I'm Cameron Mansson-Perrone, Morgan Stanley Music Live Events analyst. Before we get started, note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures, all appear as a handout available in the registration area and on the Morgan Stanley public website. With that, please welcome Jennifer Witz, Chief Executive Officer of SiriusXM. Jennifer, welcome. Thanks for coming.
Thank you, Cameron. Happy to be here.
I guess I want to get into the 2024 outlook, but maybe we start, you outlined 3 goals on the call, which I thought would be a good place to kick things off. The first one, enhancing subscription value. Is that a reference to what you've done in terms of refreshing and improving the streaming app, and what we'll soon be the improvements to the in-dash experience? Or is there an added content or packaging element to that as well?
Yeah. So key to enhancing subscription value really is ensuring that our trialers and our customers have broader exposure to the great content we have. So it really touches on every aspect, product, marketing, and content. You've heard us talk a lot about what we're doing on the product side. In December, we launched our new apps off the new platform, and, you know, what we're really focused on is making sure that we have enhanced recommendations, better discovery and control features in our products, both outside the car and in the car, to enable customers to better find the content that they love. And in streaming, we started that in December, and it's continuing to roll through, you know, as consumers adopt the new app. In the car, that'll take place over time.
We have 360L in market, obviously, but everything we're doing to rebuild the platform for streaming will help in 360L as well, and that allows us to improve search and recommendations in the car. So on the product side, it's all about enhancing discovery and control. On marketing, we're also leveraging improved martech in streaming and then to come later this year in the car as well, to provide more personalized recommendations through things like Salesforce Einstein, using the AI features to really scale personalized marketing across all the life cycles, all the life cycle moments and the journeys, for trialers and subscribers. So we have some interesting things we're seeing already as we start to roll that out.
I mean, just one small example is we took a segment of low listening trialers and sent a series of messages with content-related recommendations, and were able to move up the listening levels as a result. So, you know, this kind of, you know, full life cycle, true personalization end-to-end responsive marketing is all really new to us, and we think it just gives us a sense as to how we're going to be able to scale it over time as we continue to roll this out. So... And you mentioned content, we've added some new content over the last few months. The John Mayer channel, which has been a big success. He has a really interesting way of programming his playlist, whether it's the time of day or the day of week.
We also recently launched James Corden, and he's quickly risen to the, you know, top of our sort of talk hosts on SiriusXM, with his sort of celebrity interviews and things. So we'll continue to add content to the service, and it really is about how do we use all of these tools, to make sure that consumers can find that more easily. And that's all about adding value from the product side and what's in the service, but of course, the value equation includes price as well.
Yeah.
I'm sure we'll talk more about that. But price and the things that we want to do on packaging, I believe, will allow us to reach broader set of audiences. Then on top of all that, we're working through a brand refresh, which really is about this concept of bringing customers closer to the content that they love. That'll launch next week. If you tune into the Oscars, you might see one of our spots. I think it's going to really help with sort of resetting impression of who we are. Really emotional campaign and really plays to our strengths and differentiation. So that's about kind of the top of the funnel and shifting perceptions about who we are. We've got the new brand campaign out.
We are hoping to launch some content sampling later this year, which will allow us to leverage that brand marketing, content marketing, to bring consumers into our products to sample some of the content that we have in front of the paywall. So it'll be great to be able to do that on platform. But again, all of these components, you know, across product, marketing, and content, play to our ability to enhance the overall subscription value, which ultimately drives improvement in subscriber metrics and revenue. It's just going to take time.
So, you know, really encouraged about what we're seeing right now, but there are a lot of steps along the way, and we all want to see it, you know, roll through our results, subscriber metrics and financials, but it's going to take time as we rebuild this tech platform and build out all the capabilities that come with it.
Great. Watching the Oscars is kind of a requirement of being part of the media and entertainment team. So we'll keep an eye out.
It's going to be fun.
