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Analyst: After Pandora Deal, SiriusXM Should Pursue Live Nation

Liberty Media's SiriusXM and Pandora are better off together, even if the pending acquisition doesn't change its structural disadvantages when compared to rivals Spotify, Apple and Amazon, a leading…

Liberty Media’s SiriusXM and Pandora are better off together, even if the pending acquisition doesn’t change its structural disadvantages when compared to rivals Spotify and Apple, a leading Wall Street analyst has suggested.

BTIG Research analyst Brandon Ross, who wrote two years ago that a SiriusXM-Pandora merger was inevitable, said on Tuesday that as streaming services continue to grow in popularity, and improve their viability in Sirius’ core area — the car — the company will need to “truly embrace digital” and, for starters, use Pandora as a subscriber funnel to its free trial ecosystem.

Ross states that he “never believed” in a standalone Pandora but that it holds great potential value as a wing man of sorts for its new owner, given that it has “an engaged audience on mobile which could be useful in driving active users to another business,” and while “it has tried and failed at ticketing in the past and brought in subscription streaming… in our view, upselling into Sirius subscriptions is a better endgame given [SiriusXM’s] economics.”


On the flip side, Ross sees SiriusXM as being helpful in leveraging its relationships in the auto sphere to expand and simplify the Pandora car experience. He also expects SiriusXM to help Pandora boost its spoken-word offerings by sharing content licenses, “hopefully giving Pandora a fighting chance at taking free radio share in the car and improving its cost structure.”

Ross also states that if Pandora ultimately decides to continue with its subscription streaming tier, “it could naturally be bundled with SiriusXM subscriptions.”

More importantly, Ross notes, is that SiriusXM’s all-stock acquisition of Pandora means it holds an abundance of cash that could be used for more ROI generative investments, and that Live Nation (34% owned by Liberty) would make an ideal fit. “We believe Liberty President and CEO, Greg Maffei, desires to not only collapse the [SiriusXM] share structure and take control of [SiriusXM]’s cash flow but also to combine Sirius and Live Nation into a single music distribution company. We believe a Sirius/LN deal will come sooner rather than later.”

As for potential synergies between the two companies, Ross says Pandora could leverage its brand relationship to sell advertising and sponsorships. The digital radio service’s trove of user data would also hold huge benefits for LN’s live business. “Live Nation could use this data to help plan and promote/market tours,” Ross says. “Meanwhile, Spotify is using its data as a chip in label negotiations and expects it to unlock significant margin opportunities. Could Pandora and Live Nation do the same in the U.S.? Other opportunities include an owned platform for Live Nation to further its media/video ambitions, and the ability to offer artists a place to promote their music.”