Satellite broadcaster SiriusXM has bought out internet streaming service Pandora Music in an all-stock deal worth $3.6bn, the two companies revealed on September 24.
According to the joint announcement, the deal will create the “world’s largest audio entertainment company” by combining Pandora’s 70 million monthly listeners with SiriusXM’s 36 million subscribers. The new company is expected to generate more than $7bn in revenue in 2018.
Pandora has struggled in recent years due to competition from other streaming giants such as Spotify, Apple Music and Tidal and has been slow to introduce new features
SiriusXM operates 175 satellite radio stations across the US. In June 2017, the company invested $480m in Pandora in exchange for a 19 percent stake. Pandora’s quarterly revenues have been rising since the cash injection, which may have factored into SiriusXM’s decision to buy out the firm.
The deal has been unanimously approved by the directors of both companies and is expected to close in Q1 2019. Pandora stockholders must now approve the merger. As stated in the announcement, they will receive 1.44 shares of SiriusXM for each share of Pandora they currently hold. Pandora shares were worth $9.31 and SiriusXM’s were valued at $6.41 when New York markets opened on September 24.
SiriusXM CEO Jim Meyer described the deal as “a win-win for both companies”. He also stated: “The addition of Pandora diversifies SiriusXM’s revenue streams with the US’ largest ad-supported audio offering.” The deal represents a significant step into the streaming market for SiriusXM and its parent company, Liberty Media. The move will allow the company to expand its reach beyond its primary market of radio listeners.
Pandora has struggled in recent years due to competition from other streaming giants such as Spotify, Apple Music and Tidal, and has been slow to introduce new features such as on-demand streaming, leading to stagnant audience growth; in June 2015, Pandora had 79.4 million monthly listeners in comparison with Spotify’s 75 million. Today, however, Pandora’s monthly listener tally has fallen to 71.4 million, whereas Spotify’s has surged to 180 million. Much of this is down to the international scope of Spotify’s listener base, which extends across 65 countries, while Pandora continues to operate solely in the US.
To succeed in the highly competitive audio streaming sector, Pandora must diversify by expanding its global market reach, advertising business or subscription options. Its partnership with SiriusXM will allow Pandora to do so by drawing on the broadcaster’s expertise and financial resources, as well as giving it access to a new consumer base for streaming and subscription services.