The Industry

How SiriusXM’s Purchase of Pandora Could Change the Balance of Power in the Music Industry

 Lord Huron performs a Pandora show.
What does this mean for artists, though? Jeff Schear/Getty Images

SiriusXM, the digital radio platform with more than 36 million subscribers, announced on Monday that it plans to buy Pandora, which, with its nearly 75 million active listeners, remains one of the largest streaming music companies in the business. The $3.5 billion deal would create what the company says will be the largest audio entertainment corporation in the world.

While Pandora isn’t usually mentioned in the same breath as Spotify and Apple Music anymore, SiriusXM has been eyeing it for a while, presumably because it fears losing its edge in an industry being transformed by on-demand music streaming and podcasts. Last year, Sirius paid $480 million for 19 percent of Pandora’s stock, a deal soon followed by the ouster of Pandora co-founder and CEO Tim Westergren. The company, which has struggled as advertisers and listeners have migrated to other streaming services, continued hemorrhaging a tremendous amount of money. Pandora lost $221 million in the first half of this year.

Unlike its competitors, Pandora operates primarily by sending songs to listeners based on suggestions generated from an algorithm, rather than letting users pick individual songs. In one way or another, all three platforms do a lot of recommending to their listeners, which inevitably invites scrutiny of how they do it. Pandora’s particularly opaque style of curation gives it even more leeway to potentially guide listeners to the songs that are most advantageous to the platform due to its deals with music publishers. Spotify and Apple Music are also able to offer preferential treatment to certain songs and artists thorough playlists and their radio stations, though the gatekeeping isn’t as severe. Still, as music listening further consolidates within the walled gardens of these services, the ways these companies chose to leverage their audiences will continue to help shape which artists are able to succeed in the music and radio business.

This isn’t an out-there fear. In 2008, when Sirius merged with XM, another satellite radio company, federal regulators made the two companies agree to a series of conditions before approving the deal in order to avoid too much consolidation in the space. Those conditions, which only lasted for three years, included a provision that a percentage of the new company’s channels go to noncommercial and minority broadcasters. In 2016, long after those conditions expired, SiriusXM stopped broadcasting eight of its 10 Latin music stations.

“Musicians have experienced ownership consolidation in almost every part of their business for the past 25 years,” said Kevin Erickson, director of the Future of Music Coalition, a think tank that works on music-business issues. “It’s very hard for us to find instances where that consolidation has worked out for the benefit for musicians or listeners, and we hope that regulators look at this closely.”

Music streaming platforms are increasingly flexing their power in ways that could become alarming down the road. Last week, Spotify unveiled a new feature that allows artists to upload their music directly to Spotify and access Spotify’s 83 million paid subscribers, for free, in the vein of SoundCloud. At the moment, the feature is only available to “few hundred U.S.-based independent artists,” but plans to expand beyond that are imminent. While Spotify opening its platform for artist uploads is certainly a boon for musicians looking to gain a larger audience, it’s also a way for Spotify to bypass labels or other music aggregators and potentially pay artists less for the music they provide. Right now, getting on Spotify typically requires deal-making via a label or via the help of an aggregator service, like CD Baby or TuneCore, which represent various catalogs of musicians and negotiates with music streaming services on their behalf.

Those services weren’t exactly middlemen. They provided collective-bargaining power and ways for independent musicians to negotiate better terms. By carving out a new path for artists to upload directly, Spotify isn’t simply mimicking SoundCloud in an effort to quash competition, it’s also inviting artists to deal with the company directly and alone. If this system becomes the new norm, “Only artists on the individual level may have the ability to even be at the table,” said Erickson.

Does a hybrid Sirius-Pandora augur the kind of industry consolidation artists should fear—or could it lead to a healthier market if it is able to rival Apple Music and Spotify? “The music industry as a whole has become deeply dependent on revenues from Spotify and Apple Music,” said David Lowery, a music business lecturer at Georgia University (and founder of the bands Camper Van Beethoven and Cracker). “The financial stabilization of Pandora as a third streaming option is probably positive to artists.”

Yet there are reasons the merger should not comfort working artists, either. Liberty Media, the holding company that owns Sirius XM, is also a major shareholder in Live Nation, which merged with Ticketmaster in 2010. Greg Maffei, the CEO of Liberty Media, is currently the chairman of Pandora, Sirius XM, and Live Nation Entertainment. The deal “effectively brings these three companies together,” Lowery said. “This could be anti-competitive in the concert industry—or not. For instance, my bands enjoy significant SiriusXM play. Cross-promotion could enhance revenues of many midtier artists. But honestly that’s an unknown.”