Pandora Is Paying $75 Million to Buy a Bankrupt Rdio

firedance

Pandora is burning an epic pile of cash.  Rdio has already burnt theirs.  Which brings us to the latest music industry acquisition: a $75 million acquisition of a bankrupt streaming music platform by a cash-hemorrhaging streaming radio platform.  Seems like a pretty awesome idea!

In its multi-year tenure, Radio achieved virtually zero traction against Spotify, and plunged into bankruptcy as a result despite $125 million+ in financing.  Now, the woefully-underperforming Rdio is being plucked out of bankruptcy by Pandora for $75 million, with technology and personnel the acquisition ‘assets’.

“I couldn’t be more optimistic about Pandora’s future and the future of music.”

A huge question is where this cash is coming from: after massive royalty charges and a questionable $450 million acquisition of Ticketfly, Wall Street is starting to bum-rush the exits on a potential sinkhole.  Over the past three months alone, shares of Pandora (P) are down more than 32 percent, with overspending and royalty uncertainties curbing the enthusiasm.

Brian McAndrews, Pandora CEO, sees this as part of an aggressive, blue-sky expansion.  “We are defining the next chapter of Pandora’s growth story,” McAndrews stated against the warm, crackling noise of a bonfire in the background. “Adding live music experiences through Ticketfly was a transformative step.  Adding Rdio’s impressive technology and talented people will fast-track new dimensions and enhancements to our service.   I couldn’t be more optimistic about Pandora’s future and the future of music.”

“Pandora is not acquiring the operating business of Rdio, it is acquiring the technology and talent to accelerate its own business strategy.”

The final purchase comes with plenty of strings attached, including a successful Rdio bankruptcy proceeding.   That will allow Pandora to strip out the nasty, money-draining overhead and operational costs that got the company into trouble in the first place.  “The transaction is contingent upon Rdio seeking protection in the United States Bankruptcy Court for the Northern District of California,” a Pandora statement continued.  “Upon approval of the proposed transaction by the bankruptcy court, Rdio will be winding down the Rdio-branded service in all markets.  Pandora is not acquiring the operating business of Rdio, and is acquiring the technology and talent to accelerate its own business strategy.”

Pandora pointed to the launch of its “expanded listening experience” by the end of 2016, which would presumably include an Rdio integration.

 

20 Responses

  1. RDO

    Eagerly awaiting commentary from that dude that raves on about the $100 bn in potential revenue from charging users to find out what song they’re listening to.

    • smg77

      You mean you don’t believe that charging a per-use fee for Shazaam will save the music industry, cure cancer and solve world hunger? What kind of a monster are you?

  2. Jeff Robinson

    According to my latest Mechanical Royalty statement from Music Reports, Rdio had only 4,703 subscribers in September. Pandora should just fold the service like a Private Equity company.

    • Jeff Robinson

      Quick delineation, 4,703 for what they call Stand-alone Non-portable subscription – Streaming Only.

      They also show 95,310 subscribers for they deem Stand-Alone Portable Subscriptions.

      Sorry for the confusion.

        • Sigh...

          What a label said, below.

          RDio had far more subscribers than this.

          I imagine the 4,703 for Stand-alone Non-portable subscription – Streaming Only and 95,310 for Stand-Alone Portable Subscriptions Jeff is seeing represent the only areas where his stuff got played interactively.

          Those are classifications of interactive services (of which RDio had several different types, among others) that generate mechanical royalties under the compulsory mechanical license.

          • Anonymous

            I’m not so sure. The company reported took in ~$1.5 million per month in subscription revenue. At $10 per month, that works out to 150k paying subscribers. Granted they did have some lower tier subscribers but assuming even 20% of their subscribers were on lower tiers which is unlikely, that still wouldn’t put them at very many subscribers.

          • Jeff Robinson

            Exactly.

            Paul, I can’t print anything from the spreadsheet- or send you a spreadsheet as it’s sort of an embedded thing that Music Reports does through their site. I just pulled numbers from what was displayed. As these are Mechanical Statements, these take into account the TOTAL user base as pay rate is calculated from there.

    • a label

      Not sure where you get your numbers from, Rdio had a little under 300k subs worldwide and many millions free/ad-supported listeners. If you ever got a royalty statement you would know that.

    • Paul Resnikoff

      We’ve already seen the disappearance of the Zune music service (whatever it was called), Beats folding into Apple (consolidation), then Muve (sold into Deezer). That’s the early stuff, this space will continue to consolidate around a small number of large, dominant players, who themselves will struggle to make the financials make sense.

      • Anonymous

        Zune was more or less folded into Xbox music which has become something else within the last couple months.

        • Jeff Robinson

          Zune still works on my PCs. Nothing has changed with that service. I know they said they were ending it, but it appears nothing has changed- YET.

      • Others

        Launchcast to Yahoo!; Napster to BMG, then to Best Buy, then to a JV with RealNetworks and Rhapsody, then just made part of Rhapsody; LaLa to Apple, MOG to Beats (before it all went to Apple); Sony’s “Click Play” or whatever it was called being transformed into Sony Network Entertainment (i.e. the Playstation); MSpot into “Daisy” then re-named “Milk Music” (i.e. Samsung)…

        Am I dating myself?

  3. blahblahblah

    I think it may be a good purchase if Pandora hopes to compete in the streaming world. I prefer Rdio to Spotify and actually pay to use it. Still, I think the music biz is irreparably screwed.

    • Anonymous

      It’s a good purchase but if they are truly not buying the customers then they are vastly over paying.

  4. powpow

    Typical music industry decisions… move along here nothing to see…

  5. Anonymous

    I’m just glad to see Rdio die. Fuck them and their refusal to add features customers demand because “it’s not social” and didn’t fit their crappy business model destined to fail from the get go.

  6. Rick Shaw

    This kind of thing always reminds me of the picture where they are two hippos in a small boat.