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Sirius XM acquires Pandora for $3 billion

In a recent study conducted by MusicWatch, a team of data scientists measured the top online music streaming platforms, which together are driving the music industry. Pandora, which accounts for a small piece of that pie, made the list. Perhaps that is why Sirius XM is betting on Pandora in it’s purchase of the music streaming platform for $3 billion, according the Wall Street Journal.

The deal comes one year after the satellite radio company invested $480 million in Pandora, giving Sirius XM Holdings Inc. a 19 percent stake in the music streaming platform. The move is beneficial to both companies in a number of ways.

First, it diversifies Sirius XM’s offerings to online music streaming. The acquisition stands to move Sirius XM from streaming done mostly in the car to an on-demand music streaming company that can be done anywhere, anytime. Second, the merger benefits both companies in terms of their negotiating power with major labels and other music royalties holders. Third, the buyout ups both companies’ user bases to compete with leading rivals in the music streaming wars. Currently, Pandora’s user base sits at 74.7 million with Sirius XM’s paid subscriptions sitting at 36 million users, giving them a combined 110 million users.

As a matter of comparison: At the end of June, Spotify boasted paid subscriptions at 83 million users. Apple Music reported 70 million users at the close of Q3, although CEO Tim Cook said music streaming isn’t the major concern of his now $1 trillion company. Apple Inc. recently bought Shazam for $400 million to better integrate it’s vocal recognition software into iPhone‘s Siri function.

Once the deal finalizes, the newly integrated company will have a total net worth of $30 billion, which puts them over the top of Spotify’s $23 billion valuation after they went public earlier this year.

H/T: The Wall Street Journal