SiriusXM Shares Strong Financials, Record Subscriber Numbers

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Alec Atkins, Malcolm Brickhouse and Jarad Dawkins of Unlocking the Truth visit SiriusXM Studios on July 30, 2014 in New York City.  

Satellite radio company SiriusXM Radio rode a strong U.S. auto market to strong financial numbers and a record 27.3 million subscribers in 2014.

According to Thursday morning's earnings release, revenue grew 10 percent to $4.18 billion, net income rose 31 percent to $493 million and free cash flow rose 25 percent to $1.16 billion. The influx of free cash has been good for shareholders as SiriusXM repurchased $2.5 billion of stock last year.

The company attributed much -- it not all -- of last year's performance to the company's strength in automobiles. New automobile sales -- up 5.9 percent last year -- a higher penetration rate in automobiles, and growth in pre-owned auto volumes were given as factors. "Consumers have proven they will pay for a package of content in the automobile," said CEO Jim Meyer.

Automobile are expected to be a key battleground for the future of music and audio entertainment. Pandora, Spotify and Apple have already made major efforts to position themselves for a future of connected cars and ubiquitous mobile devices. Their goal is to erode the stranglehold AM/FM radio has on the automobile. The challenge will be to change consumers listening habits: when in automobiles, 58 percent of American adults listen to AM/FM radio most of the time, according to Edison Research.

"We intend to be well-positioned to succeed in a world of connected cars," said Meyer. He cited an "all-new streaming product," including new apps for iOS and Android, which would replace previous apps that Meyer said "weren't good enough." And without giving details he cited "major efforts" that are now underway to supplement SiriusXM's satellite network.

Of course, Meyer warned the company's connected car initiatives are a long-term play. "It's not going to happen in six month. It's not like when a smartphone comes out and everybody jumps to the new platform."