Stephen Silver
An all-stock transaction, set to close in early 2019, would create what Sirius calls the "world's largest audio entertainment company."
Satellite radio giant SiriusXM announced Monday that it has agreed to acquire streaming music company Pandora for $3.5 billion in stock.
The acquisition of Pandora, the release says, "will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas." Sirius said it will make "investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle," while also promising, "no immediate change" in listener offerings.
Pandora, founded in 2000, was a pioneer in streaming music, although it has receded in prominence in recent years following the arrival of such consumer competitors as Apple Music and Spotify.
But by mid-2017, Sirius XM had agreed to invest $480 million in Pandora, which led to Pandora's original executive team leaving and the company exiting non-U.S. markets. The merger, now a reality, had been rumored as far back as 2014, around the time Apple acquired Beats.
The price SiriusXM is paying for Pandora is actually more than the $3 billion Apple paid for Beats in 2014. That deal bought Apple both Beats' headphone and electronics business and Beats Music, which went on to form the basis for the development of Apple Music.
The SiriusXM/Pandora deal comes at a time when streaming is a much more lucrative and mature business than it was four years ago, with streaming now earning 75 percent of the music industry's revenue.
Pandora posted revenue of $384.8 million in the quarter ended July 31, while SiriusXM earned $1.4 Billion in revenue the same quarter.
Pandora ">now offers both ad-supported and subscription tiers, with a total of 70 million active users. It had launched a $14.99 Premium Family plan this past spring, in order to more directly compete with Apple Music and other streaming services.
Both SiriusXM and Pandora are available through Apple CarPlay apps.
"We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora's strategic progress and stronger execution. We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses," Jim Meyer, Chief Executive Officer of SiriusXM, said in the announcement. "The addition of Pandora diversifies SiriusXM's revenue streams with the U.S.'s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further."
The merger, which includes a "go-shop" provision, has been approved by both companies' boards and is set to close in the first quarter of 2019, pending regulatory approval.
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12 Comments
Sirius XM is now a solution looking for a problem. Who would pay $200 per year (the Select package) for a service you can get on your smartphone at half the price. I got six months of free Sirius XM when I bought my new automobile and promptly let it expire. I just plug my iPhone in and use CarPlay to stream whatever I want. To demonstrate what a bad proposition Sirius XM is, after my trial subscription expired I started to get offer after offer from them and the price went down every time until it got to $5/month. I truly don’t understand the acquisition of Pandora when Sirius XM already offers its own app for streaming content. It’s starting to look like it will boil down to Apple and Google or Amazon once again. Spotify will eventually be acquired by somebody, probably Google or Amazon.
Pandora was a nifty service, even more so before Spotify/Apple Music got the formula for streaming right, but the notion that it was/is worth $3.5B is utterly laughable. That the buyer is another "walking dead" company only underscores how out-of-touch with the market both Pandora and Sirius are. For people who enjoy Pandora, I hope it sticks around for a while, but ... can't see it (or Sirius) doing anything going forward but swirling the drain for a while.
Sirius is till a thing?