Believe it or not, more than 70 million people in the United States still use Pandora every month. The company has had the stench of an expired tech relic for a while now, with a moribund stock price, a declining user base, and a sideline role in the celebrity-fueled streaming wars of 2016. But Pandora figured out early on what many customers really want out of an online streaming service: a hands-off experience that’s as simple as turning on the radio. The company’s problem was that it could never convince users to pay for it.
Enter SiriusXM, which announced on Monday that it’s acquiring Pandora Media for $3.5 billion in an all-stock deal (Sirius had already bought a 19 percent stake in Pandora last year). Sirius has proved more adept than any other company in turning radio, a previously free service, into something more than 36 million people pay more than a hundred dollars per year to enjoy. Combined, the two companies will potentially have more than 100 million users and the only audio platform with significant penetration in cars, living rooms, and mobile devices at the same time. In its press release announcing the Pandora deal, Sirius was eager to tout itself as the “world’s largest audio entertainment company.”
This level of consolidation is a far cry from the online music world of just a few years ago. Even in that period, when iTunes was the world’s largest music retailer, digital music was a chaotic free-for-all that included piracy (BitTorrent), quasi-piracy (Grooveshark), and legal services that mimicked the limitless abundance of piracy (Spotify, Beats Music, Rdio, Rhapsody). Finding new music was messy but also built around spontaneity. It was part scavenger hunt, part virus gamble, and part testing the limits of your own musical taste.
Pandora, with its algorithmically driven radio stations, and Sirius, with its talk show personalities and celebrity-branded channels (think The Howard Stern Show, Kevin Hart’s Laugh Out Loud Radio, and Eminem’s Shade 45), offer a more curated, less adventurous experience. They have historically been for the Olds, basically, those who know what they want and desire services that deliver content as efficiently as possible. But now that desire seems to apply to music fans of all ages: In the last three years we’ve seen Spotify rebuild its entire business model around personalized playlists and Apple turn celebrity-backed radio shows into a major selling point of its streaming service. The Pandora and Sirius experiences have already merged, more or less, within the Spotify and Apple Music apps. It makes sense that the companies themselves would merge as well.
For record labels, SiriusXM’s acquisition of Pandora is the latest worrying sign that they will eventually be subject to the whims of tech platforms rather than the other way around. In the always-fraught royalty negotiations between labels and tech companies, Sirius and Pandora sometimes landed on opposing sides of an argument. This year Pandora supported new federal legislation requiring digital radio services to pay for recordings made before 1972, while SiriusXM opposed it. The combined company will likely take Sirius’s side in such disputes in the future.
It’s not just Sirius and Pandora that are attempting to gain more leverage over labels. Last week Spotify announced a new program to allow independent artists to upload music directly to the platform, without going through a record label. Spotify has consistently denied reports that it wants to become a record label, but it also has a stated goal of “giving a million creative artists the opportunity to live off their art.” What the company really wants is to make the entire concept of a record label outdated. In Spotify’s dream scenario, musicians are more like YouTube stars, splitting revenue directly with Spotify but not signed exclusively to the company’s roster. That way Spotify still gets new tracks to power its playlists but lowers its costs to rights holders like Sony or Universal.
Right now circumventing the labels feels like a far-off bet — the Chicago rapper Noname was the biggest name that Spotify dropped in a blog post announcing the new direct-upload feature. But every time the music industry gets more centralized through a major merger or an independent competitor goes belly-up, the alternatives to aligning with the aims of a Spotify or SiriusXM-Pandora feel a little more remote. SiriusXM itself is the result of a merger between two competing satellite radio companies, and Pandora will arrive at Sirius with the remnants of Rdio, the streaming service it acquired in 2015. When the music industry was in free fall, there was a sense that the era of the gatekeeper was over. Turns out we may have just traded an old regime for a new one.