... SiriusXM, and we're thrilled to welcome back Jennifer Witz, CEO, and to welcome Scott Greenstein, Chief Content Officer and President of SiriusXM. So, let's just start with Jennifer. What are your top three priorities over the, let's say, next three years? And is there a single metric or KPI that would best demonstrate to investors you're successfully executing?
So first of all, thank you for having us. We're really excited to be here and talk about the business, and also have Scott here to lean into the content side even more. I want to start, if it's okay, with you know, we had talked on our second quarter earnings call about the possibility of increasing our free cash flow guidance for 2025. So we are raising guidance for this year by $50 million to approximately $1.2 billion of free cash flow. You know, this ties very much to OIBDA and lower cash taxes, but also refinement that we've made to our non-satellite CapEx number. We've been making progress on our cost program and expect to come in at the lower end of that range we've provided on non-satellite CapEx for this year of $450 million-$500 million.
So again, increasing free cash flow to approximately $1.2 billion for this year, and reiterating our revenue guidance of $8.5 billion, approximately, and also adjusted EBITDA guidance of approximately $2.6 billion, and I feel really good about those numbers. Going to your next question, three priorities. We remain focused on continuing to lean into our core in-car subscription service, as well as building on our ads platform, and executing on our cost program across the company. And we think the best single metric to evaluate our performance against those priorities is really free cash flow, because it encompasses everything, of course. So we've raised this year's guide to $1.2 billion.
We have a target for 2027, as you know, of $1.5 billion in free cash flow, so growing from the $1.2 billion that we expect to be able to deliver this year. That's gonna allow us to, at that point, when we should be at towards the end of next year, we should be closer to our target leverage range to further expand on our capital returns program. And then beyond that, we have optionality with our satellite spectrum. Hopefully, we'll come back to that at some point.
We will
... today, but it starts with WCS, with the C and D blocks, and then, of course, in the future, we have the low band, which we have opportunities to potentially repurpose longer term. So it's really the combination of the operational improvements leading to growth and free cash flow, which allows us to expand our capital returns as well as optionality for spectrum that we believe drives future shareholder value.
That was a lot there.
Yeah.
You know, but thank you for that. I'm thinking now, like, more than a decade ago, when Mel was in, Mel Karmazin was in your seat, and this was the place where he always gave his annual guidance update, so, thank you. It usually was up, not down, so-
I'll have to look up.
That's great. Scott, how does the content roadmap help drive those business goals? And is there a single piece of content that most directly moves, you know, any of your key KPIs?
Sure. So the content is the engine and the linchpin of most of what we do. In the sense, the content drives subscriber interest, and then hopefully subscriber retention. It grows an audience for our ad sales group. As far as a single piece of content, it's more like lately, we've been blessed with a lot more data and information. So we've seen how our listening in our audience breaks down into roughly 10 groups of segments or clusters, however you want to say it. And inside any one of those, there is one piece of content that is likely the driver of that, and so we're aware of that. And again, everything is looked at through a lens of cost analysis and benefit and everything that goes with it.
It's a question of figuring out how important that piece is to keep, is there a backup, and is there something out there better?
Then, Jennifer, like, how do you drive sustained growth moving forward? I mean, that's kind of been the key question for the last few years, and, you know, what will be the biggest growth driver over the next few years?
It has a lot to do with what Scott just highlighted. How do we get the right content in front of the right audience? Like many media companies are struggling with this, it's a little bit of a unique problem for us, given our primary engagement mechanism is through the car. We have this great in-car distribution, really unmatched. That's where 80% of listening among those that are 35 and up is to radio, right? Whether it's AM/FM or SiriusXM, and we have opportunities to expand there with new pricing and packaging.
But the fact that we have this great in-car distribution, we have broader set of prices and packages in place now for the first time, and we have this great content offering, really, the next unlock is making sure that we can get the right content in front of the right customer. And we've... Look, we haven't made enough progress here. You know, I've said in these conferences before that we're working on it. We have been working on it. We have some unique challenges. We've built out a lot of technology to support it, and we're making slow and steady progress, and I expect to have more to talk about here. But that's the big unlock, is getting the right content in front of the right customer. It supports improved demand, it supports better retention, and it supports rate maximization, right?
