Clarion has reported receiving high marks for its factory-installed, voice-activated navigation system with Sirius Travel Link in the Lincoln MKS. The company says its system ranked highest in J.D. Power and Associates’ 2009 Navigation Usage and Satisfaction Study and the system in the Ford Flex is second on the list. Navigation systems in five Ford and Lincoln vehicles earned five of the top 10 positions, according to the company.
The announcement is significant for several reasons including the fact that the contract with Ford was won by Clarion just two or three years ago – long before the automotive industry meltdown was ever dreamed of. It is also important because the Clarion navigation systems are available on more than 15 Ford vehicles and Ford is showing the most visible success in the marketplace among the Detroit Three.
The news is not only important to Clarion, as the market moves into a recovery phase, it is also important to Sirius Satellite Radio and other Ford partners including Microsoft. It shows Ford’s increasing clout in a market littered with downturn casualties.
The downturn in the auto industry robbed Sirius of its major growth engine - new car sales. In its most recent earnings report, Sirius had surprisingly positive yet still modest good news. Reported revenue of $629.6M increased 2.75% year over year. Subscriber revenue, representing 93.3% of total revenue, rose 2.64% year over year. Net advertising revenue declined 30.5% year over year. Equipment revenue declined 18.3% year over year. Net additions of new subscribers were 102,295 subscribers, or 0.6%, on a sequential basis, vs. a net loss of 405,181, or 2.14%, year over year. The company ended the quarter with a subscriber count of 18.5M.
Churn, defined by Sirius as the monthly average of self-pay deactivations for the quarter divided by the average self-pay subscriber balance for the quarter, was 2% in the quarter and 2.1% year-to-date. This compares with 1.7% in the third quarter of 2008. The conversion rate, defined by Sirius as the percentage of subscribers that receive Sirius service and convert to self-paying after the initial promotion period, was 46.8% in the third quarter of 2009 vs. 47% in the year-ago quarter. For year-to-date 2009, the conversion rate was 45.3% vs. 49.2% in the first nine months of 2008.
The average revenue per user, derived from adding both subscriber and advertising revenues then dividing that total by the average number of subscribers, was $10.87 vs. $10.51 a year ago. ARPU has averaged $10.67 for the first nine months of 2009, a 1.3% increase year over year.
The company faces continuing market, technology and content challenges including its contract with “shock jock” Howard Stern (expiring in late 2010), future infrastructure investments and competition from technologies ranging from Internet radio, podcasting and automotive Wi-Fi and Bluetooth connectivity to the impact of sun spot activity on service over the next few years.
The success of Ford and Clarion does make for strange bedfellows, though as Ford’s Sync technology may present one of the most immediate competitive threats to Sirius should Ford decide to deploy the Internet radio capability it demonstrated at last year’s Consumer Electronics Show.
Until its Ford win, Clarion was probably best known for its work for Nissan and Infiniti. Here, again, Ford’s success is a boon to both Clarion and its partners including Zenrin for map content and Nuance for voice technology. Ford’s success has thrown off additional accolades for many of these suppliers contributing to their success on other platforms and with other suppliers. Sirius, for example, has just announced that Mercedes will add Sirius traffic to its 2010 model year vehicles.
The success of the Ford system has a lot to do with its user interface which includes an enhanced, touch-enabled display with high contrast and company-specific colors and graphics. It is also noted for the performance of its voice recognition system. The combined solution is a powerful on-board and connectivity-enabled system that continues to receive high scores from consumers and serves as a model for the industry.