Sirius/XM takes $1 billion write-down on Pandora!

[davideduardo]

Per Inside Radio, Sirius/XM is taking a huge loss in the value of Pandora due to a new assessment of the royalty costs.

SiriusXM Updates Guidance, Plans $1 Billion Pandora Write Down.

SiriusXM said Friday that it added 909,000 net self-pay subscribers in 2020 to finish the year with 30.9 million self-pay subscribers, beating its most recent guidance. The company also announced

www.insideradio.com

 

[MarkW]

In hindsight, I think the acquisition of Pandora was an unwise move, at least as structured. They too much money for it. SXM's management is treating Pandora like an after-thought from a strategic positioning and marketing standpoint. I thought by now Pandora would be more fully integrated into SXM branded content offerings.

In my opinion, SXM should abandon the Pandora branding and roll the service into SXM's suite of content offerings. Take a page out of the Walmart handbook vis-a-vis jet.com.

All SXM digital app users and all Pandora digital app users should be on a unified platform.

All digital users should have the option to choose between:
- Free customizable music (ad supported)
- Premium customizable music (ad free but requires a monthly subscription fee)
- Sirius XM curated music, talk & sports content (basically, the existing Sirius XM channel line up) at various package levels.

 

[TheBigA]

The stock took a dive on the news. This may be part of why Jim Meyer is "retiring." They overpaid. We see people say that about radio companies all the time. If Liberty in fact moves forward with the purchase of iHeart, it'll be even more interesting to see how they integrate their businesses.

 

[TheBigA]

- Sirius XM curated music, talk & sports content (basically, the existing Sirius XM channel line up) at various package levels.

Jim Meyer has been opposed to that, because he feels it will lead to the end of satellite radio. The satellite radio model is far more profitable than online radio. They need to protect the profit center.

 

[Kelly A]

SXM assumed they could apply the royalty fee structure negotiated with satellite radio for Pandora. Problem was, (Diamond) Jim Meyer forgot that Pandora already was getting crushed by music streaming fees prior to the purchase. Wrong assumption.

 

[MarkW]

He dropped the ball - no question about it.

Given the terrible job SXM has been doing of integrating Pandora, I am quite skeptical about any ability to assimilate iHM. Not to mention, commercial terrestrial radio's business model is so horribly outmoded that I'm not sure why anyone would feel integration of iHM would make SXM a stronger company.

Now, if SXM were interested in peeling off specific parts of iHM, perhaps that would be different.

Jim Meyer has been opposed to that, because he feels it will lead to the end of satellite radio. The satellite radio model is far more profitable than online radio.

His opposition to making SXM content more easily accessible to a captive audience is incredibly foolish. Satellite radio makes money from folks subscribing to its CONTENT. The means of accessing such content should not be terribly relevant. SXM already has plenty of digital methods by which to access its content. Having Pandora and SXM's digital content in separate silos is silly. Again, I point back to the jet.com and walmart.com example.

 

[TheBigA]

Given the terrible job SXM has been doing of integrating Pandora,

They really haven't integrated Sirius & XM yet. There's still a lot of duplication, some of it by necessity.

Having Pandora and SXM's digital content in separate silos is silly.

They have to be separate silos because they're covered by two different regulatory systems, and two different royalty structures.

 

[Kelly A]

In hindsight, I think the acquisition of Pandora was an unwise move, at least as structured. They too much money for it. SXM's management is treating Pandora like an after-thought from a strategic positioning and marketing standpoint. I thought by now Pandora would be more fully integrated into SXM branded content offerings.

Considering Pandora was on the verge of insolvency, they probably did pay too much. That said; 'Diamond Jim' was in a pickle. After a long, protracted battle with regulators, Sirius and XM merged but nothing from a profitability and cost cutting standpoint changed. SXM had hit a wall when it came to the mass hoped of new subscribers. Rightfully so, the future looked like streaming, but how to get around the royalties that plagued Pandora? Do like iHeart, and start your own streaming platform that carried mostly existing radio properties so the royalty payments for radio would carry over. Problem is, not only were the streaming royalties a lot more than traditional radio, there was a snowballs chance in Hell that Sound Exchange would allow the seizing of a large cash cow like Pandora forcing lower streaming rates. As BigA said, technically Pandora is a division of SXM, which made the delineation of Satellite Radio and Streaming separate business entities under one corporate umbrella.

Right after the acquisition, there was a lot of promoting Pandora on SXM. The problem was internally, Satellite Radio felt the new kid in the building was cannibalizing the flagship, so there was some additional distancing, moving Pandora promotion to on-line and app, and less satellite.