SiriusXM Is the New — and Newly Massive — Owner of Pandora

Satellite radio giant SiriusXM announced the $3.5 billion all-stock acquisition of Internet radio giant Pandora on Monday, which will bring the two companies together into a massive audio entertainment firm.

In a press release, the two companies said that both brands (and their products and services) will continue to operate under the “definitive agreement,” which creates one company “with more than $7 billion in expected pro-forma revenue in 2018 and strong, long-term growth opportunities.” SiriusXM — whose expertise is in subscription radio in cars — will benefit from Pandora’s home- and mobile-based music service as well as its strong advertising platform, while the latter will find advantages in SiriusXM’s scale and financial resources. (SiriusXM has about 36 million North American subscribers, while Pandora has around 70 million monthly active users.)

Through cross-promotion opportunities, the pairing of exclusive content with ad-supported and subscription tiers, investments in content and technology and the creation of a promotional platform for artists, the combined company plans to drive long-term growth.

Jim Meyer, SiriusXM’s CEO, said:

“We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora’s strategic progress and stronger execution. 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. Through targeted investments, we see significant opportunities to drive innovation that will accelerate growth beyond what would be available to the separate companies, and does so in a way that also benefits consumers, artists, and the broader content communities. Together, we will deliver even more of the best content on radio to our passionate and loyal listeners, and attract new listeners, across our two platforms.”

And this from Roger Lynch, Pandora’s CEO:

“We’ve made tremendous progress in our efforts to lead in digital audio. Together with SiriusXM, we’re even better positioned to take advantage of the huge opportunities we see in audio entertainment, including growing our advertising business and expanding our subscription offerings. The powerful combination of SiriusXM’s content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S., will create the world’s largest audio entertainment company. This transaction will deliver significant value to our stockholders and will allow them to participate in upside, given SiriusXM’s strong brand, financial resources and track record delivering results.”

Pandora has been in a shaky financial spot for the last few years, as it found its traditional ad-supported radio service disrupted by the likes of streaming services such as Spotify and Apple Music. It began offering paid on-demand content, like the aforementioned companies, but its lateness to the streaming game held it back.

Lynch — who just rounded out his first year heading the company after coming in as the embattled company’s fourth CEO in just as many years — told Rolling Stone earlier this month that employees “felt like the company was losing” a year ago, and that the company is in “a completely different place now” after intensive restructuring and a refocusing of goals. Weeks after he was named CEO in August 2017, SiriusXM injected a $480 million strategic investment into Pandora, which began the rumors that the company was interested in a complete acquisition.

Per the release, listeners will not see any “immediate change” in either service following the transaction’s close — which is expected in the first quarter of 2019 — but on a conference call Monday morning following the press release, Meyer pointed out one upcoming difference: the acquisition will help SiriusXM retain users who don’t want to pay for music anymore by funneling them toward Pandora’s free, ad-based tier. “The truth is the majority of trial-ers ultimately decide not to pay for our service,” he said.