The second goal that you outlined was getting as much growth out of the ad business as you can. Recognizing that the ad market is something that's out of your control, what operationally can you do to you know, try to execute, deliver on that?
Yeah, I mean, just a minute on the ad market. You know, I think we're all hoping for a broader recovery this year across multiple categories. But, you know, what we're seeing so far seems relatively positive, and it has a lot to do with the extent of the portfolio that we have. So just starting with streaming, music streaming, you know, we've seen a lot of positive indicators on the Pandora side. Even though the user base has been declining, and last year we stemmed the declines a bit, both MAUs and ad hours were down less than 4%. And we've really been able to. The science team has done tremendous work in trying using ML to really improve not only ad capacity, but also the user retention. So it's sometimes hard, those are often competing goals.
Yeah.
But they've found ways to really personalize ad loads and things like that, to be able to enhance both. And that really plays to our ability to continue to improve monetization on Pandora, which of course is the core asset in our ad portfolio. We also have a great portfolio in podcasting, and I'm really pleased where we are. Hopefully, we'll talk more about SmartLess, and it's gonna be a great addition to the set of podcasts that we have. And, you know, there's a lot of tailwinds in the podcast business. Programmatic is a place where, you know, we really do have an industry-leading set of tools, and particularly this time in the quarter, there's a lot of demand for programmatic.
Yeah.
You know, so very self-serve, and a lot of advertisers come into the space. So we've got great tools there. And then, you know, we do have lots of new solutions for brands, and in particular, we launched recently synthetic voices, which is an AI-based tool that will allow small businesses to come in and really use artificial voices to create campaigns, to just iterate, you know, edit, and scale them much more easily in self-serve mode. So we'll have more to talk about on the AI front as it relates to advertiser tools over the course of the year. But I just—I like the portfolio we have, you know, across streaming, broadcast, and podcasting and other off-platform. So I think we're really positioned well here as, hopefully, the market recovers.
Yeah, definitely. The last goal you outlined was, I think, optimizing the organization's focus and cost structure. You obviously spoke on the earnings call about the $200 million of kind of optimization opportunity, and I wanna focus on the focus element of that. Where is the organization focused right now, and what do you mean when you say that, you know, part of the priority is kind of focused?
Yeah, it's so $200 million is an ambitious number, and-
Yeah
... you know, we have a path to get there, but especially on top of everything we've put into place last year. And it's gonna touch every line item of the cost structure, clearly. But. And look, you end up, when you do these programs, you focus on the easy stuff first. But now it's about leveraging technology and building improved, you know, workflows and organizational structures to not only improve efficiency and drive cost savings, but really benefit from opportunities to increase organizational effectiveness and the customer experience. So just a couple of examples. I mean, on the marketing side, we've brought the marketing teams together so that we can really have an agnostic approach as to how we're approaching the consumer, no matter where they listen to our product.
Mm-hmm.
So that'll result ultimately in efficiencies in how we spend marketing. And then on the customer service side, we are using some more automation and tools, and we'll talk hopefully more about that, to drive improved customer service experiences, but also at a lower cost to serve. So I think those are interesting areas where we can actually drive goals, in multiple places. And all of this is in order for us to continue to reinvest, to support the first two priorities we talked about-
Yeah
... enhancing subscription value and building our ad business, and still maintain our industry-leading margins.
Great. Let's move on to the outlook for the year. Your guidance called for some revenue pressure this year. Maybe could you talk a bit about those near-term headwinds and what the timeline might be to see kind of growth re-accelerate from there?
Yeah. So our revenue outlook is really impacted by two main factors, a relatively level subscriber numbers going into the year, of course, and throughout this year, and then also the modestly lower ARPU. And, you know, there are a number of things impacting ARPU and the outlook there. We know we aren't doing a rate increase this year. We've talked about that. Really, I think it's important to lean in enhancing subscription value first before we position ourselves for another rate increase. And also, you know, we've traditionally used and continue to use self-pay promotional plans to retain and attract new customers. That's a factor. We also have a growing, albeit still relatively small, streaming subscriber base at a lower price point. And then there's the impact just of our OEM paid trial deals.