So it really is core to overall revenue growth and putting us on the right trajectory there.
I just want to amplify a little on what, what Jennifer said. Most content companies, virtually all content companies go through the exercise of, does this content really work? How happy are they, the focus group? We've all heard about the top two boxes, all of that. We've had, you can pick any point in time, but let's call it the last five years, the satisfaction level, and we've tested it with internally multiple services, there's no longer any debate. We have a highly, highly satisfied group of subscribers that love our content. And then as you break down into those segments, there's certain pieces of content they absolutely love and would leave without it. So we know, on one hand, we've already solved one problem. We have content that a mass amount of people, roughly 30 million people, subscribers, know they like this.
So as Jennifer mentioned, when the technology gets to a point where we can find all the lookalikes that might like the same content, it's highly likely some portion of them will want to subscribe, because we've already tested it with millions who are not only liking it, they're paying for it.
So let's just dig a little deeper into, you know, content, including podcasting. I'll start with podcasting. So Scott, you had a great New York Times article recently. And the quote from that was that, "SiriusXM has quietly become a dominant player in podcasting." And you do have more than top twenty podcasts than any other network, and a major key to that success has been signing top talent. But on the other hand, you've also been focused on cost-cutting over the past few years, while podcasting has been an area of investment, particularly for top talent. So, like, balancing that, how are you thinking about renewing or maintaining some of these contracts in podcasting, which typically run three years?
Yeah, and just for the record, it's four of the top ten and-
Oh
... half of the top twenty, so it, it's all good there. But the podcasting part of our business is much more data-driven and analytical in many ways, especially as you get to large podcasts. They already have a built-in audience. You can roughly tell through our ad sales group and their data, what potential revenue streams are, and then once we have them, we're actually in it, and we know exactly what we're doing on that. So, the ability to decide whether to sign something, there's often enough data out there, like we had for Unwell and Call Her Daddy, and then there are others we renew that we have, and we know exactly what we're doing on that. So it's a lot less of guess and much more science on this. It's almost like a math exercise with that.
Now, having said that, that's only part of the game. How do you grow it? How do you get the talent? For instance, Unwell created a twenty-four-hour music channel for us as part of that, that's doing well, and Conan O'Brien has a top twenty podcast, but also has a channel with us. So there's things around the edges besides the math that we're looking at and how we can grow with that.
Do you believe that you have all the right pieces to move forward with podcasting, with your podcast strategy, or are there areas that you'd like to have a better presence in or a better technological capability?
So from a content point of view, our ability to acquire audio content right now is unparalleled. They understand we know how to grow it, monetize it, treat talent correctly, and all of that. Video has become a major player, and YouTube, obviously, and podcasting. So over time, we have to figure out what we're gonna do there. Could be a partnership with somebody that's important in video. It could be growing it, it could be just being selective and all that, but it'll all depend on the economics on that.
Okay, just keep going, but Howard Stern, I don't even know how to bring this up, but, you know, he's been all over the internet and news lately, and obviously, Howard's been a centerpiece of SiriusXM for two decades, his contract, as everybody knows, is expiring this year, and there's tons of speculation, most recently in the press, about it. Not asking you to publicly negotiate, but can you talk about, like, you know, what are your thoughts on how important the show is to the content, you know, on your platform right now?
So Howard, for all these years and right up till now, is as important a content, single piece of content as we've had, from the sense of being a lightning rod to get awareness for the service and publicity and all of that. He's the best interviewer out there, period, you know, bar none. We've always had a series, as all of you know, of renewals. With any talent at that level, you're always gonna have an extended period of negotiations. We've been pretty lucky all these years. We'd love him to stay. It certainly has to make sense, but we feel pretty good that we've done this before, and we'll see where it goes.
Yeah, I think he's been core to our platform for over 20 years, so I'm confident we'll get to the right place.
And then last one, Scott, on this, but how do you evaluate ROI on talent? Like, what are the metrics that you use when you consider renewal or redeploying spend? You know, like, within that, you've recently signed a deal with Stephen A. Smith. What, like, what made you sign that deal?
