Buying Pandora Might Be Good for Artists, Royalties, SiriusXM Chief Says
SiriusXM's agreeing to buy Pandora for $3.5 billion in an all-stock deal means they would pay close to $2 billion on royalties next year combined, said Sirius CEO Jim Meyer on a Monday conference call. “The two companies have a tremendous respect for what artists bring to our business, what songwriters bring to our business. We obviously fully endorse models that compensate them for what they bring. I think this merger will be good for everyone in music for one simple thing, and that is, if we’re successful, we will begin to shift share from those channels that are not paying performance rights to musicians.”
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Meyer thinks music "labels will wholeheartedly endorse that strategy." RIAA didn't comment. Almost exactly a year ago, Sirius completed its $480 million “strategic investment” to buy 19 percent of Pandora’s stock (see 1709220042).
Pandora can walk away from the new deal if it pays Sirius a $105 million termination fee but would be obligated for only $52 million if it cancels the deal to accept a “superior” offer by Nov. 22 under a “go shop” provision that Pandora wanted written into the contract that enables it to talk with alternative suitors, said an SEC filing Monday.
How Sirius and Pandora can best mesh their "complementary" services once the transaction closes in early 2019 is something “we’re going to have to just evolve our way into and test our way into,” Meyer told analysts. “My ultimate thinking on this is, whoever comes into one of our trial funnels, no matter where they come in, our goal ought to be that as they exit that trial, somewhere, somehow, they’re in a funnel which we’re monetizing and creating value with.”
Meyer hopes Pandora CEO Roger Lynch “joins us going forward” after the sale closes, he said. Lynch, who was on the call, said nothing about his plans.
Sirius hasn’t “done anything” to cross-promote with Pandora since closing the strategic investment deal last year, said Meyer. It purposely stayed away from doing so to give the new Pandora management under Lynch, who joined the company a year ago, a chance to right its financial “ship,” he said. Lynch thinks there’s “no shortage of ideas that Jim and I have had on things that we can do together,” he said. Meyer’s “gut feel” is that there's “real money to be made by optimizing cross-promotion” between the Pandora and Sirius “platforms,” he said. “That’s where I see the biggest opportunity.” That could "take share -- you can guess where from -- from other audio platforms that are out there today,” said Meyer. Spotify didn’t comment.
Sirius subscribers “stream quite a bit,” said Meyer. There’s a “misconception” that the Sirius subscriber base is “technically illiterate,” he said. “That’s nonsense. They stream a lot and they find the content they want. It’s one of the reasons why I think this combination is powerful because I think the offers complement each other as opposed to compete with each other.”