Wednesday, February 14, 2007

Toyota And Lexus Get Sirius In Canada

February 14, 2007

SIRIUS Satellite Radio available June 2007

TORONTO, Feb. 14 /CNW/ - Toyota Canada Inc. (TCI) and SIRIUS Canada, the country's leading satellite radio company, today announced a multi-year distribution agreement that will make SIRIUS Satellite Radio receivers available in select Toyota and Lexus vehicles, beginning June 2007.

Toyota Canada will offer dealer-installed SIRIUS Satellite Radio receivers with a subscription to SIRIUS Canada's premium 110 channel satellite radio service featuring the most commercial-free music and exclusive talk and entertainment programming in Canada. A number of Toyota and Lexus models are covered by the agreement and a complete listing of applicable models will be announced closer to launch.

"We are thrilled to announce this partnership with Toyota Canada," said Mark Redmond, President and CEO of SIRIUS Canada. "Toyota and Lexus vehicles are among Canada's most popular vehicle brands and we look forward to making SIRIUS Satellite Radio's premium 110 channel line up available to their customers. Now, Toyota and Lexus customers will be able to choose SIRIUS as their satellite radio provider of choice."

"TCI is committed to exceeding the expectations of our loyal customers, and that means offering Canadians a variety of choice for in-vehicle entertainment," said Tony Wearing, Managing Director of Toyota Canada Inc. "We are pleased to formalize our relationship with SIRIUS Canada and provide our customers with SIRIUS' premium 110 channel satellite radio service."

SIRIUS Canada's automotive partners include Aston Martin, Audi, BMW, Chrysler, Dodge, Ford, Jaguar, Jeep, Land Rover, Lexus, Lincoln, MINI, Pana-Pacific, Subaru, Toyota, Volkswagen and Volvo.

About Toyota Canada Inc.

Toyota Canada Inc. (TCI) is the exclusive Canadian distributor of Toyota cars, trucks, sports utility vehicles and forklifts, as well as Lexus luxury vehicles, through a sales and service network of over 260 dealers across Canada. A consistent award winner for product quality and ownership satisfaction, Toyota has sold over three million vehicles in Canada. More information about Toyota is available at www.toyota.ca, or through the Toyota Canada Customer Interaction Centre at 1-888-TOYOTA8.

Labels: lexus, OEM, sirius, sirius canada, toyota

2/14/2007 12:24:00 PM

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Sunday, February 04, 2007

Counting Subscribers

February 4, 2007

Some analysts and even XM themselves point out that subscriber growth in the first half of 2007 will not be particularly strong. Those statements left alone without further understanding can be a bit dangerous. This is particularly true given a change in the methodology XM will be using counting some subscribers.

With a change in methodology come an unbalance, and until the current methodology can absorb that change, the balance is disturbed. That is exactly what will be happening for XM in the first half of 2007.

The "weaker" first half numbers are not at all indicative of "nothing happening", or a "weakness in the sector". Quite to the contrary, XM will be building a "backlog" of subscribers during that time with Hyundai, Nissan and Toyota. This happens because, going forward, subscribers from Hyundai, Nissan, and Toyota are not counted in subscriber rolls when the consumers promotional period starts. Instead the installations will be counted after the promotional period ends and when a consumer decides to keep the service. The method is derived from the structure of the deal. Absent any revenue from Hyundai, Nissan, and Toyota, these installs are a pure "promotional period", and because there is no revenue, they are not counted as subscribers at the inception of the promotional period.

Thus, during the first half of the year, this new method will be taking shape for XM. After a three month trial, those that keep the service will become a part of the subscriber count. This is where a "backlog" of subscribers is created.

For example, if we were to assume 50,000 installs from these automakers in January of 2007, and a 50% take rate were also assumed, XM would have a sudden swell of 25,000 subscribers in April. The February crop would hit in May, the March crop in June and so on. As the year progresses, and installation rates increase, the crop will get bigger. With a deeper penetration rate anticipated for model year 2008 cars, we should expect bigger monthly numbers beginning in July or August of 2007.

It stands to reason that this type of change in the counting methodology will take 6 months or so to become absorbed into the overall system. Given these changes, and the investment XM is making into these installations, we hope to see some sort of breakdown or statement from XM on how things are progressing.

These changes require that investors shift from what they have been conditioned to accept. With all of the other OEM deals, the subscriber crop has been counted as soon as the "seeds" were planted. With Hyundai, Nissan and Toyota, it is the "harvest" that determines the subscriber count.

Investors should think of OEM installations as "seeds" and "harvest" of a crop. The "seeds" are planted and take three months to come to fruition. With GM and Honda, the "seeds" are added to the subscriber number. With Hyundai, Nissan and Toyota the "harvest" determines what is added to the subscriber number.

Labels: gm, honda, hyundai, nissan, subscriber count, toyota, xm

2/04/2007 10:46:00 AM

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Wednesday, January 31, 2007

Toyota - Push vs. Pull

January 31, 2007

While this article speaks to SDARS in relation to Toyota, it is also applicable to other OEM's, as well as retail.

There are two methods in satellite radio installs as far as Toyota is concerned. There is the "PUSH" model and there is the "PULL" model. Simply stated, a factory install program is a "PUSH" and Port Installs are a "PULL"

PUSH

Push is where an OEM such as Toyota makes a decision to integrate satellite radio into their cars at the factory level. Installations happen, and the cars are shipped with ready to operate satellite radio receivers complete with three months of service. The concept of satellite radio, and XM specifically, is "PUSHED" out into the market place. The upside of this practice is that XM Satellite Radio gains an opportunity to get their service in front of the ears of many consumers. The downside is that there is a percentage of those consumers who will not have an interest in the product, yet the subsidy expense for XM has already happened. The key to a “PUSH” system is that the benefit obtained by those that keep the service outweighs the expense of the program. Typically OEM take rates seem to hover between 50% and 55%. For the purposes of this article, and simplicity we are assuming 50% as a take rate.

