Will Record Labels Soon Have a Sirius Problem?

Pandora once had an adversarial stance toward the music business -- the company even bought a traditional radio station in an effort to lower its royalty payments -- but eventually backpedaled, presumably so it could enter the on-demand streaming business. "Pandora has become much more of an ally," says the major-label source. "Is this going to be a return to those days?"

It's unclear how, or even if, the combined company could change the royalties it pays, which are set by the Copyright Royalty Board, although it can also make direct deals with rights holders. But it is certainly big enough to throw its weight around. "The concern is certainly real," says Kevin Erickson, director of the Future of Music Coalition. "They can essentially say, ‘You have to agree to our terms or we don't have to play you at all.'"

Other label executives are excited about the promise of combining SiriusXM's original content and growth in cars with Pandora's ability to reach smartphone users -- and both companies' listener data. "If they execute this well, they become a formidable competitor to AM-FM radio," says Zack Silver, analyst with investment bank B. Riley FBR.

Glassnote Records founder/president Daniel Glass predicts SiriusXM could benefit from Pandora's new Amazon Echo functionality. "It's hard to ignore the mass of Pandora. The audience and engagement is massive," he says. "SiriusXM is great in cars, and Pandora is in people's homes and restaurants. If SiriusXM gets to use the data and voice recognition, it's going to be a very good deal."

This article originally appeared in the Feb. 9 issue of Billboard.