Okay, so for the first question, we look at both quantitative and qualitative. So we'll look at hours listened, ad revenue, social media and publicity, which is basically in-kind free marketing and other things that go to that. So those metrics will be there, you know, in considering, you know, a renewal. On the qualitative side, it's really just looking at what do they mean to the service? What do they mean potentially to this segment? What does it mean to have it be part of a spectrum of content that we have that's out there? So Stephen A. is a good example. While being relatively definitive and certainly polarizing, which is good for radio in sports, so we knew what we were getting with Stephen A.
We had him on the service for a little while through our ESPN deal and other things. He's emerged as probably the leading voice in sports, but much more importantly, Jennifer and I took a bet on where he was gonna end up in his political commentary, and he's become a factor. He can get almost anybody on the air. He's the only person I've ever seen be on Hannity at night and The View in the morning, and he's just uniquely suited where politicians and potential politicians wanna be on his show. So we have that, and with all that, he can be monetized from subscriber value, 'cause we think we'll get subscribers, ad revenue on his channel and on his show and his political show, and it'll be released in podcast and will result in podcast revenue as well.
So all of those factors went into that.
Yeah, I would just add on, we have so much more data, and I know we'll probably talk more about that, and Scott alluded to it earlier. With the volume of 360L trials and self-pay subs and, you know, the millions of subscribers who are streaming, that we have a lot more analytics to bring to the table, right? We look at metrics for any individual piece of content, like cost per listener or cost per listening hour. But as Scott said, we have to supplement that with research because research and other sort of, you know, ways to attribute the perceived value or optionality of content.
So something like sports, you may not be listening every day, but the fact that you get into the car, you love the NFL, and your team is playing, and you know you can find it on SiriusXM, has a lot of value for us. So there is value beyond the analytics, but having all this data has just been a, you know, game changer for us.
It's, it's definitely the quantitative data, but also, you know, in our passion studies, what is most important to you? What would you leave the service for? It becomes pretty clear that while in certain listening data, some sports may, as Jennifer mentioned, not register, and yet it could be number one for why they have the service.
Interesting. Jennifer, how are you thinking about CRB Web VI outcomes and the potential for 2026 to 2030 rate changes?
Yeah, we just wrapped the case, and we would expect to see a decision from the CRB by the end of the year, so by December, and you know, I think we're hoping for a fair and logical resolution to this based on the value that we bring to artists, whether it's you know, extending their reach, bringing them exposure, allowing them to connect with fans directly, especially on SiriusXM, but really a structure that represents both the value that we bring to artists and you know, really supports the sustainability of our business model.
Scott, for sports content, can you talk about how you think about broadly rights versus shoulder programming, team-centric feeds or other kinds of sports-related content?
So again, the benefit of data in hindsight, when you look at what's broken through on live TV, live sports is definitely the anchor on a lot of this, and the idea that that's all been fragmented in video, the NFL has probably eight or 10 deals out there, and other leagues have all of that. We have al l the play-by-play rights under one roof, so including college and automobile racing and tennis, golf, and other things. So there is some comfort in knowing our subscribers and our potential subscribers know we have those rights. So that's, that's the game stuff. We also try, whether it's music or sports, to build a sense of live community where you can interact with others on this. So the twenty-four-hour channels are two things.
One, they allow three hundred and sixty-five days a year, twenty-four seven, you to feel part of your favorite sport and interact with it, and they have the imprimatur of the leagues that they're official channels, and nobody else has that. So those are important, to make it a full sort of passion service for any sports fan. In addition, not to be beholden, we have independent channels like Mad Dog Sports, which now has Chris Russo, who's, you know, as accomplished a sports broadcaster as anybody, and now Stephen A. Smith on that channel, Katie Nolan, a young sportscaster who's great.
So we have as complete a sports package as you can have, and, you know, as Jennifer mentioned earlier, where that fits in the dynamic. It is some of it comes out in listening data, and other comes out in why they subscribe.
Right. Jennifer, can you talk about your overall advertising business strategy and also how podcasting plays into that?
