SiriusXM’s 19% Stake in Pandora Increases Threat to Terrestrial Radio

Recent transaction means that Pandora has ceded control to Sirius
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NEW YORK � SiriusXM is investing $480 million on preferred Pandora stock, giving it a 19% stake in the music streaming service. Sirius will gain three seats on Pandora�s board, and Pandora separately agreed to sell its Ticketfly ticketing unit to Eventbrite for $200 million, reports Variety.�

The SiriusXM satellite radio subscription business generated $5 billion in revenue and $746 million in net income in 2016. The company had 31.6 million subscribers at the end of Q1 of 2017 and expects to add 1.3 million paying subscribers in 2017.

�...Sirius� business is highly dependent on the automotive market, which is changing as cars are becoming connected, capable of accessing other services over the internet. Sirius isn�t just lacking an internet strategy, the company also doesn�t have a real answer to the growing popularity of on-demand streaming services like Apple Music and Spotify,� according to the same article. �The Pandora investment represents a kind of long-term insurance policy for Sirius against these market shifts. What�s more, with a stake in Pandora, Sirius is also for the first time set to profit from ad-supported radio, allowing it to attack traditional terrestrial radio on two fronts.�

This transaction means that Pandora has ceded control to Sirius, according to this article in Forbes. �...while the reported deal terms limit Sirius from buying more Pandora shares for 18 months as well as preventing it from acquiring more than 31.5 percent of the company without the Pandora board approval, the entity with all the leverage here is Sirius. It essentially controls the board, has the deep pockets that Pandora desperately needs, and has the ability to put Pandora's assets to greater use than Pandora ever could by itself.��

The same article goes on to say that �...Sirius will end up with Pandora and covert it totally to SiriusXM online, with the existing Pandora being only one of the channels that it offers. Pandora may have trouble getting people to subscribe now, but that's something that people will pay for.�

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