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

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BY : Diego GutiérrezApril Fri, 2019

Sirius XM compra Pandora convirtiéndose en líder de entretenimiento de audio en el mundo. El mundo de la música, y el negocio musical, ha ido adaptándose a un nuevo público con unas necesidades muy diferentes a las que anteriormente había, exigiendo una mayor calidad de sonido, mayor variedad, personalización y disponibilidad inmediata.

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 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 por la buy de la empresa, debido en gran medida, al estancamiento de la empresa y el de sus competidores, al no ser capaces de generar todavía flujos de caja y al reducir el crecimiento.

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.

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