Yeah. The what's key is the breadth of our portfolio, right? So broadcast, music streaming, podcasting, and kind of the scale and the precision that we offer to marketers, as a result. So audio, we've talked about this for so many years, audio is under-monetized, right? And the way to improve that, based on the vast amount of consumer engagement with audio, is with better targeting and measurement. And, you know, we have developed a number of partnerships on the MMM side, you know, or the clean room side, to be able to offer solutions to marketers to provide better targeting and measurement or predictive audiences. So there's a lot of opportunities for us to continue to unlock just monetization in general. On the podcasting side, you know, and Scott's referenced this a bit, we have unbelievable monetization.
So our second quarter podcast ad revenue was up almost 50%, but we've always had industry-leading monetization in music streaming. We've been at this for 20 years, due to ads, and now we're bringing that to podcasting. So we're transitioning. We're bringing a lot of the skills that we have with the sales organization and the tech stack that we have into podcasting. But podcasting is so key to our future strategy because it not only supports the ad platform, but as Scott said, we've brought content over to SiriusXM to support our subscriber base, too, with exclusive content. So it's really core.
... how much of future growth depends on advertising?
We have opportunities for growth across both sides of our platform. Obviously, subscription revenue is closer to 80% of our revenue overall, so we're very focused on driving that, and growth opportunities there really come down to what we've talked about, getting the right content in front of the right consumers, so they understand that we have something for them, and that's unlocking a lot of the personalized marketing and bringing, you know, kind of the technology that we've put in place really to accomplish that. On the ad side of the business, there's a number of opportunities. We have continued to improve monetization, including at SiriusXM, right, which is mostly broadcast inventory. But also with our Creator Connect product on the podcasting side, which lets advertisers really buy alongside a creator.
So whether they're buying the audio, video, or the social feed, they can really align with a creator. So we've continued to reinvent this business in really interesting ways, I think, to bring better monetization on the ad side. So we really have growth opportunities on both sides of the business.
Maybe a little more of the here and now, but what are you seeing in the advertising marketplace currently?
Yeah, I guess I'd say overall, I'm cautiously optimistic. I think the second quarter started out, sorry, the third quarter started out a little soft, and, you know, the last few weeks have been a bit more solid. You've got categories again that are strong, like tech and telco and, you know, CPG and pharma, but others, you know, like retail, where I think there's a little uncertainty going into the sales season. The holiday sales season, we are seeing retail accounts starting to step up, so I'm encouraged with that. And we're just seeing broader demand across categories, but also deeper within categories. Again, it's, you know, I'm cautiously optimistic is I guess how I would answer that.
One other category, just to complete it, is live events. We've grown a very healthy live event business over the last 20 years, and as you know, probably the first 15 years of those, we wouldn't allow any advertising at those events. The demand built for them. They're usually the biggest artists in the world, playing very small venues, 1,000, 1,200 people or less. Now we've started to open that up, and we've done it at Super Bowl fairly regularly the last three or four years, and they're now starting to generate real money, and the ability to do it is. I wouldn't say unlimited, but the demand from artists for us to do more and more with them is there.
So I think the ability to get great live content for the content side, meets ad sales for the actual physical event side, is an interesting mix going forward.
Where are you taking SXM Media on targeting and measurement? Can you talk about what the roadmap is there?
Yeah, I think so we not only have the scale of SXM Media across all of these portfolio, of course, platforms within our portfolio, but we also have a really strong tech stack with AdsWizz. So, you know, the goal for us, certainly programmatic is a big piece of the puzzle, and adding more DSPs will help drive growth there. And then on targeting and measurement, you know, we talked a bit about this on music streaming. So, you know, we'd always kind of led the pack there, but now that there has been, you know, a lot of changes to data privacy, and marketers are looking for different kinds of solutions, we've integrated with clean rooms and MMM and used other solutions to bring better targeting and measurement.
We feel like we're in a good position on the music streaming side. There's more to unlock, but podcasting is a bit farther behind. A lot of that's because, you know, we're distributing podcasts off platform to many other distribution platforms, but confident we can get that to parity over time. Then SiriusXM broadcast, we have an opportunity to just make it easier to buy, because right now it's broadcast inventory, but we can cut it up, make it look more like digital. It'll probably be a manual process to start, but actually let advertisers buy on impressions with targeted audiences, and over time, the targeting will get better with 360L in the market, because we can actually deliver authenticated impressions in that environment.
