Last week’s investment of $480 million (€428m) by pay-radio operator SiriusXM into music streaming service Pandora leaves far more questions unanswered than answered. The deal has yet to proceed through various hurdles, but assuming the deal wraps, then SiriusXM will have an 18 per cent stake in Pandora, and with Pandora saying it will use the SiriusXM money “to make targeted investments and capitalise on opportunities to build on its position in the streaming radio business”.
The price SiriusXM footed is about a 14.2 per cent premium over Pandora’s average stock price for the previous 20 days with that apparent over-payment helped by a few days prior to the deal being agreed where Pandora’s share price fell back (initially by 7.7 per cent and the following day by another 3 per cent).
By and large the industry comment was that ‘at last’ Pandora could beat Spotify in terms of revenues despite the quarterly audience of a claimed 100 million listeners. Pandora is slugging it out with well-established players such as Spotify, Apple Music, and now Google and Amazon.
SiriusXM’s services remain focused on delivering music and entertainment to cars and vehicles, while Pandora depends much more heavily on streaming to handhelds and home computers. In that regard, there could be value for both players in reaching further than their current loyal subscribers.
Jim Meyer, SiriusXM’s CEO, said in a statement that SiriusXM’s investment in Pandora “represents a unique opportunity for SiriusXM to create value for its stockholders by investing in the leader in the ad-supported digital radio business, a space where SiriusXM does not play today. Pandora’s large user base and its ability to provide listeners with a personalised music experience are tremendous assets.”
However, it is widely acknowledged that Pandora is losing cash. Its core subs numbers are down, and amidst the fierce competition for North American listeners/subscribers, its prospects were far from rosy.
New Pandora services such as its ‘AutoPlay’ feature, which lines up the next similar track to something just listened to, could be useful and was launched earlier in June as part of its $10/month ‘Premium’ service (most users to Pandora use its ‘free’ service which is ad-supported). And simply re-signing recording artists such as Taylor Swift to its portfolio could do a power of good to its bottom line.
SiriusXM is North America-only. Pandora looks a little further beyond the USA and adds Australia and New Zealand availability. Back in July 2008 Pandora was in talks to extend its services to Europe but pulled out when it was clear that royalties would have to be paid to artists. Pandora offers a Hispanic service for US listeners. There are – sadly – a number of pirate sites internationally hooking up to Pandora.
However, a year ago in a conference call with analysts, Pandora said it would be more aggressive in seeking an international presence. Needless to say, any expansion globally will be expensive in the short term.
And whatever international activity might have been contemplated last year, the involvement of John Malone and his ever-expanding Liberty Global/Liberty Media brands, and access to millions of cable and cellular clients must be appealing. Liberty Media owns 60 per cent of SiriusXM. “Liberty Media has long recognised the strength of the Pandora brand and the opportunities in the ad-supported digital radio market,” said Greg Maffei, Chairman of the SiriusXM Board of Directors and CEO of Liberty Media. “We are very supportive of SiriusXM’s strategic investment.”