Published January 14, 2015
NEIL CAVUTO, HOST: You'll soon be able to listen to XM Satellite Radio (search) when you buy a new Lexus. XM inking a deal with Toyota to offer the service as a factory installed option starting in 2006.
Toyota will also be offering rival Sirius Satellite Radio (search) in nine models. Sirius stock has been outperforming XM in the past year. It's more than tripled in value while XM Satellite is up 66 percent.
But if you take a look at a longer-term chart like this one here, you will see that XM still has the upper hand, but for how long? Well, for a very long time if my next guest has anything to do with it.
Joining me now the guy who runs XM, Gary Parsons.
GARY PARSONS, CHAIRMAN, XM SATELLITE RADIO (XMSR): Welcome. Thank you, Neil.
CAVUTO: We had your counterpart, Mel Karmazin (search), the newly installed big cheese at Sirius. You think Sirius is on fire. Are they?
PARSONS: Certainly their stock is. I think that it's hard to be disappointed at all on a day when the Dow is down 100, the NASDAQ is down 36 and we hit a 52-week high. We signed one of our biggest new deals and pretty well locked up or insured our continuing dominance of the new car market place with the Toyota Lexus deal.
CAVUTO: The Lexus already has Sirius.
PARSONS: No, that's incorrect. Lexus and Toyota have always only had XM.
CAVUTO: I've got you.
PARSONS: And what they've done is they've made it permanent with a factory installed basis, so that all the cars that actually come from the factory, arrive...
CAVUTO: That's how you make money on this, right? You've got to hook up with the car guys, right?
PARSONS: Absolutely. And in fact, there's a huge different between factory installed. I mean, as a matter of fact, even Sirius and Mel Karmazin (search) will tell you, you really get very little out of dealer installed after market or parts department type installations. It is the factory-installed basis.
CAVUTO: How many customers do you have?
PARSONS: Well, we can't say exactly. Our guidance for the end of the year is 3.1 million. We passed 2.5 million at the end of the time...
CAVUTO: So you have more than Sirius?
PARSONS: Right. We continue to have about an 80 percent share in the new car marketplace and a 60 percent to 70 percent share in the retail.
CAVUTO: Yes, but Howard Stern (search) and Mel and football and controversial radio hosts. What do you have to offer?
PARSONS: Well, I think that we have to show the results in the performance.
CAVUTO: See, you're not going with marquee names to draw people in. You're going with just...
PARSONS: We're going with some marquee content. I mean, clearly, Major League Baseball, NASCAR, other things like that, are premium content that people look for. But also, I think that most people that are buying satellite radio are buying it for the commercial-free music. And we tend to have the knowledge, the dominant position there, the largest number.
CAVUTO: Can you both survive? I kind of think you both can survive.
PARSONS: I think certainly. This is going to be...
CAVUTO: It's not either/or?
PARSONS: It's not an either/or. It's going to be an enormous marketplace. We're looking for 20 million subscribers by 2010.
PARSONS: Absolutely. It's on that sort of a run. And we're doing it very, very cost effectively.
Actually, Toyota will be one of our lowest costs, along with Honda, distributions and will be factory installed on a standard basis in some models, on an option basis in others. But we're extraordinarily pleased with this. This is a huge deal that really solidifies our dominant share in the new car marketplace now.
CAVUTO: Gary Parsons. Good seeing you. We'll see how this battle works out.
PARSONS: That's great.
CAVUTO: We've got to run. XM Satellite Radio.
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