SiriusXM announced it is buying Pandora for $3.5 billion in an all stock transaction “to create the world’s largest audio entertainment company.”
The deal combines the world’s largest streaming audio company with the top subscription audio company, said SiriusXM. It will allow SiriusXM to expand is presence in the home and in “other mobile areas,” said the company.
SiriusXM had previously invested $480 million in the music streaming service,
The two companies will be able to cross-promote each other’s services on each platform to drive growth. SiriusXM has more than 36 million subscribers and 23 million listeners on a trial basis. Pandora has more than 70 million monthly active users, which represents the largest digital audio audience in the U.S., said SiriusXM.
Pandora can benefit from SiriusXM’s extensive partnerships with auto makers to expand into new cars.
SiriusXM CEO Jim Meyer said, “We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses. The addition of Pandora diversifies SiriusXM’s revenue streams with the U.S.’s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further.”
The all stock deal results in a $7 billion company. It is expected to become final in the first quarter next year.
Jim Kramer, commenting on CNBC, said the deal is a hedge against Apple and Amazon (via Alexa, presumably) entering the car and the fact that automobile sales are no longer growing. Co-host Carl Quintanilla of CNBC’s “Squawk on the Street,” noted while SiriusXM has 36 million subscribers, kids today prefer to listen to streaming music. Kramer also noted that the satellite radio company still has an uphill battle in competing with Spotify.
Pandora may lead in the US, but Spotify is the world leader, with 83 million paying subscribers and Apple Music has been catching up in the US, said The Wall Street Journal.
Consumer spending on music streaming services will jump 29 percent to $6.6 billion this year, according to the Consumer Technology Association.