How do you plan to grow or maybe stabilize Pandora's active users and listening hours? Like, what do you think the role is for that company five years from now?
Yeah, it starts with ad hours. You know, we have seen declines on the listener base side. It's still a massive platform in the U.S. But for instance, on the ad hours side, the trend line's been a bit better. A lot of that's because, you know, we have a loyal listener base, and their engagement keeps increasing. So we actually saw a decline on ad hours of only about 1% in the second quarter. So it's key to our ad portfolio. It's key as a consumer listening platform, especially on the music side. And maybe, Scott, you can talk to some of the data we're using and leveraging.
Sure. So Pandora is very valuable. One, the labels, the record labels truly value the promotion on Pandora because they know a lot of people listening to Pandora, that's what they listen to. So you have that. Secondarily, it's provided data to us. So we saw the term sleep continue to pop up on Pandora, and eventually we realized that people were using it to create a sleep channel, and we moved that over to Sirius, and now that's become, you know, an important digital channel for us on Sirius. Artists like Teddy Swims, we saw a tremendous action on Pandora well before Sirius was playing it or terrestrial or anybody was playing it. So that data led us to be the first to really play that on Hits 1 and move that along.
Pandora is there, and, as Jennifer said, it's stable in that sense, but it is a valuable tool, and it's very valued by the labels.
... Moving on, like, a core pillar of your strategy is to deepen engagement with your in-vehicle sub base. But the world is increasingly shifting towards streaming entertainment, and there are maybe not unlimited streaming options, but a lot of options. What in-vehicle advantage do you think Sirius has in this world, and how do you adopt that advantage to out-of-vehicle listening?
Yeah, it starts with this unmatched presence we have in the car, right? Where 80%, again, of the listening for those 35 and up is to radio, right? AM/FM or SiriusXM. And we have a real opportunity there with the content portfolio that we have to get people into lower-priced subscription packages, who probably, given the rate increases we've done over the years, have been priced out of the market, right? So, you know, our... And we'll talk more about Play, our low-cost with ad subscription, but we have a real opportunity to take share from AM/FM with a subscription that's sub-$10, right? With our low cost with ads subscription package. And that helps us unlock more opportunity in the car because, frankly, there are still a lot of customers who just love that embedded experience.
They just don't want to deal with CarPlay or Android Auto. That said, we've also improved the app in CarPlay and Android Auto, and we have seen increasing engagement through that platform for, you know, the SiriusXM app. And we'll continue to make improvements to that experience because there are a lot of consumers there. Those consumers will probably look very similar to our in-car consumers. They're not gonna be radically younger, but they're going to appreciate the uniqueness of what we deliver in terms of a live, premium content and human-curated bundle, so there's more to tap into there. And then outside of the car, it's really about our subscribers listening more in more locations, and that's been key to our really low churn rate.
Because we have more opportunities to expand engagement, even just across the household, with more listeners on more devices there.
Okay. You guys kind of touched on this a little bit at the beginning, but let's move on to 360L, and how 360L and deeper OEM integrations are improving your trial conversion rates, your churn, your ARPU. What do you think?
Yeah, it's. I mean, again, this has been a game changer for us. And, you know, you've known us for a long time, we've been talking about this for a long time, and we're finally now to the point where we have 50% of our new car trial starts with 360L. We have, I don't know, something like over 10% of our used car trial starts now with 360L, and over 5 million of our self-pay subscribers. So, you know, we have a lot of data coming back, but it's really about the advanced personalization that 360L brings and the better consumer experience, where we've seen increased engagement across the board. And, so it's every metric. So better conversion rates.
So when we look at 360L versus non-360L, it's always hard to adjust for other variables, but everything we can see is better conversion rates, better churn rates, and better ARPU because of that enhanced engagement.
Impressive. So, Scott, then, you know, also, we kind of touched on this before, but does 360L have enough critical mass to meaningfully inform your content decisions, your marketing choices?
