Liberty Media just added some more static to the shifting signals it’s been sending about its interest in buying Pandora Media.
“We think the stock is overvalued, so it’s unlikely we’re going to buy them,” Liberty CEO Greg Maffei told investors today at the Deutsche Bank Media, Internet & Telecom Conference.
“I would buy Pandora if it were not $13” a share, he told a questioner. “You want to sell it for $10? We probably would buy it. But they’re not selling it for $10.”
He noted that stock owners “have floated the idea that we’re a buyer at some price with a premium. We’re not.”
Liberty owns satellite radio provider SiriusXM and last year informally offered to pay about $3.4 billion, or $15 a share, for Pandora — which the board rejected. Pandora signaled in December that it had warned to the possibility of a deal.
Maffei’s comment today sent Pandora shares down 1.4% to $12.30 in post market trading. Last week the stock shot up after Maffei called Pandora a “great product” that’s “way under monetized.”
Maffei warns that music streaming “is a very tough market” due to the number of competitors who are in “for other strategic reasons. If I’m Amazon, I’m selling a lot of Echos and Prime services. …If I’m Apple I can discount my music services because you’re buying iPhones, and other devices. Giving away music is pretty easy.”
What’s more, terrestrial radio stations pay zero for performance rights while Pandora has to pay anywhere from 30% to 50% of its revenues for content rights.
“I’m challenged to see how it becomes an attractive, growing, profitable business,” Maffei says. Spotify has 50 million subscribers and is “still not profitable.”
Still, Maffei says he can envision some opportunities for Pandora.
“If you’re a car dealer are you want to geolocate people who are going to buy cars in Marin County, your ability to use Pandora to target them is far better than if you advertise on a San Francisco radio station which broadcasts all the way down into San Jose,” Maffei says. “That’s the dream and the opportunity….But that’s not what’s happening today.”
He remains optimistic about SiriusXM, even though it faces more competition from services including Pandora as cars connect to the internet.
As that happens, the satellite radio company can cut its payments to car companies to have exclusive connectivity access and use some of its satellite spectrum for other purposes.
What’s more, there’s “an opportunity to do more” with price increases, which in the past have “not had an impact on churn in a measurable way.”
On other matters, Maffei — whose empire with Chairman John Malone includes investments in Charter, Discovery, Lionsgate, and Liberty Global — says that “you will see more” consolidation in content.
But it’s hard to predict because so many companies in the field are controlled by families that are “happy with their business.”
There have been rumors that Verizon might want to buy Charter, the No. 2 cable operator after its acquisition last year of Time Warner Cable. But Maffei says it “would be a big price” and “I’m not sure there’s a buyer who’s willing to pay that price.”
He has big plans for Formula 1 racing, which Liberty recently bought.
The sport had been “undermonetized and undermanaged,” he says. Now under former Fox COO Chase Carey, F1 plans to become “more engaging, more accessible to a younger audience” That includes launching digital and gaming initiatives.
Maffei also wants to make the races “more competitive, more compelling, more exciting.” That should help F1 negotiate lucrative TV contracts, perhaps a direct to consumer service, and attract advertisers.
“You have to work hard not to have a Coca Cola or Pepsi to support you,” the CEO says. F1 also needs to amass more data about its audience. Heiniken, a lead sponsor, “had more data about our audience than we had. We underinvested in simple analytics.”
