Meyer (pictured) was full of beans when speaking to analysts on an earnings call today (January 30), and understandably so: Sirius just posted a record annual net profit of $1.18bn for 2018, nearly doubling the equivalent income number from the year before.
The executive explained that he had “a ton respect for Roger Lynch and the masterful job he has done at Pandora over the last 16 months”.
Ultimately, though Lynch is being ousted due to Meyer making “a decision to immediately consolidate [Pandora’s] G&A functions and have the business units report directly to me”.
Meyer explained exactly why Sirius has snapped up Pandora – and what the music business can expect in the wake of the deal…
1) Combined Reach
At the close of 2018, Sirius (which is available in the US and Canada, plus Puerto Rico) counted 34 million subscribers on its platform, while there were 69 million active listeners on Pandora (which is only available in the US) at the end of Q3.
“The combined [Sirius and Pandora] company will reach over 100m listeners in North America, with nearly 40 million self-paying subscribers and 75 million trailers – trialers and ad-based listeners,” said a confident Meyer today.
“The North American audio market is the most influential in the world. The suite SiriusXM and Pandora bring to content creators and advertisers is a powerful promotional platform.”
He added: “Together, the SiriusXM and Pandora brands are uniquely positioned to lead a new era of audio entertainment by delivering the most compelling subscription and ad-supported audio experience to millions of listeners in the car, at home and on the go.”
2) Projected cost savings of over $50m a year
“We plan to close the Pandora transaction on Friday, and we will hit the ground running,” said Meyer. “I’ve made a decision to immediately consolidate the G&A functions and have the business units report directly to me. My goal is to streamline decision-making, increase the speed of integration and manage the businesses holistically from day one.
“As we move closer to the combination, we are seeing increased opportunities for cost saving. By the end of next year [2020], these cost synergies should exceed a run rate of $50 million per year.”
3) Harvesting user data – and cross-selling
“With our massive audience, particularly from the Pandora side, comes a tremendous amount of listener data that will be invaluable as we grow the combined company in the future,” said Meyer, stating that, based on Sirius research, “approximately half the owners of the SiriusXM-enabled vehicle fleet have used Pandora in the past two years… this is incredibly powerful.”
“approximately half the owners of the Sirius XM-enabled vehicle fleet have used Pandora in the past two years… this is incredibly powerful.”
He added: “Data from Pandora can significantly improve our understanding of these users’ preferences and behaviors when it comes to music listening. This kind of data should help us refine our marketing efforts for retention, conversions, win back as well as our streaming experience for SiriusXM subscribers over time.”
Meyer hinted that Sirius will soon offer consumers audio packages that combined its service with Pandora, which would bring together “SiriusXM’s in-vehicle position with Pandora’s strong position out of the vehicle”.
He added: “There are strong prospects for cross-promotion across our combined North American audience. Quite simply, I’d like to monetize at some level every single one of the close to 23 million SiriusXM trials we are running annually. Over the next decade, the vast majority of Americans will have experienced one of these trials, and I am thrilled to now have a complete stack of compelling offerings to offer consumers, from paid to free.”
Those offerings include: Pandora’s free tier; its limited subscription $4.99-a-month tier; its fully interactive $9.99-a-month tier; Sirius’s own packages, which range from $10.99-a-month up to $20.99-a-month and beyond; plus any combination of Sirius and Pandora.
“In early February, we will begin a targeted promotion to SiriusXM subscribers and Pandora listeners. Select Pandora listeners will receive an offer to obtain a unique $5-a-month Mostly News, Mostly Music or News Talk [Sirius subscription] package in their satellite-equipped vehicle.”
Meyer further revealed: “In early February, we will begin a targeted promotion to SiriusXM subscribers and Pandora listeners. Select Pandora listeners will receive an offer to obtain a unique $5-a-month Mostly News, Mostly Music or News Talk [Sirius subscription] package in their satellite-equipped vehicle.
“SiriusXM subscribers will also receive an extended 14-day trial to Pandora Premium. By mid-year, we expect to deliver a new Pandora-powered channel to our SiriusXM app users based upon their favorite artist and a new radio channel, driven by the latest trend from Pandora’s billions of thumbs.
“This is just the beginning. We expect over time to create new, unique audio packages that will bring together the best of both services, creating a powerful platform for artists to reach their fans and to create new audiences.”
4) Sirius believes it can ‘Fix’ Pandora’s declining user base and listening hours
Pandora’s recent listener decline tells a torrid tale.
The firm’s active users in Q3 2018, at quarter close, stood at 68.8m. In the prior year, that figure stood at 73.7m (not including Pandora’s now-closed Australia and New Zealand audience).
In Q3 2018, Pandora’s total quarterly listener hours were 4.81bn. The year, in Q3 2017, that listener hours number stood significantly higher, at 5.15bn.
“Without a doubt, the biggest challenge at Pandora is clearly related to active users and, even more importantly, listener hours,” said Meyer today.
“This is going to be a tremendous focus for my management team in 2019 and beyond. The biggest opportunity for change here is through improved content and marketing. The launch of Pandora’s slate of podcasts is a great first step, and I’m confident Scott Greenstein and his team will add immediate value here.”
“the one flashing light that you got to worry about is the decline in listening hours, and we are very focused on that. We believe, deep in our gut, that metric is fixable.”
He added: “There is a lot I love about Pandora. I’m thrilled we’re going to close this thing on Friday and hit the ground running… 15 minutes later. But the one flashing light that you got to worry about is the decline in listening hours, and we are very focused on that.
“We believe, deep in our gut, that metric is fixable… first and foremost, by making the entertainment experience more compelling and by adding more content… [we must tell] that story well to attract listeners, both into the funnel, and once listeners come into the funnel, will stay there longer and listen more.”
5) Certainty
Meyer commented: “The Pandora team, for the last three or four years, has been constantly faced with the question of, Where are you going? What’s going to happen to Pandora? Are you going to sell the company? All those questions.
“Those are all done now, okay? That’s done. At the heart of where we are is getting back the focusing on the fundamental metrics of the business, particularly listening hours and [working] on improving those.
“It won’t be easy, but I’m confident we can do it.”Music Business Worldwide