Sure. I mean, now it's had enough of a mass, plus our other data we have, that it's very valuable in looking what subscribers are using, what they like, with that. The other thing, it's allowed much more content to go in the car. So by virtue of that, that's more cross-promotion, that's more everything. And again, it all stems from: Can they find the content they want, and when they want it? And also, what they're listening to now may not be what they're listening to in a year or two, and so that content has to be readily available, and 360L offers that. The other thing is, we've had a number of homegrown channels that have become very big, whether it's The Highway or Yacht Rock or others, and we grow subsidiary channels off of that.
So Yacht Rock has Yacht Soul, LL Cool J and his Rock the Bells has three channels on our service that can run through 360L and all that. So it's really allowing us to maximize a lot of our content and-
We've seen a lot of increased engagement with those, what we call extra channels, at least internally. Digital channels that are offshoots of some of our big brands, as well as the ability to do basically what Pandora offers in the car and in the app, which is, you know, create a station based on an artist. So that's something we never could have done without 360L in place.
And even the ability to have mashups on the channels. Our decades channels are huge, so but people have always wanted to combine '70s and '80s, '80s and '90s. So a lot of the stuff that you would have to do, you know, almost by hand, are done in extra channels, and now those are available in the car. So you can, you know, especially on long drives, you may like a certain body of work, but you may want it in a different format than you normally do, and that's available now.
Jennifer, how do you return to positive self-pay net subscriber growth? And if you can, how much runway remains for Sirius's subscriber growth overall?
So there's really three areas of focus there. There's how do we continue to increase the funnel? How do we stabilize conversion rates, and how do we at least lean into our sustained low churn rate or perhaps improve it. I actually think there's opportunities potentially to improve it. In terms of the funnel, it's about new acquisition. So we have our very strong in-car funnel, high penetration rates, but more recently we've added EV implementations. We've done three-year dealer-driven subscription programs. We have better used car data to identify the owners at point of purchase, and we have Podcasts+ . And all these things have helped us reach a broader set of customers and bring them into the service.
So we've had a success there building the funnel, and we have opportunities beyond that, probably more like 12 months out or beyond that, on distribution, right? And then we have to do some work on identity. This is a very non-interesting thing, but our whole data structure is based on the car, and we need to flip that to people, consumers. And that's gonna give us the opportunity really to do hard bundles, to align with other distribution partners, to increase our distribution beyond what we have today. So that's funnel. And then in terms of improving conversion, has a lot to do with right content in front of the right customers, right? Like Scott and I have been talking about, that's the big unlock for us. We think we have the content we have.
We just need to make sure we have marketing in a place where the capabilities allow us to do that, off-platform and with our own channels. And then on churn, it's about increasing engagement always, and we have more data. So we wanna make sure that our subscribers are experiencing more of our content on more devices across more members of our household. And those are the three things that I think are really gonna help propel us and drive growth ultimately in our subscriber base.
But is there a content strategy that can reduce churn, like really...?
A content strategy?
Yeah.
Yeah, I mean, again, what I mentioned before, I'm extremely bullish on, to have close to 30 million subscribers, knowing what they like over a long period of time, to find, as Jennifer said, get the right content in front of the right people. If you find any portion of lookalikes out in the world there, it's likely they're gonna like the content similar to what we've already proven they like. And these are, you know, mass scale clusters and segments, so there's no reason not to believe that. It's just a question of doing that. And then from the churn point of view, not everybody listens to the same five things they started with. So over time, it would be great that everybody would know what we have.
It may not seem appealing or whatever in the beginning, but as time goes on, they may wanna try other things, and it's there for them. So it's an awareness issue, not a content issue.
I think one good example of this is last fall, we pushed down a lot of our news, talk, and sports content to a broader set of subscribers in advance of doing a rate increase, like six months later. We saw very little churn impact as a result because that was a rate increase that was, on average, I think, $1.50 or something across all of our full-price packages. So it's that idea of giving customers more value. They had access to more content, and we couldn't even tell many of them because, you know, we... Or we could tell some of them because we have marketing channels, but some of them may never have received the marketing. They just found it on their own.
It's a great example, I think, of what Scott's saying, where if we can make sure customers are seeing or experiencing more of the content we have, they're gonna be stickier.
Right. Any initial thoughts on how things are shaping up for the 2026 self-pay subscriber growth?
