SiriusXM, the U.S. satellite radio station controlled by John Malone’s Liberty Media, is in talks to make a strategic investment in Pandora as opposed to buying the company outright, sources tell Billboard -- a deal that would have to close imminently given the terms of Pandora's agreement with another potential investor.
Such a deal would mean relief for both Pandora and its ticketing company Ticketfly -- which had faced a less certain future in a full sale to the Liberty-controlled company, given Liberty’s stake in its competitor, Live Nation’s Ticketmaster.
The other investor, private equity firm KKR, had agreed to invest $150 million if Pandora didn't find a better deal in the 30 days ending today. SiriusXM is now proposing a larger investment, and as a music company, could be a better strategic partner, sources say. Today Pandora issued a statement saying, “KKR and Pandora agreed to a brief extension of the pre-closing period” to allow Pandora a chance to “explore interest expressed by a strategic investor in making a substantial minority investment in Pandora, in lieu of the KKR investment.”
Reuters earlier reported the potential SiriusXM investment.
For Sirius, a stake in Pandora would come with a presence on the board, sources say, and could help the company compete with other streaming services in connected cars.
For Pandora, the investment would be a lifeline as it struggles to turn a profit and works to get its subscription business off the ground.
With a proposed acquisition of Pandora by SiriusXM off the table, Pandora’s ticketing unit Ticketfly is safe at the streaming company for now -- but questions about its long-term future persist. A representative from Pandora told Billboard the company was unable to comment on the future of Ticketfly.
If a sale had gone through, it’s possible that Malone would have pushed for a sale of Ticketfly because Liberty has a significant investment in Live Nation’s ticketing platform Ticketmaster. Having both companies under the same ownership group could mean anti-trust issues for Ticketmaster, which is still operating under a U.S. Department of Justice consent decree following its 2010 merger with Live Nation.
A spinoff of Ticketfly by Pandora would likely come at a loss -- the October 2015 acquisition was originally valued at $450 million, although Pandora paid $335 million upon close in November 2015, according to an SEC filing. A sale would also undo a year’s worth of work and investment integrating Ticketfly and Pandora, creating a ticketing platform that was well received by independent promoters and seeing an uptick in new client signings including Jam Productions in Chicago and a renewal with I.M.P., which operates the 9:30 Club and the new Anthem music venue in Washington D.C.
By combining streaming data with ticket sales, Ticketfly is able to send personalized push notifications and feed alerts to fans whenever their favorite artists are playing at Ticketfly venues near them. The integration allowed Ticketfly clients to tap into Pandora’s 80 million users and use the company’s data to identity new customers and convert more listeners into ticket buyers
If Pandora does decide to spin off Ticketfly, it’s unlikely they would unwind the Pandora integration, one source within the company tells Billboard. Pandora could continue to license its data to Ticketfly post-sale and even open Pandora’s Music Genome Project to other ticketing companies.
“There is so much money and time invested in the Pandora integration, I don’t think they would just drop it,” the source tells Billboard, adding that Ticketfly haven’t been involved in the Sirius/Pandora talks and are watching from the sidelines. After the 2015 sale, Ticketfly continued to operate somewhat autonomously, keeping its offices in San Francisco across the Bay Bridge from Pandora headquarters in Oakland.
Ticketfly performed well under Pandora, generating $86.6 million in revenue in 2016, according to an earnings call in February where Pandora CEO Tim Westergren confirmed that Ticketfly was one of Pandora’s strongest units.
“In 2016, Ticketfly generated more than half a billion dollars in gross transaction value,” Westergren said on the call, including the sale of “6 million new tickets, an increase of approximately 25 percent year-over-year in gross transaction value. In total, Ticketfly sold over 15 million fee-generating tickets in 2016 to more than 5 million unique customers.”
Ticketfly has had some rough patches, too -- company officials are fighting with the investors of Pemberton Music Festival in British Columbia over $6 million in ticket funds. Last month, the festival filed for bankruptcy and instead of offering refunds, told fans they would have to apply for a refund as an unsecured creditor. It was later learned that Ticketfly had advanced $6 million to the festival’s organizers and that Ticketfly was potentially on the hook for millions in refunds, creating a potential seven-figure write down for Ticketfly amid talks at Pandora.
