SiriusXM-Pandora Future Is 'Compelling' in 'Benign' Market, Says Analyst

The future of SiriusXM-Pandora is “compelling,” amid a “fairly benign” competitive landscape, wrote Macquarie Capital analyst Amy Yong in an investor note Wednesday night. Competitor promotions were minimal in Q3, though Spotify’s pending initial public offering is generating excitement as financial details emerge showing 60 million-plus subscribers and 140 million-plus active users, said Yong. Pandora was the headliner in the quarter, though, giving away three free months of Premium through T-Mobile’s Tuesday customer appreciation giveaways, contributing to its position as top-grossing app at the Apple Store, she said. The beginning of cross-pollination between satellite and digital includes ideas to expand each other’s mobile and car presence, with Pandora leveraging SiriusXM content, she noted. Sirius could benefit from a Hurricane Harvey effect as damaged vehicles will drive an upswing in new car sales that include a free trial period before customers are converted to a paid subscription, she said. Pandora, with a new executive team's “well-articulated plan,” and no longer burdened by Ticketfly, can “refocus its attention on finding the perfect balance of ad/subscription," Yong said. Pandora controls about two-thirds of U.S. audio and is focused on improving monetization through targeted ads. She cited the Video Plus offering where advertisers pay only when users watch, along with Pandora’s plans to offer content outside of music, leverage voice-enabled speakers and engage the 25 million listeners that currently don’t meaningfully drive ad revenue. Recently named Pandora CEO Roger Lynch will bring “valuable insight, as he built and scaled Sling TV under a tight, cost-controlled environment,” she said.