It's a little early. We'll probably provide better context on that early next year, but again, we've seen real improvement in the funnel, like I talked about with some of these new programs, and we actually this year expect our in-car net ads to be better than last year, and last year they were better than the prior year, so the trajectory on in-car ads has been solid. On the streaming side, you know, as you know, we've gone through this rationalization on where we were spending to get streaming trialers, and we're now to a point where this year we'll probably lose around 300,000 streaming net ads. I mentioned that in the last call, so that, I mean, that's not gonna happen again next year, right? We've rationalized that, so we should be in a better trajectory.
Those are a couple data points that might help give you some context.
Okay. Can you walk us through the strategic intent for your new ad-supported tier, and how will that guard against the cannibalization of full-price subs?
Yeah. I'm really excited about this. We launched it in the middle of July. It's fewer channels and ads, and it gives us a price point below $10. I don't see risk of cannibalization, but of course, we're gonna be really targeted in how we use it in both demand and retention, and we'll watch those metrics to make sure that we're not seeing any downgrades. I think the retention opportunity, which is where you might see the most cannibalization if somebody's calling to cancel, is really for us to reduce our reliance on these discounted promotional plans, right? That, you know, customers are getting the full service for a much lower price.
Right.
Now, we can put them on something like low cost with ads or our music-only subscription. And we've had our music-only subscription at $9.99 in the market for, I don't know, a year and a half or so, and we have not seen any evidence of downgrades to that. So it's a real opportunity for us on both demand and retention. And, you know, the thing I would say is that that's how we unlock and take more share from AM/FM, right? 'Cause we just... At a $25 price point, we're probably not gonna get somebody to go from free to $25, but at something less than $10, it looks much more attractive.
Right.
Any price point that gets people in initially to try our content, we'll feel pretty good that they'll at least have a shot at wanting to subscribe to one of our plans.
We can upsell from there.
Exactly.
And then, just how do you think about the trade-off between, like higher pricing, you know, driving ARPU versus maintaining your low churn? It's always a balance.
Yeah, and I think, you know, the example of what we did last fall leading into a rate increase this early spring is a model we're gonna use going forward. And, you know, we've talked about every other year rate increases. We may be able to do them more frequently based on the experience that we just saw, but we have to deliver value in advance of that, and it has so much to do with right content in front of the right customer, right? That drives value, but also just making sure that more members of the household are listening, 'cause essentially our service is a family plan, right? You have the in-car subscription and streaming-
Right.
And we need to take advantage of that more.
Yeah. No, we see across other companies and industries, like, absolutely.
Mm.
So at the very beginning, you touched on spectrum, so let's go there. Can you update us, first of all, on the timeline to consolidate SiriusXM platforms?
Yeah, I might start in advance of that just with WCS. We acquired the licenses for the C Block and D Block late last year. We're currently using that for some emergency services, but I do think we have more monetization opportunities there, and we're actively in discussions about what those could look like. So that's two five megahertz bands. Then the low band, so another example of, you know, when we sat here many years ago, right, is just we talked about possibly being able to free up the low band the middle of this decade. Well, we're here now, but we really... I don't think we're in the right position to do that because we still have several million subscribers on the low band. And so what's changed? Well, the churn rate was materially lower, so it's a good thing.
You know, we still have a long runway on, you know, sort of cash generated by those subscribers, and we don't want to disrupt their experience. So they're slowly moving to high band and, you know, I think what you're getting at, transitioning to the other platform. So I don't know. It's somewhere between a few years and several years-
Nice
... that we'll be able to free that up, and in the meantime, there are a lot more opportunities as to how to be able to use this spectrum that are emerging now.
Exactly, what do you expect to do with the extra spectrum that you'll eventually have?
I mean, there's, of course. So we're gonna know a lot about Pandora and what low cost with ads opportunity we have, and, you know, we could expand, for instance, the opportunity there by offering it in more vehicles. We also have wideband vehicles coming to market, right? So we had started several years ago, building modules that cover both bands. So we can do more services for our subscribers or for trialers today, either audio or video or other adjacent services, or we can look to pursue some form of relicensing to be able to get additional capabilities and offer different types of services. So that may, in fact, be where the bigger opportunity is ultimately.
