Why the Sirius/Pandora M&A is Sweet Music for Both Sides

Sirius is now planning to go head-to-head with Spotify through its announced $3.5 billion acquisition of Pandora, culminating a 15-month discussion between the satellite-radio giant and the internet radio service provider.

Sarah Ghostine
Sep 28, 2018 · 3 min read

Written in collaboration with Patrice Cucinello

Image for post
Image for post

Streaming music services have revolutionized how we listen to music, with Spotify almost single-handedly leading the resurgence of the music industry. Sirius is now planning to go head-to-head with Spotify through its announced $3.5 billion acquisition of Pandora, culminating a 15-month discussion between the satellite-radio giant and the internet radio service provider. While the deal has not yet been approved by shareholders and regulators the combination could provide advantage.

The acquisition could not come at a better time for Pandora, which has seen its large user base peak. In fact, you could say Sirius has saved the day for Pandora. Why? Two major ways.

Image for post
Image for post

1. Sirius’ subscriber services experience

Churn rate is also consistently low at ~2% which is better than Spotify’s ~5% churn. This expertise should be a valuable asset to Pandora, whose attempts to follow listener habits by introducing its first on-demand service in early 2017 has been received tepidly. Since Pandora’s early 2017 introduction, Spotify and Apple Music have grown their aggregate paid subscribers from 75 million to 133 million through the second quarter of this year. Pandora grew to 6 million.

2. Getting with the (original) program

Podcasts offer another interest area that could improve Sirius and Pandora’s competitive position. Though only in existence for little more than a decade, podcasts have skyrocketed in popularity and have become a huge differentiating factor among streaming services, one that Spotify has benefited from handsomely. Sirius could leverage its proprietary content across Pandora’s large streaming user base to help revitalize growth at Pandora.

Sirius is clearly positioned in this acquisition to deliver real value though aligning with Pandora. For one, Sirius has been trying to become less car-centric and Pandora’s 70,000+ monthly mobile listeners would accelerate this strategy. Sirius can leverage Pandora as a distribution platform outside of the car.

Additionally, Pandora generates roughly three-quarters of its revenues from advertising. Pandora’s digital streaming service also garners two-thirds of the digital audio ad market. This would help diversify Sirius’s revenue base. Pandora’s recent acquisition of audio adtech company AdsWizz should help leverage Sirius’ ad inventory placement to marketers.

Image for post
Image for post

Conclusion

Why? Forum

Commentary from Fitch on why we think what we think.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store