SiriusXM, the satellite radio company, is taking over the rest of Pandora, the internet radio company, in an all-stock deal valued at $3.5 billion. Sirius bought a large stake in Pandora last summer and had reportedly tried to acquire it previously, so this isn’t a big surprise.
Why is it happening?
Pandora needs help and SiriusXM needs the internet. Pandora is still losing money — although less than it used to — as it tries to build a business beyond free, ad-supported radio. Last quarter, the company lost $92 million on $385 million in revenue, reflecting a decline in advertising sales but an increase in subscription revenue.
Pandora is still widely distributed and is still very much a thing: It had 71.4 million active listeners at the end of June — a big audience of mostly mobile streaming listeners that could be useful to SiriusXM.
That kind of mobile internet reach could be enormously useful to almost any consumer company, but especially Sirius, which delivers almost all of its music to listeners in their cars, using actual satellites that it launches into space. I think that makes about as much sense as using ponies and pigeons to deliver the mail, but apparently it continues to work for Sirius.
While still large, Pandora’s audience is still shrinking — the company reported 76 million listeners the same time a year ago. And its six million paying subscribers is a small fraction of Apple’s or Spotify’s total. Spotify, for example, had 180 million active users and 83 million premium subscribers.
SiriusXM and Pandora say that if the deal closes — it’s currently awaiting antitrust review — it will create the “world’s largest audio entertainment company” with more than $7 billion in revenue and a $41 billion enterprise value.
Among its growth opportunities touted in its deal-announcement: “Unique audio packages”; driving in-car listening for Pandora; and cross-promotional opportunities — including more than 23 million SiriusXM trial listeners every year, primarily through car purchases.
In addition, the companies describe the combination as a “strong promotional platform for emerging and established artists.” Also worth noting: Liberty Media, which owns SiriusXM, and now Pandora, has a big stake in LiveNation, which dominates both the concert-venue business and the ticketing business (through its ownership of Ticketmaster). This provides obvious opportunities — especially if it ever pushes to combine them and potential antitrust problems, as well.
Read more about this on The Verge:
https://www.theverge.com/2018/9/24/17895332/siriusxm-pandora-acquisition-music-streaming
