Sirius XM announced at the end of September that it is purchasing streaming audio service Pandora, bringing together two major players in the audio space. While it grabbed a lot of headlines, the acquisition wasn’t all that surprising as Sirius had established a 15 percent ownership stake in Pandora and many in the industry expected a complete takeover.
But why Pandora?
Sirius has faced challenges keeping subscribers who are unwilling to pay after free trials conclude, and they are betting on an easier sell to shift them to either Pandora’s subscriber or ad-supported service.
Pandora also comes with scale – their 70+ million user base is twice that of Sirius, and those users also bring data that can be leveraged in a variety of ways.
Lastly, it moves Sirius online in a big way. While they have a streaming option, it isn’t a big draw for users, and it pales in comparison to Pandora. Bringing the streaming audio giant into the fold makes them a legitimate player in streaming audio.
This isn’t a one-sided deal, though – Pandora stands to benefit too, and by extension, so will advertisers.
Pandora needs to reverse user decline, and the potential influx of Sirius users at the end of free trials might achieve that.
Pandora also needs a competitive edge to fend off Apple Music and Spotify, and content partnerships with Sirius personalities like Howard Stern could be a point of differentiation for users.
For advertisers, this means the streaming audio space maintains some diversity with three legitimate players. While acquisitions often mean consolidation and fewer choices, this instance could be good news for advertisers if it keeps Pandora in the marketplace.
Nobody is counting any chickens yet, though.
Terms of the deal allow Pandora to pursue another deal at a higher price, and Q1 2019 is probably the earliest the deal could close.
Both Pandora and SiriusXM are saying “business as usual” for now, so advertisers and consumers shouldn’t expect immediate change.
The long-term impact could be positive, though, if it bolsters Pandora’s efforts to stay relevant and remain a competitive alternative to other streaming audio services.