The US satellite radio platform buys the ‘streaming’ service for 3.5 billion dollars

Competition in the audio entertainment business has just escalated. The SiriusXM satellite radio platform agreed to acquire Pandora, the streaming service that popularized the way of listening to music online, for $3,500 million. The transaction is made through an exchange of shares and caused its stock market valuation to rise close to 13% after the announcement.

The SiriusXM offer represents a 10% premium when compared to Pandora’s capitalization last Friday. The integration of the two companies is expected to be completed by the first quarter of 2019, creating the largest audio entertainment group in the world. Wall Street had long anticipated this maneuver, which caused Pandora to double its value this year.

The satellite radio company, which was born out of the merger of Sirius and XM a decade ago, has 36 million subscribers in the North American region. Pandora, for its part, is the pioneer in online music streaming and has 70 million active users per month. But it is under heavy pressure from competition from Spotify, Apple Music, Google Play and Amazon Prime Music.

Pandora is third in the streaming business behind Spotify and Apple. He debuted on Wall Street seven years ago amid great expectation. But it is seeing how its users migrate to alternative payment services and that is not only affecting their income, but also putting their existence at risk. The fund KKR and SiriusXM already injected liquidity a year ago and had to sell Ticketfly.

The rivalry is fierce in a business where new Internet services must still prove profitable, because most of their customers do not pay to listen to music. SiriusXM, however, has exclusive programs that cover all genres and during the last years put a large amount of cash to attract figures from traditional radio, such as Howard Stern.