Seeking Alpha

Report: Google in talks to buy Pandora rival Songza

  • The NY Post reports Google (GOOG +0.3%) is in talks to buy streaming radio service Songza; one source reports the offer price is $15M.
  • Songa's Android/iOS apps offer curated radio stations based on mood and activity - Beats Music, soon to be in Apple's hands, does something similar.
  • The company has 5.5M active users - a base much smaller than Pandora's (P +1.2%) 77M. Pandora has dipped slightly in response to the report, but remains up on the day.
  • Buying Songza would provide a shot in the arm for Google's music efforts. All signs suggest the company's Spotify-like All Access music service has seen limited uptake since launching last year.
  • A reported YouTube music service (would feature both music videos and audio-only streaming) might fare better, if Google can reach terms with music labels.
Comments (21)
  • Tom Shaughnessy
    , contributor
    Comments (1102) | Send Message
     
    On a price per user ratio, its not a bad buy when looking at Pandora's valuation.
    6 Jun, 01:41 PM Reply Like
  • stoj
    , contributor
    Comments (261) | Send Message
     
    why not pay 7B for Pandora too, sweep the market
    6 Jun, 01:46 PM Reply Like
  • blake303
    , contributor
    Comments (55) | Send Message
     
    Why would any company be interested in purchasing Pandora now for $7B when they weren't interested in buying Pandora when it traded under $10/share and was growing more rapidly?
    6 Jun, 03:50 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (166) | Send Message
     
    Why not pay 7B?!?!?

     

    If this reported deal is true, it values the Songza listener base at $2.72/user. A purchase of Pandora for $7B would value their listeners (and their thumbs) at $90.91/user.

     

    I had to double check that quick calculation to make sure I didn't slip a decimal point.
    9 Jun, 10:51 AM Reply Like
  • MrGorbochev
    , contributor
    Comments (7) | Send Message
     
    Who thinks that this will be the death of Pandora or will it be a non-event like when Google tried to out-Facebook Facebook through Google+?
    6 Jun, 01:49 PM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    LOL Pretty much Apple and Google saying Pandora isn't even worth 1B.

     

    Google saying Songza music selection algo isn't worth more than 15m (so much for genome thumb nonsense) and Apple saying twice the revenue of Pandora is worth half of Pandora value!

     

    IF THE CUSTOMERS SAYING NO TO PANDORA VALUATION, WTF ARE THESE ANALYST DOING WITH THEIR 45+ NONSENSE TARGETS?

     

    SCAAAAAAAMMMMMMMMMMMMM...
    6 Jun, 02:03 PM Reply Like
  • Joseph Dedvukaj
    , contributor
    Comments (412) | Send Message
     
    I think there will continue to be companies that purchase cutting edge technology. If they cannot innovate or if its cheaper to buy, they will continue to buy complimentary technologies.
    6 Jun, 02:04 PM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    Thank you captain obvious, but Pandora has no cutting edge technology, has no profits, has no patents, has no exclusive content, has no advantage in licensing deals, has no assets, restricted to USA and is running on 50x ER.
    6 Jun, 02:21 PM Reply Like
  • supersaverguy
    , contributor
    Comments (54) | Send Message
     
    there's just no original thinking - amzn, appl, goog, samsung .. just copying each other and buying other companies.... what ever happened to building cool stuff ??
    6 Jun, 02:59 PM Reply Like
  • duhaus
    , contributor
    Comments (307) | Send Message
     
    Exactly supersaver,
    I'm afraid the way these big rivals are all in lockstep with each other will end up burning one or more of them eventually. Apparently, in their minds they have no choice but to respond in kind to any substantial move by a rival out of fear of being left behind. I understand the basic reasoning behind this but like I said I think the compulsion to react in kind may get ahead of proper evaluation and judgement and someone is liable to make an ill advised deal just to try and keep up. That is if one or more of them hasn't already.
    6 Jun, 03:18 PM Reply Like
  • stoj
    , contributor
    Comments (261) | Send Message
     
    ofc the tech behind Pandora isn't worth 5-10B, but the user base is, since internet radio channels are so numerous and competitive, Google has the power to buy P for 6-7B and turn it into a free service like youtube. Google should also buy Soundcloud u can get that company for 1,5ish B, and incorporate both soundcloud and P into Google sound services. That's the proper thing to solve ( before driverless drones )
    7 Jun, 11:51 AM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    Google thinking of buying Songza for 15m, so your ridiculous argument has been shot down.

     

    http://bit.ly/1xxvKNP

     

    NO ONE WILL BUY PANDORA
    9 Jun, 09:35 AM Reply Like
  • dgulick
    , contributor
    Comments (1347) | Send Message
     
    Firesale! Songza is a bit player in streaming (5.5M is *total* users, not *active*, so compare it to 250M for Pandora, 40M for iTunes Radio, 40M for Spotify). But Songza is struggling to keep the lights on as they are being crushed by P's colossal lead in ad selling. Google is likely considering this deal simply as a cheap way to quickly bolster it's playlist curation (something that is quite lacking in Play Music All Access) or for Google's rumored YouTube streaming service. But even if Songza execs accept this lowball offer, I don't see this precluding Google from buying P as well (for P's genome, huge thumbs/stations data, users, lead in car dashboards and overall ubiquity, concert series and local/national ad sales team).
    9 Jun, 02:29 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (166) | Send Message
     
    Do you have anything to support your "5.5M is total users, not active" claim? Everything I see out there points to it being "active".
    9 Jun, 04:00 PM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    Google saying Pandora not worth more than 210m.

