SiriusXM said on Monday (September 24) that it would acquire the music streaming service Pandora for $3.5 billion, in a bid to corral listeners who don’t want to pay for premium channels.

The all-stock transaction is expected to allow SiriusXM to expand beyond its expertise in in-car entertainment.

SiriusXM, one of the first commercial enterprises to sell radio service through satellite systems, has been partly hampered by the high capital costs of its business. Acquiring Pandora would give SiriusXM access to the fast-growing online segment of listeners, those who prefer streaming music through mobile phones. Fewer people are listening to traditional programming, whether over terrestrial or satellite radio.

Jim Meyer, SiriusXM’s chief executive, said the acquisition would enable Sirius to try to keep listeners who did not want to pay for music by diverting them toward Pandora’s free ad-based model.

“The truth is the majority of ‘trial-ers’ ultimately decide not to pay for our service,” Mr. Meyer said. “As I’ve said many times, we would benefit from having a free funnel.”

SiriusXM has more than 36 million subscribers in North America, while Oakland-based Pandora has more than 70 million monthly active users.

Source: Slate