So we, you know, continue to work closely with the OEMs and modify the structure of our deals. Those, over the course of the last few years, have tended to reflect a different trial structure. Some are unpaid, some are shorter. And so we've seen that decline in OEM promotional revenue, but typically that comes alongside improved penetration rates or also lower subsidies, which you would-
Yeah
... see obviously in another part of the P&L. So, so those are, those are some of the factors in, the outlook for this year. And, look, our subscriber results for the year, I think, will represent largely what we saw last year in terms of the seasonality. So I would expect to see some losses in the first part of the year and then growth, growth in the second half of the year. And of course, we're really focused on improving our net adds year-over-year in terms of-
Yeah
... how we end the year. But overall, from a revenue trajectory standpoint, it's all about setting ourselves up for future subscriber and revenue growth. And that comes back to everything we're doing on enhancing subscription value, because, you know, the more content consumers engage with, in our service, the more likely they are to pay higher rates, take higher, you know, packages, and to stick with us. So that drives, you know, subscriber volumes, obviously, and ARPU over time. And then, of course, we're hoping for the tailwind of advertising.
Mm-hmm.
You know, that's a little less certain, but that certainly will help with our revenue outlook as well.
Yeah, the product roadmap, I feel like, also has an opportunity to help there. You have your new in-dash experience coming. You have a new commerce platform launch... maybe what's your latest thinking on the timing of each of those opportunities? And then anything else on the product pipeline front that you'd highlight?
Yeah, it's, it's really more than a new commerce platform. So it's commerce, billing commerce, subscription management, identity, data platform, martech. It is all tied together in a really significant replatform of the business. And, you know, most of it launched in December to support the new apps, but that's gonna continue to roll through. Existing subscribers will migrate over, starting probably with streaming and then the in-car base over the course of this year. And then alongside that, improvements in martech will launch. And that's, you know, right now we're seeing that we should have improved personalized marketing journeys on the streaming side in market even later this month, and that will continue to get better. And what we learn there, I think, will help reinforce what we roll out in the in-car side of the business over the course of the year.
In terms of in-dash, I mean, it really has to do with 360L. Hopefully, we'll talk a little bit more about that, and how we continue to roll out that platform in general, and how we can support that in the car with improved discovery in the product, but also outside of the car with the data we're getting to inform, you know, the marketing, alongside that.
You also have a partnership with Audible coming. Any more detail you can provide in terms of what that partnership's gonna look like?
Yeah. I mean, it's just the first phase, that'll be launching in the next couple of months, and I'm excited about it because I think there's a lot of commonality across the user bases. You know, we tend to have a very affluent and highly educated listener base, so do those that listen to audiobooks. I mean, Audible's been a leader in the space, so it's great to be working with them. And it really involves two components. It's some content sharing across platforms, so SiriusXM content on Audible, Audible content on SiriusXM. And that provides, because it'll be integrated in that way, it provides an opportunity for enhanced subscription value for both services, but also exposure to the content and hopefully trial generation. So on Audible, trials for SiriusXM, and on SiriusXM, trials for Audible.
And so, we have a lot of common goals, and I think we'll see increased ways to work together in the future once we get through this first phase.
Great. Maybe let's move and focus in on the in-car business a little bit. You know, growth in self-pay net adds is obviously very linked, similar to advertising. But the other cyclical part of your business, which is auto sales and also outside of your control, what can you do when we talk about the kind of reaccelerating the net add picture, from an operational perspective within whatever the auto sale backdrop is?
