We reported the numbers from Sirius XM’s Q2 financial results yesterday. Today, we dive into the transcript of the company’s conference call for more insights into the long on-again-off-again saga of its interest in Pandora, as well as its more recent efforts around the Amazon Echo smart home speaker.
CEO Jim Meyer addressed the Pandora question early on in his talk, noting that a main interest in the audio company is its free listening option. He said that free lean-back listening was an area of interest since Sirius XM has no free option aside from trial periods.
“In considering whether to enter the free market, the question for me is very simple. Can it deliver more cash flow for our shareholders?” he said. “Our investment in Pandora will help us to find an answer and give us a great toehold in this area on advantageous terms.”
Later on in the call, CFO David Frear addressed a question about the reasoning behind Sirius XM’s choice to take a minority stake in Pandora rather than pursuing a full acquisition. He acknowledged that both parties were interested in the total takeover option, but couldn’t reach needed compromises.
“If we had had a meeting of the minds on value, I think the two sides could have reached a deal to do a complete acquisition but that wasn’t there,” Frear said. “And so making an investment to fundamentally a debt investment is a way for us and taking the board seats, it’s a way for us to get involved, and as Jim said, to learn the business more.”
Both framed working with Pandora as a learning opportunity rather than a natural synergy. Frear highlighted the different niches each company has pursued: subscriptions to comprehensive radio for Sirius XM and free, ad-supported music for Pandora. “I think both companies have been very successful focusing specifically on those separate businesses,” he said. “And then we’ll see what we can learn from each other over time.”
In addition to the Pandora discussion, Sirius XM has rolled out support for the Amazon Echo in June. Meyer said that “hundreds of thousands” of Sirius subscribers linked their accounts in the first month.
“The one thing I was really surprised about, and probably shouldn’t have been, was how much uptake we got in such a short period of time with Alexa,” he said. “And I think that just tells us we’re absolutely on the right path. And so, I’ll go back to what I said in my comments. I don’t care where they listen or how they listen; I only care that they listen.”