So, if we assume a factory install level of 350,000 units by Toyota in 2008, then realistically speaking, the takers will number 175,000, and those that do not keep the service will number 175,000.

If we assume costs of $75 per radio (marketing, subsidy, etc.), those 350,000 installations will cost $26,250,000. At the end of 3 months 175,000 will keep the service. Using an ARPU (Average Revenue Per User) of $11 per month, it would take 13.64 months of continued service to break even on the investment.

Factory installation also offers some synergies with other vehicle options and capabilities. Pull installations will typically lag behind before those synergies can be incorporated.

PULL

Pull is where the consumer asks for a service to be installed on their vehicle. Regarding Toyota, there is actually a combination of PUSH and PULL. From the standpoint of PUSH, dealers such as Penske have deals with Sirius, and they install Sirius in their vehicles. This type of installation is PUSH, because it still is not the end user that makes the decision as to whether or not the installation happens. Likely, the take rate on these Sirius installs is similar in nature to the XM factory installs. The difference between a port install and a factory install is transparent to the consumer.

The Pull aspect of the port install deal Sirius has is that consumers can request that Sirius be installed in their vehicle. If consumers request it enough, dealer always have the option of ordering cars with the radio already installed so as to have an inventory of Sirius equipped cars on their lots.

The disadvantage of PULL is that it relies on the consumer to be aware that Sirius is an option, and the likelihood of some consumers to “give it a try” may not be as strong. In other words, Sirius loses the ability to make an attempt to market their service unless the consumer is a willing participant. By nature, PULL radios begin to represent what the demand for satellite radio is. The advantage of the PULL method is that you are better able to control expenditures, and the take rate should be substantially higher than 50% (because the consumer is making the request). Thus, each radio you install pays for itself faster. If 100,000 radios were requested by consumers, and Sirius the cost to Sirius was $75 each, then the investment into these consumers would be $7,500,000. If we can assume an 85% take rate (remember, these are consumers that made the request to have Sirius), then there would be 85,000 radios at a cost of $7,500,000. At an ARPU of $11, it would take Sirius 8 months to recoup their investment.

A big factor in PULL is that Sirius needs to ensure that consumers are aware of the option. If Sirius can create a large enough PULL, then the PUSH factor of the dealer ordering equipped cars can increase.

The point of this article is not to say that one method is better than the other. It is to highlight out the advantages and disadvantages of each type of install. Where PUSH generates volume, PULL generates cost efficiencies, etc.

From an investors standpoint, the PUSH strategy at least gives people a reasonable understanding of what kind of numbers to expect. The PULL numbers seem to be shrouded in mystery, and thus it is hard to contemplate how “valuable” the port install deal between Sirius and Toyota is.

In a perfect world, the subsidy would be inexpensive, and a consumer could simply get either or both services to try. SDARS is not there yet.

Labels: OEM, pull, push, sirius, toyota, xm

1/31/2007 01:56:00 PM

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January 31, 2007

Press Release
Source: XM Satellite Radio

XM Announces Extension of Agreement With Toyota as Factory-Installed Satellite Radio Provider, With More Than One Million XM-Equipped Vehicles Expected Annually by 2010

New Agreement Extends Current Partnership through 2017

WASHINGTON, Jan. 31 /PRNewswire-FirstCall/ -- XM Satellite Radio, the nation's leading provider of satellite radio with more than 7.6 million subscribers, announced today that Toyota Motor Sales, U.S.A., Inc. has extended its agreement with XM as its factory-installed satellite radio provider for Toyota and Lexus vehicle models. The new agreement extends the current partnership between the two companies through 2017. Toyota's annual factory production of XM-equipped vehicles is expected to exceed one million by 2010.

"We're pleased to extend our agreement with Toyota through 2017, making XM available as the sole provider of factory-installed satellite radio for one of the world's largest and most successful auto manufacturers," said Nate Davis, president, XM Satellite Radio. "XM looks forward to broadening our reach to millions of loyal Toyota and Lexus customers."

"XM provides exceptional entertainment programming and innovative data services like real-time traffic, recently launched on the all-new Lexus LS. Our agreement with XM will help us continue to provide these services and develop additional in-vehicle applications for future products," said Dave Danzer, group vice president of strategy and product planning for Toyota Motor Sales, U.S.A., Inc. "XM will be available as a factory-installed service on Toyota and Lexus vehicles."

In 2006, Lexus introduced factory-installed XM as a standard feature on the new 2007 Lexus LS 460 L. XM Radio is also available in the 2007 LS 460, which includes the service in its navigation packages. Later this year, Lexus will provide factory-installed XM as standard equipment on the upcoming luxury hybrid, LS 600h L.

Every Toyota and Lexus vehicle equipped with factory-installed XM comes standard with a 90-day trial subscription.

Labels: OEM, toyota, xm

1/31/2007 08:45:00 AM

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Thursday, January 18, 2007

Toyota May Partner With Ford

January 18, 2007

Toyota may work more with Ford
Detroit Free Press (via.www.theflyonthewall.com)

Toyota (TM) doesn't rule out a partnership with Ford (F) if the U.S. automaker proposes a mutually beneficial plan, says Toyota president Katsuaki Watanabe. He says anypartnership likely would be technological. Ford already uses some Toyota patents in its hybrid system.

Labels: ford, toyota