On September 24, SiriusXM announced its plan to purchase Pandora in a $3.5 billion deal. Why would a satellite radio service be interested in acquiring a music streaming platform? To provide the most complete audio service available.

What’s the difference between SiriusXM and Pandora?

SiriusXM

SiriusXM is a paid, ad-free service that allows users to stream satellite radio in their cars, on their smart speakers and through their phones and other devices. Sirius offers nearly 1,000 channels for music, sports, podcasts and news. SiriusXM has 36 million paying subscribers.

Pandora

Pandora is primarily a free, ad-focused music streaming service that allows users to create stations based around one song or artist. Pandora does not allow for exact song selection — in other words, it’s like Pandora is constantly on shuffle. Pandora has 71.4 million monthly active users.

Pandora also offers a paid service, called Pandora One, which omits ads and allows for exact song selection. Pandora One has 6 million paid subscribers.

Why is SiriusXM buying Pandora?

SiriusXM released a statement about its move to acquire Pandora:

Together, we will deliver even more of the best content on radio to our passionate and loyal listeners, and to new listeners, across our two platforms.

The paid streaming service aims to create a holistic audio offering for some 100 million select consumers who listen in their cars, in homes and on mobile devices. SiriusXM notes that many prospective consumers partake in free trials with Sirius but don’t subscribe to the paid service. Sirius has approximately 36 million subscribers plus 23 million trial customers every year.

That’s where Pandora comes in. Their users are familiar with free, ad-based streaming services with limited personalization. Pandora’s current funnel could allow SiriusXM to entice consumers and enter the competition against Spotify and Apple Music. Jim Meyer, Chief Executive at SiriusXM, said, “My ultimate thinking in all of this is no matter who comes into our trial funnels, as they exit that trial that somehow, they are in a funnel in which we are monetizing.”

Meyer also mentioned that the growing popularity of podcasts is a motivator for this acquisition. The U.S. podcast ad revenue reached $314 million last year and is predicted to grow to $660 million by 2022.

While the deal is still awaiting approval from the FTC and Pandora’s stockholders, SiriusXM readies itself to compete with popular streaming services for expanded user base and additional ad revenue. As of now, the brand has noted that Pandora will remain free (and SiriusXM will remain paid and ad-free), but we predict the future will bring change.

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