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.