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How Will Pre-1972 Lawsuit Affect Sirius And Pandora?

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In a report published Monday, SunTrust Robinson Humphrey analyst Robert S. Peck maintained a Buy rating on Pandora Media Inc (NYSE: P).

Sirius XM Holdings Inc. (NASDAQ: SIRI) announced that it would pay $210m to five record companies to settle a lawsuit related to the use of pre-1972 sound recordings.

"The settlement covers all SIRI plays of the respective sound recordings to date (since 2002) and grants continued access through 2017 without further payment (covers ~16 years in total). Further, the settlement guarantees SIRI access to the respective sound recordings from 2018 through 2022 at a rate determined either via direct negotiation or binding arbitration."

Pandora faces similar litigation as Sirius. Analyst Robert Peck added, however, that any settlement involving Pandora was unlikely before the pending CRB rate decision due to "potential precedent as a rate per track benchmark." While the pre-1972 sound recordings could be "a point of negotiation" in any direct deals between Pandora and the record companies, this would be post CRB.

Any Pandora settlement would likely be less than the $210m to be paid by Sirius, which equates to less than $1 per Pandora share, with the company having $481m in cash and no debt. In case Pandora needs to ultimately pay the same rate per track for the pre-1972 sound recordings that it does for the post-1972 ones, this would lower the EBITDA estimate for 2016 from $185M to $157M, Peck said.

Latest Ratings for P

Oct 2016Bank of AmericaDowngradesNeutralUnderperform
Oct 2016Credit SuisseMaintainsNeutral
Oct 2016Goldman SachsMaintainsBuy

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Posted-In: SunTrust Robinson HumphreyAnalyst Color Reiteration Analyst Ratings


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