You both mentioned video as a possibility. Do you need that spectrum before you can do that? Like, how do you... Would-
Yeah, I don't think there's... We used to have a small video service on Sirius for backseat. I don't see it as being feasible through 360L, through IP in the car, or, you know, through our current broadcast spectrum, but you could free up the low band and do more video there. Yes.
Yeah, the video that I reference is really purely to do with podcasting.
Off platform.
Off platform, where they video it-
Yeah
... so it's YouTube friendly.
Okay, and then Jennifer, with SXM -10 having commenced service late August and SXM -9 beginning service earlier this year, can you help us think through the step down in CapEx? You mentioned you'll be at the low end this year, but what about, like, over the next several years and-
Yeah, on satellite CapEx, in terms of the next, I don't know, ten years or so, we're actually this year is sort of at a peak, right? And last year was bigger, but this year is at about $200 million of satellite CapEx. Next year is $115 million. I think these numbers are all on the website. We have $50 million in 2027, and we expect it to be close to zero in 2028, and that's because we're launching SXM-11 next year and 12 in 2027, and then we're gonna be done for probably a decade. So, you know, you can imagine that being. And then we have to decide, are we gonna launch more satellites? You know, we have to, you know, make those decisions. You talked a little bit about risk mitigation, I think.
So we have, you know, satellite and IP in a lot of vehicles now. It's not the majority of the vehicles on the road, so we would have to balance that. But it does provide us with an opportunity to manage risk by having both of those delivery mechanisms. It also provides a lot more opportunities for features, like we've talked about with 360L and things like better targeting and in the ads, in both low cost with ads and just generally in our subscription service. So that's on the satellite side. Non-satellite CapEx, we talked about being at the low end of the range of $450 to $500 million this year, and we expect that to be closer to $400 million next year.
We're completing a pretty massive repeater upgrade, you know, in the next kind of twelve months or so. It's a $100 million project that won't be done for another ten years, so, you know, we get beyond that, and we just continue to look for opportunities across the cost structure, including on the now non-satellite CapEx side. I think we have a solid trajectory there to support free cash flow growth.
I'm gonna squeeze in one more question. Can you talk about your capital allocation strategy? You know, you took a little bit about CapEx, but you, your plans to delever and thinking of how you think about share buybacks versus, you know, increased dividends as we look to the future.
... Right now, our priorities haven't changed. We're focused on getting to our target leverage range, which we expect to do by the end of next year, and that coincides with our path to growth and free cash flow toward our target for 2027 of $1.5 billion. So that gives us a lot more opportunity to expand capital returns beyond the levels that we're at today for the dividend or share repurchases. And I think in terms of the mix, we have to really see. There's so many factors that go into that, and you know, largely, that won't change until we move towards the end of next year, and so I think we'll have more to share on what's appropriate at that time.
Right. I mean, acquisitions have not been, like, a big part of your-
We've done some small ones over the last few years, mostly on the podcasting side, and we'll continue to look, but we're really focused on delevering. We don't see anything that makes strategic sense that would change, you know, our perspective on that. But, of course, we're opportunistic to the extent something becomes available or we think it makes sense for our portfolio.
Anything on the content side that we should be thinking about? Any last thoughts before we-
I mean, content is as it always, it's a moving target. Certain things are stable, like live sports rights, and then other things, you know, whether it's Call Her Daddy or SmartLess on the podcast side. The other thing, just to mention on that, is the podcasters are so incentivized to grow their audience because with or without us, they want that audience for their ad sales. And as we look at the data and find those segments we have, we're gonna start to look to lean more on our content partners and talent to use their social media as part of the marketing thing. So one of the factors, you know, down the road will be when we look at someone is, yes, they're audio and content talent first, but what other social media and other marketing benefits do they bring to the equation?
There could always be an exclusive content play. We have a lot more data on what's working today, and, you know, there might be an opportunity to do something new there.
Yeah. The way... I mean, Howard went behind the paywall from free radio. Maybe one day there'll be a podcaster that has a large enough, passionate enough audience that makes sense to go behind the paywall.
Amazing. Thank you both so much.
Thank you.
Thank you.