Yeah, I mean, it starts with not in our control, but it certainly starts with the, the strength of the auto industry in general. And, you know, we saw a new car SAAR in February at 15.8, which is, you know, pretty strong. February is, you know, seasonally a soft month, but year to date, in January and February, we're up, or the industry is up on the new car side, about 4%. A little hard to get a read on the used car market. There's a lag in kind of the industry data reporting, but it seems like there's some recovery there. Of course, in both, there's more new car inventory, so there's some pricing pressure, which should, I think, provide some, you know, some pressure on prices and used as well.
So hopefully, that actually opens up the market and we see more consumer demand. And, you know, a healthy, robust auto market is great for the business, so, so we're eager for that to happen and play out. But in the meantime, we focus on the things we can control, which has a lot to do with what we've been talking about in terms of enhancing subscription value, working on continuing the broad rollouts of 360L, making sure that there's more consistency in the feature set for 360L, and then taking advantage of all that, you know, data we're getting back to ultimately improve the conversion through to self-pay.
Yeah. The important in that 360L rollout is the penetration, your in-car penetration. That's kind of bounced around, been pretty stable in the low 80s. It's come in a little bit from, you know, a few points from, I think it was 83-
Mm-hmm
... and 22, and came down a couple points at least.
Yeah.
Can you talk about what's going on there? Is 80, do you think it returns to 83? Do you think it moves beyond that? Like, what's the outlook for penetration?
It's always gonna move around a bit, depending upon model launches and changes in what the OEMs are doing or producing. But, in general, I feel really good about the low 80s. And, two key factors last year, at least, there were more fleet sales, and, I think we expected we tend to be penetrated at lower rates in fleet vehicles because we can't,
Yeah
... drive through to self-pay at the levels we can in consumer.
Yeah.
And then Tesla, right? Tesla's continued growth and market share has been a challenge for us because we're not there yet, but I'm hopeful we'll have some progress there. But, but yeah, I feel good about the low eighties. It's you know, there's always economic opportunities to look to improve penetration, but, you know, we seem to be in a comfortable level there with the OEM.
Staying on the EV topic, you announced new deals with Rivian and Polestar. Do those deals get standard over time? And, you know, how should we think about... Is there any structural reason why penetration within EVs shouldn't look the same as kind of the legacy OEM?
No, in fact, our penetration rates among EV vehicles manufactured by, say, the more traditional OEMs, are very strong. They probably trend higher than 80%, and we're in something like 80 or 85% of all EV models. Of course, Tesla is the big gap there, and can we get a lot of requests from our customers, whether subscribers or prospects, to have broader representation across the Tesla lineup. And so I'm hopeful that we'll have more to talk about with them in the next couple of months. But we're in the S and X today. It really has to do with you know, launching more broadly across the 3 and the Y. We launched in Lucid. We'll be launching with Rivian in say, the middle of this year, hopefully-
Mm-hmm
... and in Polestar. And the great thing about these software-forward programs is that when we launch, of course, it's a huge development effort upfront, but when we launch in new vehicles, we also typically can do an over-the-air update, which updates all the vehicles, you know, out on the road, which, you know, that means a lot for those that are broadly distributed. And we can also customize in different ways, and so, I'm really encouraged. I think, we'll hopefully have more to say on that in the coming months.
Great. I think you said one of your biggest priority with OEMs in 2024 is to focus on 360L, and leaning into that product, really scaling that product, right? Most of us, I feel like, view the growth of 360L to be kind of a gradual one because you're tied to turning over the vehicle installed base. What can you do in terms of, you know, what's in your control in terms of really focusing on 360L and growing it?
Yeah. I think our biggest opportunity with 360L is at trial start, right? Because that's our opportunity really to expose people to more content and convert them through self-pay. And so, yeah, the base, it's gonna take a long time to roll through, especially with cars staying on the road for many, many years, upwards of 20 years in many cases. But, but we should be at, on the new car side, about 40% of trial starts with 360L this year. And, we're really focused on continuing to drive the rollouts more broadly across the OEM models. And, you know, showing them what's happening in terms of consumer response is really important on that front, and, because it's been great for, conversion, retention, and ultimately ARPU as well.
