Sirius Bets Big on Pandora

First, they merged with their competition, XM Radio, and now Sirius is going after streaming media provider Pandora. However, early reports that Sirius XM would be taking over Pandora turned out to be little more than rumors. It seems Sirius IS making a major investment in Pandora, though, buying about $480 million in preferred shares, equal to about a 16 percent stake in the company.

Pandora’s other investors were happy with this news, as stocks went up about 6 percent when the investment was announced.

The deal should be an interesting one for both parties involved. Both SiriusXM and Pandora have taken on terrestrial radio but in radically different ways. Sirius competes with so-called terrestrial (traditional) radio by offering a pay service with a lot more variety than most people can get on their standard radio dial.

The service is also very popular with people who travel for business or pleasure, and, thus, spend a lot of time crossing through zones of various different radio stations. Drivers can listen to the same shows from coast to coast and rarely lose the signal. Meanwhile, the company also offers a lot of other additional content, like talk and comedy and stations dedicated to specific bands and entertainers.

Meanwhile, Pandora came into this as an ersatz competitor to Apple’s iPod. Instead of buying and keeping umpteen songs on their own devices, Pandora allows users to subscribe and build stations of music they enjoy. Hugely popular, especially with Millennials, Pandora offers something for the first American generation not raised on radio in a century.

At first blush, Pandora is getting the better deal here. Sure, SiriusXM struggles to reach the key target market of Millennials that are drawn to Pandora, so they are expanding their profit base by investing in the streaming company. That said, streaming competes with more than just terrestrial radio. As WiFi is cheaper and more readily available, and limitless plans are growing in popularity, some of the checks that held streaming services back are disappearing. Older demographics that have been loyal to both AM radio and were early adopters of Sirius are now becoming more acquainted with streaming audio.

But for Pandora, the influx of ready capital could not have come at a better time. Locked in a bitter struggle with fellow streaming rival, Spotify, as well as newcomers to the market owned by Apple and Amazon, respectively, Pandora has been taking a real beating. Stock prices have been down, more than 30 percent by some measures, and there hasn’t been much in the way of good news on the horizon. New investment from SiriusXM may just be the competitive advantage Pandora needs … and it could serve as a Plan B for Sirius if the days of radio decline faster than expected.