SiriusXM’s $3.5 billion acquisition of Pandora, announced Monday and still awaiting stockholder approval, creates an audio monolith with more than 100 million monthly listeners, but even more importantly establishes a beachhead for the combined company against the likes of Apple, Spotify and Amazon for connected car dashboard supremacy. With in-car listening the dominant factor in audio broadcast consumption, the combination of SiriusXM — which is strong in cars — with Pandora — which remains the dominant personalized radio service — creates a formidable power.
But what does it mean for the company and larger radio industry, which has seen its impact and influence diminished with the rise of on-demand streaming services and their playlists and recommendation options that arose well after Pandora’s proprietary “genome,” which selects music for listeners based on previous habits and other factors.
“One hundred million active users in this new subscription landscape is incredibly valuable, regardless of platform,” says one prominent industry executive, a SiriusXM shareholder. “And it gives SiriusXM reach well beyond just vehicles into the home and mobile space, where Pandora dominates. I don’t know where this positions them relative to Spotify or Apple, but I’m bullish on anything that expands the reach and accessibility of music and this certainly does that.”
(Indeed, the comparisons between on-demand streaming services such as Spotify and Apple Music and Pandora, which is primarily a digital radio company that recently added an on-demand option, are not apples-to-apples.)
While the emergence of a new, two-headed giant would seem daunting in the broadcast world, at least one executive in terrestrial radio welcomes the competition. JD Crowley, chief digital officer at Entercom Communications Corp. — which formed its own uber-entry by merging with CBS Radio to create a $2.4 billion company last year — told Variety, “This is great for the audio industry, illustrating the power of audio to engage with consumers. We have seen the growth of digital audio on all of our digital platforms, including radio.com, and are bullish about audio as a medium and as a content platform.”
John Malone, controlling owner of SiriusXM parent company Liberty Media (pictured above), is bullish on terrestrial radio as well: Earlier this year he made a $1.16 billion offer for 40% of the financially troubled iHeartMedia, which includes the largest U.S. radio network iHeartRadio, before withdrawing the offer in June.
A key reason for SiriusXM’s move is the opportunities it offers for a free, commercial-supported alternative — Spotify has long claimed that its ad-supported platform has enticed millions of listeners to subscribe to its paid service.
“This is the way of offering to keep free users in the family,” says Randy Frisch, an indie publisher who runs his own LoveCat Music. “The key is to get people to download a combined SiriusXM/Pandora app on your phone and go from there. Imagine if they offered a ‘Best of Howard Stern’ on Pandora for free? They have the infrastructure and the content. It could be the gateway to premium.”
All of which are compelling reasons for SiriusXM’s purchase — as is Pandora’s robust advertising division, which SiriusXM CEO Jim Meyer admitted is “is multiples bigger than ours.” But another strong motivation would be to keep Pandora off the market so that another, even bigger fish — like an Amazon, Apple, Spotify, Google or some other would-be media monolith — can’t use it against them. And will Malone’s strengthened position inspire him to make another pass at iHeart, as some have speculated?
“The best reason for SiriusXM to buy Pandora,” Frisch concludes, “is to prevent someone else from buying it.”