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SiriusXM’s Pandora acquisition shows how fast the streaming market is growing

SiriusXM’s Pandora acquisition shows how fast the streaming market is growing

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Photo by Amelia Holowaty Krales / The Verge

Liberty Media, the parent company of SiriusXM, wants to be the sole winner in internet radio.

That’s one of two big takeaways from Liberty’s move to acquire Pandora for $3.5 billion. The other is that the 106 million monthly listeners that SiriusXM and Pandora will have when the deal closes is the first clear evidence that the streaming market will not end up in a two-horse race like PCs and Macs or iPhones and Androids. It backs up a long-held belief by many executives in the music industry that digital music will have multiple winners across different formats like on-demand streaming and internet radio — especially in different regions.

digital music will have multiple winners across different formats

The regional divisions are already forming in on-demand streaming. Apple Music is now the top streaming service the US, surpassing Spotify in active users last month. Apple Music will likely claim Japan as well, where it also holds the top spot, according to CEO Tim Cook. Spotify owns Europe, dominating its home region with decent competition from Apple and Deezer. And Tencent Music dominates in China with over 600 million monthly users and 17 million paid subscribers across three music services.

Even smaller players like Tidal are trying to carve out space: the service targeted Africa with a recent launch in Uganda, which allowed it to pick up 10.5 million users on a trial basis through a carrier deal in a market largely ignored by the bigger players.

So where does that leave Pandora and SiriusXM? While Pandora recently launched its own on-demand service, this deal is clearly about the power of online radio, where both Pandora and SiriusXM dominate the landscape. Pandora is a free service with 70 million listeners, while SiriusXM is a paid service with 36 million users; the combination gives the new company a user base that surpasses everyone except Spotify in the streaming market, and there is far less competition in radio. SiriusXM will likely look to emulate Spotify’s conversion tactics, which have allowed the company to convert 50 percent of “engaged” users on its ad-supported free tier to its premium service.

SiriusXM’s main competition will be iHeartMedia, which is the nation’s top radio broadcaster. It’s also bankrupt. (Liberty Media has also tried to buy iHeartMedia, and it still retains an interest in acquiring a stake in the company.) But while SiriusXM and iHeartMedia compete in many aspects, they each have a clearly defined audience, with 90 percent of Americans still listening to the radio at least once a week. Even if Liberty Media were to acquire iHeartMedia, there’s a case to be made that it could coexist with SiriusXM and Pandora for years to come.

SiriusXM has shown the ability to grow its paying subscriber base while turning a profit

Liberty Media is betting that the market for online radio from Pandora and the combination of personalities like Howard Stern and Kevin Hart, audio simulcasts from the major sports leagues, and talk radio that makes up SiriusXM will be enough to keep growing the service. SiriusXM has shown the ability to grow its paying subscriber base while turning a profit, something that Pandora will need to do to make this partnership work. If Sirius can leverage Pandora’s 70 million user base properly, it can continue to own the space between a full-fledged streaming service and terrestrial radio for the foreseeable future.

When on-demand streaming first came to the US, many considered it a one-size-fits-all solution to music consumption. But that consideration has rapidly fallen by the wayside, with companies like Amazon coming up with new strategies around subscription models, Pandora’s continued retention of a market that many thought wouldn’t last, and the massive number of people who still consume traditional radio on a weekly basis. While streaming in general has been a boon for the music industry, we’re rapidly moving toward a market with multiple flavors of streaming — like smart speaker-only services from Amazon, vehicle-targeted services like SiriusXM, online radio, and on-demand — all being successful in their own right.