Will settle for bronze: Sirius XM buys Pandora for $3.5B to keep up with Spotify and Apple

Sirius XM bought Pandora for $3.5B in an effort to join forces against market leaders Spotify and Apple.

September 25, 2018

Sirius announced yesterday it will buy Pandora for $3.5B. Once the merger passes antitrust review, Sirius will become a $41B company with $7B projected for 2018 revenue.

But, with both companies struggling to expand, the merger is a last-ditch effort to hold ground against market leaders Spotify and Apple.

They were meant for each other…

But not necessarily in a good way. Pandora’s audience shrank from 76m to 71.4m in the past year, with just 6m paying subscribers — a far cry from Spotify’s 180m listeners and 83m paying subscribers.

Sirius XM, on the other hand, only offers a premium paid radio product, losing revenue on millions of dads who refuse to upgrade their car radio (23m listeners use Sirius’ “trial” version, most without upgrading).

Execs hope the merger will offer Sirius listeners a new free listening option and add to Pandora’s audience size in the process. But if Pandora’s past performance is any indicator, investors should be wary.

Closing Pandora’s box

Since it was founded in 2000, Pandora has spent most of its life on the brink of extinction, begging employees to work for free for 2 years after going broke in 2001 before clawing its way back to a 2011 IPO.

Unfortunately for Pandora stockholders, the sale prices Pandora stock at $10.14 — 37% lower than when the company IPO’d and at ¼ of the stock’s all-time high.

The new Sirius faces an uphill battle: Pandora and Sirius XM have 44.4m mobile monthly mobile listeners combined — still short of Spotify’s 47.7m and Apple Music’s 49.5m.

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