Sirius XM Holdings, a huge name in the broadcasting services industry based in the United States of America, has recently decided to invest $480 million in a music streaming and recommendation service named Pandora Internet Radio. Pandora has given three seats and the chairman’s to Sirius along with a significant chunk of its shareholding. However, Sirius cannot buy more stock in the company for the next 18 months according to the deal. The scope of an outright acquisition exists in the distant future.
Pandora is a pioneer in the music streaming industry since it is one of the very first services that recommends songs to listeners based on their input. The more popular services today are all successors of Pandora, which was has a 17 year old legacy compared to its competitors. It operates only in the US, New Zealand and Australia. The basic plan is free and there are a few paid plans to cater to varying needs of different customers.
In spite of having a first mover advantage, Pandora did not do exceedingly well. Both the revenues as well as the user base have been decreasing consistently. This is reflected in a fall in the stock’s value by more than 30% over the past one year. Slow adaption to a rapidly changing technological scenario was the main reason why other services such as Spotify and Apple Music raced past Pandora.
It is not clear whether or not the benefits received by both parties in this deal are equal in value. Pandora clearly has potential, which if tapped into, can be a fruitful venture. With the cash inflow from Sirius coupled with new brains on board, it definitely can be put to good use. Pandora has also generated $200 million by selling off Ticketfly, a ticketing service that it acquired in 2015. For Sirius, using its resources to fund a firm that can boost its own business is a huge plus provided that it can make Pandora dance to its tunes. However, the market has reacted positively to this deal and Pandora’s stock increased by 5%.