Analyst: SiriusXM-Pandora Bundles May Be In The Future

Though not an outright sale, the SiriusXM deal makes the satellite-radio company Pandora’s largest shareholder, with three seats on the board, including the chairmanship. Sirius XM, controlled by billionaire John Malone, will have to help Pandora contend with the fast growth of Spotify and Apple Music, along with the billions of dollars Amazon.com Inc. and Google are investing in music.

Sirius XM is interested in Pandora’s large audience for online radio, which is a natural complement to its own large customer base for satellite radio. The sale of Ticketfly, for a fraction of the $335 million Pandora paid just a couple years ago, suggests Sirius is less enthusiastic about Pandora’s expansion into other businesses.

According to Bloomberg, “SiriusXM is working hard to find new channels to acquire and convert drivers into paying subscribers and Pandora has access to 100 million-plus listeners,” said Stan Meyers, an analyst at Piper Jaffray & Co., in a research note. “A potential SiriusXM/Pandora bundle could make SiriusXM more valuable/stickier with subscribers, thereby reducing churn.”

Pandora will use the money to invest in its radio business, the companies said. The press release made no mention of Pandora Premium, the on-demand service the company has spent the past few years developing. Pandora co-founder and Chief Executive Officer Tim Westergren listed the on-demand service as the company’s top strategic priority for 2017.

Meanwhile, Billboard reports Sirius covets Pandora for several reason: its advertising structure, which is now showing it can generate both national and local advertising revenues; its 81 million active users, versus the Sirius listening base of 31 million subscribers; the diversity of the Pandora's listener demographics, which also includes younger demos in which Sirius is weak; and the possibility of experimenting with more functionality for Sirius' existing programmed model -- learning from Pandora's experiences -- without going into more expensive, on-demand licensing.