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SiriusXM Buys Pandora

T

TheBigA

This has been in the works for a while. SiriusXM purchased a big block of stock a while ago. Now they bought the rest:

https://www.nbcnews.com/tech/tech-news/siriusxm-buys-music-streamer-pandora-3-5-billion-n912446

Looking at the financials, Pandora has a market cap of about $2.5 billion, so Sirius appears to have greatly overpaid. As a result, Sirius stock is down fifty cents, and Pandora is up.

Sirius was founded on being a subscription-based system. Pandora was originally free. Over the years, Pandora has been promoting its subscription services, but the biggest part is still the free side. The one thing Pandora has been unable to do is create programming. They've been primarily a music distribution service. It will be interesting to see if Sirius changes that.

I expect to see a press release from music organizations demanding increased music royalties from Sirius and Pandora as a result of this purchase. The music industry feels these two companies aren't paying enough of their revenue to the labels and musicians, and the songwriters also feel their royalty is too low.
 
TheBigA said:
This has been in the works for a while. SiriusXM purchased a big block of stock a while ago. Now they bought the rest:

https://www.nbcnews.com/tech/tech-news/siriusxm-buys-music-streamer-pandora-3-5-billion-n912446

Looking at the financials, Pandora has a market cap of about $2.5 billion, so Sirius appears to have greatly overpaid. As a result, Sirius stock is down fifty cents, and Pandora is up.

Sirius was founded on being a subscription-based system. Pandora was originally free. Over the years, Pandora has been promoting its subscription services, but the biggest part is still the free side. The one thing Pandora has been unable to do is create programming. They've been primarily a music distribution service. It will be interesting to see if Sirius changes that.

I expect to see a press release from music organizations demanding increased music royalties from Sirius and Pandora as a result of this purchase. The music industry feels these two companies aren't paying enough of their revenue to the labels and musicians, and the songwriters also feel their royalty is too low.
Click to expand...

You think SXM's legal eagles (who have a pretty sorry record in high-stakes cases) deliberately waited until the agreement on pre-1972 music and the five-year extension of existing royalty rates became final before giving corporate the go-ahead to spring this deal? Would this strategy succeed in further frustrating the frustrated music organizations, at least for the foreseeable future?
 
CTListener said:
You think SXM's legal eagles (who have a pretty sorry record in high-stakes cases) deliberately waited until the agreement on pre-1972 music and the five-year extension of existing royalty rates became final before giving corporate the go-ahead to spring this deal?
Click to expand...

The Music Modernization Act, including the revision to pre-1972 music, has not become law yet. The House still has to approve the Senate's revisions, and then it goes to the White House.

But yes, Pandora, at least under founder Tim Westergrin, has a better relationship with the music industry than SiriusXM. And it was SiriusXM that proposed a last minute change to the MMA that might have killed it. So the music industry is not at all happy about this.
 
TheBigA said:
The Music Modernization Act, including the revision to pre-1972 music, has not become law yet. The House still has to approve the Senate's revisions, and then it goes to the White House.

But yes, Pandora, at least under founder Tim Westergrin, has a better relationship with the music industry than SiriusXM. And it was SiriusXM that proposed a last minute change to the MMA that might have killed it. So the music industry is not at all happy about this.
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Found this in the Rolling Stone story on the deal. https://www.rollingstone.com/music/music-news/siriusxm-pandora-deal-728314/ Interesting in that SXM apparently sees value in Pandora's free, ad-based service as a way to keep subscribers tired of paying more and more for music on SXM but who still value SXM's news, sports and talk programming:

Per the release, listeners will not see any “immediate change” in either service following the transaction’s close — which is expected in the first quarter of 2019 — but on a conference call Monday morning following the press release, Meyer pointed out one upcoming difference: the acquisition will help SiriusXM retain users who don’t want to pay for music anymore by funneling them toward Pandora’s free, ad-based tier. “The truth is the majority of trial-ers ultimately decide not to pay for our service,” he said.
 
One point I'd also make is SiriusXM is largely controlled by John Malone's Liberty Media company. That same company made an offer to buy iHeartMedia earlier in the year. The offer was dismissed as being too low. Pandora is bigger than iHeart's streaming company, and doesn't include the baggage of the towers & transmitters business. So while I haven't seen any mention of it in any of today's releases, I suspect this effectively kills any bid from Liberty to buy iHeart. Such a purchase, combines with Pandora, would certainly trigger anti-trust conversations.
 
I've been using Pandora for like 10 years So tripling the subscriber base by adding mostly non-paying accounts
 
nickp said:
I've been using Pandora for like 10 years So tripling the subscriber base by adding mostly non-paying accounts
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Sirius feels it has the better business model, so I doubt they will want to give much away for free. They've been extremely hesitant to stream shows like Stern, even though it's where the growth is. They could have easily built their own platform. But they're buying the brand as well. Perhaps they think Pandora is more respected than Sirius.

The other issue is music royalties. They pay a lower rate than Pandora. So I expect they'll want to use their size to drive down the rate they pay. I can already hear how the music industry will respond.
 
TheBigA said:
Sirius feels it has the better business model, so I doubt they will want to give much away for free. They've been extremely hesitant to stream shows like Stern, even though it's where the growth is. They could have easily built their own platform. But they're buying the brand as well. Perhaps they think Pandora is more respected than Sirius.

The other issue is music royalties. They pay a lower rate than Pandora. So I expect they'll want to use their size to drive down the rate they pay. I can already hear how the music industry will respond.
Click to expand...

Given the entertainment industry's (and that includes singers, songwriters and musicians) widespread antipathy toward the current administration and Malone's right-wing leanings -- not to mention SXM's cozy relationship with Fox and willingness to give Breitbart News a significant presence on its "Patriot" channel," could House and Senate Republicans be more likely to approve the Music Modernization Act the way Sirius wants them to, and to hell with what liberal singers and songwriters want, or will it be a case of who can make more of our elected representatives wealthier, which is the usual way business is conducted in DC?
 
CTListener said:
could House and Senate Republicans be more likely to approve the Music Modernization Act the way Sirius wants them to, and to hell with what liberal singers and songwriters want...
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No. The decision has already been made, and the Act has been approved by the Senate without the Sirius suggestion. I don't think it ever was in question. However, I doubt Sirius will be able to get any discount on royalty rates. In fact, they're likely to go higher.
 
TheBigA said:
No. The decision has already been made, and the Act has been approved by the Senate without the Sirius suggestion. I don't think it ever was in question. However, I doubt Sirius will be able to get any discount on royalty rates. In fact, they're likely to go higher.
Click to expand...

So the five-year extension is out of the final bill?
 
Just read that Liberty Media, which has a stake in Sirius XM, the new owner of Pandora, also owns Live Nation, which owns Ticketmaster. Makes me wonder just how this will affect the live music business moving forward.
 
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