You know, the OEMs are sharing in the revenue, so that certainly helps them. But we're also focused on feature parity, and we just have launched our really most advanced 360L platform on Android Automotive Operating System, and that's with the Lincoln Nautilus, the 2024 model year. That'll be rolling out on more Ford and Lincoln vehicles that have their digital experience platform, also in Volvo and Nissan. And AAOS for 360L provides not only that same sort of opportunity as EVs, where we can push an over-the-air update to those that have AAOS in those models on the road, but also has the most enhanced feature set that we have. So we can do things like broader in-vehicle messaging, we have 100 more music channels, and really enhanced recommendations.
So one of the things we're excited about is ignition on recommendations, because somebody gets in the car different times of the day, we'll be able to serve up recommendations. It really is so critical to finding content that we can improve that user interface, and unfortunately, it's gonna take a while to work through, but I'm encouraged about what we're seeing on the new car side and really excited for this to roll out. One of the key features that we're gonna see this year, hopefully, is what we call seamless app login. So if you come into the car with your phone and you're listening to SiriusXM in the car, we'll be able to have a button where you can just automatically download the app.
Mm.
And so that kind of seamless movement between the in-car experience and, you know, your streaming device is ultimately gonna result in a lot more engagement, discovery of our content, and improved retention rates over time. So it's about, you know, broadening the availability of 360L, improving feature parity through things like AAOS, and and enhancing awareness in general, you know, through marketing, using the data we're getting back from the 360L platform to provide more personalized recommendations in marketing, and using it to create awareness around the features, as well as consumers.
Yeah. You've talked about it helping, I think, on both churn and conversion. We obviously get less granular information in terms of its contribution externally. What scale do you think it needs to reach for it to be obvious to investors, the benefits that 360L is bringing to both of those metrics?
Yeah, I mean, so we talked about 40% of trials on the new car side this year. I hope over the next couple of years, that'll get closer to 50% on the new car side. Our used car trial starts are growing. You know, they should get close to 50% of total trial starts over that timeframe. And so we're talking about 25% of total trial starts, let's say, in the next couple of years. And so, yeah, it's not gonna roll through the whole, you know, the conversion rates and in-turn rates quite the way we would like. However, the data we get back, we can use...
You know, again, once this platform is rolled out and the and, our in-car base is migrated over, we can use the data that we're getting on 360L to create lookalike models to be able to enhance the marketing we're doing, for non-360L vehicles. So I am encouraged about how it can scale beyond just, the trial starts that have it.
Yeah.
And it's still, you know, early in terms of the number of self-pay customers we have on 360L. We're probably at about three million subscribers, but there's enough data there to learn an awful lot. And we, we really haven't traditionally been focused on how to use data to improve retention, and we already have really exceptionally low churn rates. And so I expect us to be able to do even more, once we start having better visibility into what customers are listening to. And again, we can improve kind of how we present other things, to expand their content engagement.
Yeah, that's great. You've spoken in the past about how you view SiriusXM as a complement in terms of an audio product. How does that view or how has that view informed the way that you've approached the, you know, the product and brand refresh or new initiatives this year?
I mean, I think the brand refresh is a perfect example, and it's all about getting closer to the content you love, whether it's the stars or, you know, kind of the unique, human curator or hosted channels and experiences we have in our product. So, you know, every one of our subscribers is gonna have some form of music catalog, right? And whether that's a music streaming service or some other form, of music listening, it's typically a part of somebody's everyday life. But our service is really different, right? Not only do we have a much broader set of content, but, you know, we have enhanced discovery and real human curation that helps with a much more guided experience. So I really believe we're complementary, you know, not substitutional for, streaming services in general.
When we think about the opportunity for the streaming-only product... do you view the bigger opportunity for SiriusXM as driving an incremental subscriber to sign up for that package? Or do you view the bigger opportunity to be driving, extending the listening of your current 30 million-plus sub base outside of the vehicle?