     

    EVEN IF YOU SAY SONGZA HAS LESS THAN 1M ACTIVE USERS, ITS STILL QUARTER OF A BILLION MARKET CAP VALUE FOR PANDORA.

     

    BOTH APPLE AND GOOGLE NOW CAME OUT AND PRETTY MUCH SAID PANDORA IS WORTH LESS THAN A BILLION.

     

    So get your head out of your .... dgulick and accept that NO ONE WILL BUY PANDORA IN YOUR RIDICULOUS 70-90 LOL PT.

     

    I WILL BET YOU IN THE END THIS GARBAGE FALLS BELOW 5$ AND GETS BOUGHT OUT EITHER BY SIRI OR TRITON FOR 2$.
    9 Jun, 04:11 PM Reply Like
  • dgulick
    , contributor
    Comments (1347) | Send Message
     
    @AngleSideSide,
    "5.5M is total"
    No, I don't, and I could be wrong, but there is no standard definition when it comes to calculating "active" users, and the motivation to inflate is too great, so many get quite creative. Even P metrics, which were updated monthly, only count accounts that were active in the prior month, but people share accounts (we have 3 listening to 1) and also users may listen to more than one account (to get past the 100 station limit, for example). But what is telling is iTR doesn't even provide this, just "total" users (including accidentals!), and while Spotify breaks down total from subscribers, you can't know how many of their free users are active.

     

    But only Pandora actually provides the metric that matters the most, and that is usage, i.e., hours listened. This is especially critical for the radio streamers (P, iTR, iHeartRadio, Slacker, Songza) as this is the primary metric that correlates with ad revenues.

     

    Regarding Songza, no doubt Google (and Apple for that matter) are bargain hunting, but it will turn out to be a mistake as both Beats and Songza (assuming this rumor turns out to be true) are very far behind in the streaming race. But if no one picks up Pandora, the end result will be similar to the one playing out on the television side with Netflix as the disruptor. For despite numerous competitors (ironically many of the same deep-pocketed players: Amazon Prime, AppleTV, Google/YouTube, Hulu, Vudu (WMT), HBOGo, Xbox (MSFT), Crackle (SNE), U-verse (T), Redbox Instant (VZ, though they also offer StreamPix), CMCSA (despite being a Hulu partner), they have all struggled to gain traction, despite trying to copy NFLX business plan as close as they could, sound familiar? This is precisely what they are all attempting to do to Pandora and Spotify. But their failures are largely already apparent (Apple and Google's music services haven't seen large usage).

     

    I think consolidation will continue, if P doesn't receive an equitable offer (and they may not, the arrogance and ignorance at big tech may be higher than I anticipated! Great article on how clueless Apple iTR management was until it was too late: http://bzfd.it/1oJAAmQ then I suspect P will team with an on-demand service, one with a large international presence (Spotify, Deezer?) as I think the combination of radio with on-demand will be more formidable than the stand-alone services (as it looks like Apple and Google are planning, though they are both trying anything and everything to slow P and Spotify!).
    10 Jun, 02:10 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (166) | Send Message
     
    A simple, "I made it up" would've sufficed. ;)
    11 Jun, 07:36 AM Reply Like
  • dgulick
    , contributor
    Comments (1347) | Send Message
     
    Haha, no, I deserved that, I was going off this article, but as I reread it, this looks to be Songza users in Canada only:
    http://bit.ly/SA8caa

     

    I did find an interview w Songza CEO Elias Roman where we get a glimpse at the elusive "usage" metric, Songza listeners stream "70M min/day", P streams ~40x that, or looked at another way, each of P's 77M users on average is using P 3x as much as the average Songza user (23hrs/month/user for a P listener vs. ~8 hrs/month/user for Songza listener):
    http://onforb.es/SA8aiE

     

    All of that said, if GOOG does snag them for $15M (they may have competititon: http://bit.ly/SA8cae), it does appear to be quite the deal, as you pointed out above. Though GOOG is buying a service that has had little luck competing with P (P streams ~78x the music to ~34x as many users in the US) and basically found most of its growth in Canada, a market P never entered due to unfavorable royalty rates, rates that recently came down considerably, and that P now appears to be considering entering:

     

    http://seekingalpha.co...
    "the Canadian equivalent of the CRB came back with royalty rates ... about a tenth of what what we pay. Ultimately we have to make sure the entire cost structure is accretive to the business ... to determine whether or not we enter into Canada."
    11 Jun, 05:00 PM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    Songza is being bought not for its user but mostly for its curation technology.

     

    Most likely Google wants to incorporate it in Google now to play you Google Music depending how you feel.

     

    Dgulick you clueless as always.
    11 Jun, 05:28 PM Reply Like
  • Bob Trikakis
    , contributor
    Comments (20) | Send Message
     
    Give up Google, you'll NEVER make music profitable.
    9 Jun, 03:44 PM Reply Like
  • manicdvln
    , contributor
    Comments (576) | Send Message
     
    Maybe Pandora should give up, having market lead for over 12 years and still can't make money.
    9 Jun, 04:15 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|