Sirius XM to buy Pandora, aims to expand reach

Satellite radio provider Sirius XM said Monday that it would acquire music streaming service Pandora Media for $3.5 billion in a bid to corral listeners who do not want to pay for premium channels.

Pandora rose to success by providing tailored radio stations for its users that were sprinkled with ads. In recent years it has struggled to compete with rival services like Spotify and Apple Music, which dominated online music streaming by offering paid on-demand content — something Pandora was slow to replicate.

Pandora has been a potential acquisition target for at least two years: In 2016, a continued slide in its share price prompted it to look for possible buyers, and Sirius XM has been in the running to buy Pandora since it injected $480 million of funding into the company last year.

The investment allowed Pandora to cover basic expenses and also spurred a shake-up in the executive ranks that brought in Roger Lynch, Pandora’s fourth chief executive in four years.

On a call with analysts, Jim Meyer, Sirius XM’s chief executive, said that the acquisition would enable Sirius to try to keep listeners who did not want to pay for music by diverting them toward Pandora’s free adsbased model.

“The truth is the majority of (trial users) ultimately decide not to pay for our service,” Meyer said. “As I’ve said many times, we would benefit from having a free funnel.”

Sirius XM has 36 million subscribers across North America and more than 23 million listeners on trials. The companies said that combined with the 70 million monthly active users on Pandora, this would create the largest digital audio audience in the United States.

Sirius XM, which is controlled by Liberty Media, announced that it was buying Pandora in an allstock transaction. Sirius XM shares dropped 10.3 percent Monday, and Pandora shares fell 1.2 percent.