I think it's both, right? I mean, we absolutely know that there's opportunity in streaming-only subscribers with our growing audiences and beyond that. And I expect us to see real progress there. But also just, you know, I think that's one of the things that's played into our low churn also, is just being able to have more of our in-car subscribers listen outside of the car. And, you know, we started including that in our subscription packages, several years ago, luckily, right before the pandemic, and I think that drove a lot of out-of-car listening. And we still have opportunity there to grow that. So it really is in both areas, and everything we're building on a platform basis is gonna support both of them.
Yeah.
But also it supports 360L, right? Because it's fundamentally, streaming delivery, and that's increasingly a part of 360L as well. So, so it's nice that we can actually drive both at the same time.
Mm-hmm. Of course. One of the biggest, I think, differentiators from the content perspective that I think defends the complementary argument is your sports content, which is something that we don't really see other audio players talk about. Do you think that that's because there's unique value in having kind of all of the audio, the sports audio under one umbrella? Or do you think that your audio peers are kind of missing the value in that content?
We definitely have a unique value proposition in sports. I mean, by having all the big leagues play-by-play in one place, I mean, it really it doesn't exist, certainly in audio and also in video anywhere. So, while it may not be the largest driver of time spent listening, it is really important as part of the value proposition. And we see that, whether it's trialers or our subscribers, when they tune into sports, that conversion rates and retention rates are higher. So it's definitely a key part of our value proposition. I believe we're incredibly differentiated there. And it's not just the big leagues, right? We have golf and wrestling and-
Sure
... MMA and tennis and racing. So, you know, it's the broad set of not only, you know, hearing the races or anything else, but also, the commentary we have around that. And I think there's probably even more we can do there. But it's not just sports, right? I mean, we're differentiated also because of the breadth of content we have in talk and podcasts, you know, with the exclusive content we have with hosts like, obviously, Howard Stern or, you know, Jeff Lewis or Megyn Kelly, where we have live call-in, but also and increasingly, podcasts, obviously, as people want to time shift their listening. But also on the music side, I mean, it's, it's hard to be differentiated in music because artists want their songs to be everywhere.
And so for us, it's about how we package up the music and make it more accessible. So, you know, our customers discover a lot of music, so we're really talent forward. We've supported a lot of artists, in terms of launching their careers and building them. And, you know, there's just this real connection, among our subscribers to the music channels because they're human-curated playlists and they're human-hosted. And so, you know, this human element is really... It's hard to describe, but it's really unique, and I think that's why it plays so well into the, the brand campaign, is the connection that our subscribers have to the talent, whether it's like Jose Mangin on our, you know, hard rock channels-
Mm-hmm
... or Tappen, Alt Nation, or you know, it's just they're a guide, you know, to your daily habits of listening to your favorite music, sports, or talk.
To pivot a little bit, you mentioned the used channel earlier, but what's the state of the used car market today and that as a funnel for you guys? And is there a leg of opportunity there, be it from driving more trial starts in the used channel or driving higher conversion rates amongst those consumers?
Yeah, I mean, you know, part of it's the industry that we don't control, obviously. But I—but yes, in terms of the nice thing about penetration rates is it's sort of organic as the cars turned over. We're sort of in the mid-fifties today, and that'll continue to grow over time to closer to where we are on the new car side. The real key for us is capturing more of those transactions at point of sale, right? When somebody buys the car, we want the experience to be just like it is on the new car side, which is really unique to us. No other service really lets you just walk in, get a trial. You don't have to do anything. It's completely frictionless.
Yeah.
Increasingly, we're finding opportunities to do that in the used car side, where the car is on. I mean, so the radio is on, and the trial is activated as soon as the consumer gets their new car. You know, finding those programs where we can identify those private transactions is really key to unlocking more of that trial opportunity. We probably capture somewhere between, you know, 55% and 60% of transactions at point of sale. And if we can grow that, we'll have more trials, a better customer experience in terms of being able to experience the service without doing anything. So, and then lighting up the radios. We have deals with auction houses. We can do more of that to make sure the radios are on at point of sale as well.
