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SiriusXM Raises Forecast by 200,000 Subscribers for 2014

Jason Shaltz

October 11: Katy Perry is all smiles on SiriusXM’s Town Hall.

SiriusXM Radio has increased its forecast for subscription growth by 200,000 accounts. The company now expects to finish the year with net subscriber additions of 1.45 million, which would bring total subscribers to 27 million.

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The increased guidance can be attributed to "this summer's strong new car sales," said chief executive Jim Meyer in a statement. August in particular was a great month for auto sales. According to WardsAuto, light vehicle sales of 1.58 million exceeded the 1.51 million forecast and the seasonally adjusted annual rate of August light vehicle sales was 17.45, a 103-month high.

Because auto manufacturers and dealers are a vital sales channel for SiriusXM, changes in auto sales can greatly affect the satellite radio company's ability to acquire new subscribers. Automakers pay SiriusXM for free trials included with new auto purchases. Over the past two years, SiriusXM has converted about 45 percent of free trials into paying customers, according to the company's 2013 annual report.

Currently at 26.3 million subscribers, SiriusXM is closer to the size of Netflix -- 35 million subscribers in the United States at the end of June -- than music streaming services such as Pandora (3.3 million subscribers in March), Spotify (3 million subscribers in the United States in May) and Deezer (5 million worldwide). Unlike its newer competitors, Sirius XM has achieved enough scale to turn a profit and generate free cash flow.

SiriusXM left unchanged guidance on other financial metrics. For 2014, the company expects to have revenue of $4.1 billion, adjusted EBITDA of about $1.43 billion and free cash flow of about $1.1 billion.