase their commitment through this new, exclusive agreement. We look forward to working with them in the future to provide their customers with the most compelling in-vehicle entertainment available.”
Wow. Karmazin is stoked. Wolfgang Hoffmann is jumping for joy. Everyone is happy! 50% of Audis and Volkswagens will have Sirius! Sirius fits the “Audi” demographic better than XM. Everyone wins.
Or do they? Reuters digs a little deeper.
Firstly, they note that the Audi division didn’t necessarily make the decision based on content:
Sirius, No. 2 in the nascent nationwide radio market to XM Satellite Radio Inc. (XMSR.O: Quote, Profile, Research), said Audi had previously offered both services. Audi, in a separate statement, said it selected Sirius to reduce complexity in dealer ordering.
So it wasn’t primarily in the name of Sirius’ content, it was in the name of not having dealers needing to make multiple choices and fill multiple differing orders.
Secondly:
Germany’s Volkswagen is Europe’s biggest automaker, but in 2005 it produced only 1.8 percent of the automobiles sold in the United States.
I’d hardly consider that a massive penetration of the auto market, would you? I mean, 1.8% is barely a blip in any other kind of discussion… In reality, the name on the deal far outweighs its impact. And finally, and most interestingly:
XM spokesman Chance Patterson said the expense of pursuing deals with these automakers was not worth the return.
“XM has long-term agreements with Toyota, General Motors, Honda , Nissan and Hyundai Corp. We evaluated the VW-Audi deal and determined the significant cost didn’t justify the limited volume of vehicles produced,” he said.
So, despite Volkswagen-Audi saying they chose Sirius based on its content, Chance Patterson is saying that even if they liked XM’s content better, they still wouldn’t have had it because XM didn’t think the deal was worth it.
People seem very excited about this deal. Frankly, I don’t see it really doing anything for Satellite radio in any sense. Volkswagen-Audi was already offering XM and Sirius before, so it won’t mean more cars on the road with satellite receivers, just fewer choices for the people buying them.
I’m not particularly impressed with this deal. Had they scored an exclusive with Honda, Chrysler, or Ford, then maybe. Volkswagen-Audi is a niche market in the US, and I just don’t see this deal being the industry-wide boon its being made out to be.
As of 3:12pm: Sirius (Siri: 4.85, Up 7.54%), XM (XMSR: 20.50, Up 1.64%)
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