Got it. You've been pretty clear that you don't expect to lean too much, or that you don't plan to take price within the in-car business, in 2024. Looking to 2025 and beyond, should we expect the kind of ARPU growth to return to the 2%-3% annual basis? Or, you know, what are the gating factors that are gonna dictate your kind of pricing philosophy beyond this year?
It's really about revenue growth overall, right?
Yeah.
I mean, we want volume to grow and rate, but it's really about maximizing demand across our audience segments and finding those opportunities to, you know, increase demand and volume, even if the prices are lower. So streaming's a perfect example.
Yeah.
We hopefully will talk more, a little bit more about in-car pricing, but there is more opportunity to capture demand. And you see that-
Yeah
With the video streamers, right? It's not directly comparable, but, you know, they are introducing ad-supported plans at lower price points and, you know, not cannibalizing, you know, their non-ad supported plans. And I think there's more opportunity for us to do that on the in-car side as well, as we look to differentiate packages, perhaps maybe not with ads or possibly with ads, but also maybe on content or on access, like streaming versus in-car, which includes streaming.
Yeah. Yeah, you've alluded to getting more flexible or creative with packaging. Can you expand on that at all?
Yeah, it's... Look, it's a tricky, it's a tricky thing to do, right? We have to be very thoughtful about it because we're trying to solve for a lot of things at once. We want to open up this demand. We want to protect our full-paying subscriber base. And, you know, there's a lot of opportunity, I think, to do both of those at once and hopefully maybe reduce our reliance on promotional plans, you know, in acquisition and retention. Ultimately, it's about enhancing the value of our subscription, making sure that we have the right package for the right customer. And a lot of that, you know, has to do with how we're presenting our packages to customers, the flexibility that we're going to have with our new commerce platform and some of the customer service we're putting in place.
You know, we are working with Sierra, which is, you know, an AI-based technology, really cutting-edge conversational AI, to make sure that. And we've just launched it in some chat channels, but ultimately, I think we're going to be able to expand this to voice, and I think it can be extended to next best action and really drive a better customer experience, getting consumers into the package that's best for them based on the content they like, and also at, again, a lower cost to serve.
Yeah.
So, so I think it checks a lot of boxes and, really can help us navigate and provide real consistency, which is hard to get with agents, right? So really excited about working with Sierra and what's going to come there.
Great. Let's turn to Pandora, maybe. You recently signed a multi-year agreement with SmartLess.
Yeah.
There's still a little bit of ad market uncertainty today. We've heard some people at the conference this week talk about some green shoots, but it's still a little uncertain. What made now the right time within that backdrop for SmartLess, and what made it the right content fit?
Well, I always love to hear whatever people are saying, so I'm going to have to-
Sure
... listen to some and read their transcripts. But, yeah, I think we're seeing maybe some green shoots. You know, it's so early. The first quarter is seasonally soft in terms-
Yeah
... of advertising, but, you know, hopeful for what it might mean for the rest of the year. Our Pandora and off-platform segment, again, all of these ad assets kind of come together there. And, you know, SmartLess was... There's only so many podcasts in the top 10 or top 15. So we're really pleased to be working with the team there, and they have such a passionate listener base, and they seem to have a lot of fun doing it as well. So it fits nicely into the portfolio. And, you know, I think our podcasting strategy has largely been consistent.
You know, I mean, a lot of other companies, I think, have adjusted or shifted their strategy over time as the industry, you know, has grown and matured, and we've been pretty consistent about how we believe it complements the ad business we're in. You know, we really were one of the key drivers in digital audio advertising with Pandora.
Mm-hmm.
