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Rumor Fact(ory): SiriusXM renews interest in Pandora

Claire Atkinson, the NY Post writer who is at the head of many anonymously-sourced rumors about streaming media businesses, says that SiriusXM and parent company Liberty Media are again discussing an acquisition with Pandora.

This is the latest in a dating ritual which has been playing out for nearly a year, since Liberty CEO Greg Maffei reportedly made a $15/share offer to Pandora, and was rebuffed. At the time, P stock was trading in the $12-13 range; this morning it is below $10.

Although no outsiders have visibility into Pandora’s business discussions with other companies, Sirius has seemed willing to spill signals of intent (and sometimes non-intent) into the rumor mill. At face value, comparing basic business attributes, a Sirius/Pandora merger makes sense — Pandora would instantly give the satellite company a mature internet-streaming play to complement Sirius’ through-the-air juggernaut. SiriusXM is a cash-rich outfit.

Our own armchair analysis says that  deal might have happened by now if Pandora had not acquired Rdio (November, 2015) and launched the on-demand Pandora Premium service. That component represents a substantially different business model from non-interactive internet radio, which is regulated differently by the U.S. government, is mainly restricted to the U.S. (notwithstanding small Australia and New Zealand presences), and serves a large (though flat-growth) audience of about 100-million listeners.

However, this speculation is not a critique of Pandora Premium or the decision to go down that path. Pandora’s balance-sheet rationale — that subscriber acquisition costs are presumed to be negligible, an important competitive advantage vs. Spotify — is logical, and might be preliminarily borne out by the latest earnings report which claimed 500,000 sign-ups before the product was widely available.

All this speculation aside, Pandora itself is clearly more publicly willing than ever to get bought. The public attitude shifted on May 8, an eventful day that included Q1 earnings, a new $150-million investment by KKR, and a board shakeup which included a public resolution to investigate paths to generating shareholder value, including acquisition.

 

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Brad Hill

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