Contact

Sirius XM buys Pandora to become world's leading audio entertainment company


, ,
Integral service around a transaction
BY : Diego GutiérrezApril Fri, 2019

The world of music, and the music business, has been adapting to a new audience with very different needs than before, demanding higher sound quality, greater variety, customisation and immediate availability.

Traditional radio stations have made room for music streaming services, being Spotify one of the leading exponents, however, other platforms have emerged to offer other types of content that are less mainstream and more personalised.

Pandora

Pandora is one of the largest and most powerful music platforms on the market, offering personalised content, like other platforms such as Spotify, it also allows for a la carte playlists.

One of the features that makes Pandora different from other stations is the algorithm they have to be able to predict the type of music you like and to be able to offer varied content, without repeating songs, unlike other platforms.

Pandora's business model is based on providing the service free of charge obtaining revenue through advertisements or premium subscriptionsIn addition, Pandora has a data monitoring service that can be purchased by singers or artists in order to know the musical tastes of their fans or of the general public, thus being able to adapt its content.

To get an idea of Pandora's size, in 2017 they streamed over 20.61 billion hours of content, having a subscriber base of over 6 million on a regular basis and over 80 million in trial mode.

Pandora's financial performance

Pandora maintains user growth of 4.5%, however, the total number of hours of music streaming has declined by around 2% in 2017, although this figure is expected to return to growth in 2018.

Recurring subscription revenues have increased by almost $50%, while advertising revenues, which account for more than $80% of the total, have remained fairly stable, increasing by only $20,000.

However, Pandora has made a fairly significant effort to grow, increasing its content spend by more than 15% and product development and marketing by 6%.

In total, in the fiscal year 2017 has generated some losses amounting to $518M, 160 more than in 2016which are explained by the attempt to Pandora expansion and by the impairment of goodwill amounting to $132M that did not exist in the previous year.

In addition, a historical comparison also shows how EBITDA variations have worsened, due to the increasing costs of Pandora's expansion policy.

However, it is worth noting that these same current problems suffered by Pandora are similar to those suffered by Spotify in 2017 when it made a loss of $461.2M, twice as much as in 2016, a situation that in 2018 it has achieved.

Sirius XM buys Pandora to become world's leading audio entertainment company

SiriusXM acquires Pandora

SiriusXMhas paid $3,5bn for purchase The company's total cash flow is largely due to the stagnation of the company and that of its competitors, not yet being able to generate cash flows and slowing growth.

Even so, the purchase price has represented a multiple of 2.38x of Pandora's revenuesThis is quite high due to the stagnation of the music streaming sector in the US and the strong competition with Spotify, the main player in the sector.

SiriusXM is a satellite radio service provider in the US and Canada, offering music, comedy, entertainment and other radio broadcasts 24 hours a day.

SiriusXM has more than 34 million subscribers and wants to incorporate the more than 80 million users Pandora's goal is to create the largest streaming service conglomerate in North America.

Another reason for the takeover is the intention to improve the content exploitation advertising offered on Pandora, in order to increase its revenues.

The other main reason is to be able to take advantage of the Pandora's database of its users in order to enhance the content of the programmes currently offered by SiriusXM, thereby increasing the number of SiriusXM users.

Ultimately, the interest stems from the amount of data Pandora has on its users that can be exploited by SiriusXM itself and the ability to significantly increase Pandora's advertising revenues.

Our diferentiation

Market Research Technology
Our team of market analysis specialists is continuously analyzing the investments of the most active markets in the industry in order to unceasingly contribute ideas of the current market situation and identify the most relevant trends for senior management. We integrate the most relevant sources of information which allows us to discover the most interesting companies for venture capital and similarly helps us to identify the investors with the highest probability of involvement in an M&A process to ensure the success of our sell-side operations.

The reports and deductions of our advisors provide a broad view of the sector, both geographically and from the complementary or adjacent markets perspective.
Technology Data Analytics
for M&A
Advanced data anlytics is a weapon". Intelfin is an artificial intelligence tool we use for investing and creating value in SMEs through competitive analytics and the enterprise environment.

IntelFin consists of a cognitive system, which, through the application of advanced analytical technologies, facilitates the automation of investment and financing decisions in the field of non-listed companies and especially SMEs in high-growth sectors.

The information related to these companies is characterized by their lack of transparency and heterogeneity; thus, it is necessary to develop an advanced analysis which is as much predictive as prescriptive and is developed in a natural language custom, suitable to obtain greater clarity and knowledge of the investment scope.

The IntelFin system focuses especially on analyzing the variables that define and influence the competitive environment of a sector and the positioning of a company, analyzing their influence on future value creation. Therefore, IntelFin supports strategic decision-making to senior management by resolving questions such as:

¿What are my competitors' priorities, strategies and expansion plans? Who's my competition? Which competitor is most likely to grow at a higher rate?
Which areas of activity/business models will receive the most investment? Which sectors are most attractive to investors?
Which companies are going to experience the most growth in the near future? Which companies are most likely to receive investment or be acquired?
Training Methodology
We have developed training programs in an innovative set-up which guarantees our teams the acquisition of technical competences both in the field of corporate finance and in the field of psychology, that is much needed when it comes to negotiation processes.

We have a culture of continuous improvement of our processes, closely related to the use of information systems that allow the enhancement of internal communication between our teams, as well as external communication with our customers. Hence, we extend best practices identified internally in an efficient and rapid manner among our members.

Are you one of those who prefer to be well informed when making decisions?

M&A NEWS
INDUSTRIAL REPORTS
closearrow-circle-o-downchevron-downcrossmenu