And it just adds assets to the portfolio and allows us to sell, support the creators in terms of monetization on the podcasting side, but also provide more solutions for brands across the portfolio. So I think it's a great asset to have. It fits right into that ad portfolio that we have, but also, we were able to work on something more unique for SiriusXM subscribers. So, you know, there'll be some SmartLess episodes that'll launch first on SiriusXM. There'll also be some backlog catalog that will be exclusive to SiriusXM. So that balance is pretty unique for us because we can. You know, there's very strong margins on the SiriusXM side, and-
Yeah
... you know, it's kind of a benefit that we can provide value to our subscribers, but also keep broad distribution and provide more opportunities for advertisers to come into the space.
Great. Podcasting's developed a lot, it feels like, over the last five, three-five years in terms of, you know, just advertiser buy-in, measurement, ad insertion. Where do you think we are today in kind of making podcasting an attractive format for ad buyers? And how can that help? What do we need to kind of help drive the next leg of growth for podcasting?
There's a lot of gaps, I think, still on targeting and measurement and brand safety and suitability, and we have brought a lot of solutions there, to help brands navigate that. We have network buys that help them, you know, buy across audience segments, within brand safety and suitability parameters. We have better targeting and measurement, but it's. By definition, there's less first-party data because, you know, they're so broadly distributed across multiple, platforms. But, you know, we've been able to, provide a lot more targeting despite that, and I think, you know, things like synthetic voices, there's a lot of things that we can, bring to advertisers to ultimately improve the monetization there. So I think we're still at the early stages.
You know, despite the fact that podcasts has been around forever, I think there's just, you know, programmatic, all this stuff is really just starting to grow, so.
... Do you think that the bigger opportunity, there are a lot of either/or questions, might be both again. But do you think the more attractive opportunity for podcasting is the ad monetization or just driving overall engagement on the platform and adding value to listeners at SiriusXM?
Yeah, I think, look, broadly distributed podcasts are always going to monetize the best way, right?
Yeah.
Because there's such a huge audience. But there will be select opportunities for us to bring components of the content to SiriusXM subscribers to enhance overall subscription value. So that's the balance. We've done that with Conan. We'll do that with Ashley Flowers of Crime Junkie. She's developing a true crime channel for SiriusXM, in addition to her, you know, number one or two ranked podcast, which, you know, we're thrilled to have in the portfolio as well. So it's going to be a little bit of both.
Yeah. All right. Well, we're almost out of time, but given this is TMT and it's a key theme, I can't let you go without asking about AI. How is your thinking evolving with regard to AI and what the opportunity is for SiriusXM to leverage it?
I guess I'd start with, you know, I think about it on a couple of spectrums. You have kind of really consumer facing at one end and sort of productivity enhancements and sort of backend capabilities. And then you have sort of the spectrum of capabilities, which is, you know, mechanization and machine learning, all the way through to true generative AI, you know, text, voice, video, ultimately. And, you know, we're in different places, I guess, on that matrix. And from a true consumer-facing product standpoint, I think we're not going to be AI, at least for SiriusXM. We want to be very human.
Right.
You know, you see a lot of companies leaning into more algorithmic playlists and, you know, AI-generated hosts. For us, it's about doing the opposite, making sure that people really feel a connection to our service and that emotional value that they get, which really, I think, has been core to low churn and very satisfied customers. But then there's lots of things to do to enhance content discovery. We talked a little bit about, you know, we're using Salesforce tools and Einstein, which is AI-based, to scale marketing campaigns. It's really incredible to see what we can do with the data now we're now getting on listening to be able to improve life cycle marketing.
But then what I mentioned with Sierra, I mean, they're really, you know, leading edge on customer service, and so thrilled to be working with them and the solution they're bringing. I think it's going to provide, again, better customer value, and better solutions for customers when they're reaching out to us to, you know, solve problems, and get into the packages that they want, but also do that at a lower cost to serve. So it's going to benefit our business overall.
Awesome. That brings us to time. But Jennifer, thank you so much for joining us.
Great. Thank you, Cameron. Great to be here.