In this segment from the Motley Fool Money radio show, host Chris Hill and Million Dollar Portfolio's Jason Moser discuss the rumors that Sirius XM (SIRI -0.46%) is courting Pandora Media (P) -- not the first time such stories have made the rounds on Wall Street, it's worth noting. Good buy? Bad buy? Who benefits? And which side needs a deal like this more?
A full transcript follows the video.
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This video was recorded on May 19, 2017.
Chris Hill: On Thursday, shares of Pandora spiked on reports of a potential deal with Sirius XM. This is not the first time Sirius XM has flirted with the idea of buying Pandora. What do you think, Jason? Match made in heaven?
Jason Moser: Well, maybe I wouldn't quite go that far.
Hill: Match made in purgatory?
Moser: A match made somewhere. I feel like a deal here could probably make sense from a perspective that Pandora does, I think, possess some brand equity, through all of its shortcomings. And there have been a lot. I do think they possess some brand equity that could be meaningful to Sirius XM in the internet radio space, as we start to see competition ramp up and consolidation occur. But, I think Pandora needs this deal, or a deal to happen far more than the other way around. They are in a position where they're going to be kind of a desperate seller at this point, which is great for the acquirer. They can more or less name their price. Whether it's $10 a share or $9 a share, who really knows? Sirius XM has to start thinking about life after Howard. They have about three and a half years. He is responsible for a lot of the subscription growth, a lot of the subscriber growth, there. Now, Pandora probably isn't going to bring in a lot of paid subs, but it does have a lot of free listeners, and those listeners are OK being subjected to some advertising. So, Pandora can make some money on the ad side, and it may just be a nice little addition. You tuck that thing into Sirius, you can mask those financials for a while, and get some better operators setting that thing up for better success.
Hill: They need to think about life after Howard Stern. But I think Sirius XM might be taking a closer look at this, because they're also thinking about life outside the car. If you just think about Sirius XM and the majority of consumption of their programming, it's in the car, whereas Pandora, it's outside the car. So, this may be a way for Sirius XM to really get more into people's homes.
Moser: It could be. But by the same token, I think Sirius XM has made tremendous progress on their outside-the-car initiative, the app that they have that you can keep on your phone, it gives you access to their entire catalog of offerings, as well. I use it all the time, it's really terrific. Although, I think you're right, Pandora could couple very nicely with that.