The Liberty SiriusXM Group, through its subsidiary, Sirius XM Holdings Inc. (Sirius XM Holdings), engages in entertainment business. The company is a subsidiary of Liberty Media Corporation.
As of December 31, 2021, the company owned approximately 81% of the outstanding equity interest in Sirius XM Holdings. Sirius XM Holdings operates two complementary audio entertainment businesses, Sirius XM and Pandora. Sirius XM Holdings also focuses on various content categories, such as podcasting.
Siri...
The Liberty SiriusXM Group, through its subsidiary, Sirius XM Holdings Inc. (Sirius XM Holdings), engages in entertainment business. The company is a subsidiary of Liberty Media Corporation.
As of December 31, 2021, the company owned approximately 81% of the outstanding equity interest in Sirius XM Holdings. Sirius XM Holdings operates two complementary audio entertainment businesses, Sirius XM and Pandora. Sirius XM Holdings also focuses on various content categories, such as podcasting.
Sirius XM
Sirius XM features music, sports, entertainment, comedy, talk, news, traffic and weather channels and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis. Sirius XM’s premier content bundles include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through its two proprietary satellite radio systems and streamed via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and its website. The Sirius XM service is also available through a user interface called ‘360L’, which combines Sirius XM’s satellite and streaming services into a single, cohesive in-vehicle entertainment experience.
Sirius XM’s primary source of revenue is subscription fees, with most of its customers subscribing to monthly, quarterly, semi-annual or annual plans. Sirius XM also derives revenue from advertising on select non-music channels, the direct sales of Sirius XM’s satellite radios and accessories, and other ancillary services. As of December 31, 2021, Sirius XM had approximately 34.0 million subscribers.
In addition to Sirius XM’s audio entertainment businesses, it provides connected vehicle services to several automakers. These services are designed to enhance the safety, security and driving experience of consumers. Sirius XM also offers a suite of data services that includes graphical weather, fuel prices, sports schedules and scores and movie listings, a traffic information service that includes information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems, and real-time weather services in vehicles, boats and planes.
Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada Holdings Inc. (Sirius XM Canada).
Pandora Media, LLC (Pandora)
Pandora operates a music, comedy and podcast streaming platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, car speakers or connected devices. Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content, as well as search and play songs and albums on-demand. Pandora is available as an ad-supported radio service, a radio subscription service (Pandora Plus), and an on-demand subscription service (Pandora Premium). As of December 31, 2021, Pandora had approximately 6.4 million subscribers.
The majority of revenue from the Pandora business is generated from advertising on Pandora’s ad-supported radio service. Pandora also derives subscription revenue from its Pandora Plus and Pandora Premium subscribers.
The Pandora business also sells advertising on audio platforms and in podcasts unaffiliated with Sirius XM Holdings. Pandora has an arrangement with SoundCloud Holdings, LLC (SoundCloud) to be its exclusive U.S. ad sales representative. Through this arrangement, Pandora offer advertisers the ability to execute campaigns in the U.S. across the Pandora and SoundCloud listening platforms. In addition, through AdsWizz Inc. (AdsWizz), Pandora provides a comprehensive digital audio and programmatic advertising technology platform, which connects audio publishers and advertisers with a variety of ad insertion, campaign trafficking, yield optimization, programmatic buying, marketplace and podcast monetization solutions. Pandora, through its Simplecast business, also offers a podcast management and analytics platform. Simplecast complements AdsWizz’s advertising technology platform, allowing the company to offer podcasters a solution for management, hosting, analytics and advertising sales.
In 2020, Sirius XM Holdings also acquired Stitcher and its Midroll advertising network from the E.W. Scripps Company. Stitcher engages in the distribution of podcasts and serves as the ad sales representative for many podcasts, including Oprah’s Super Soul, Freakonomics Radio, Office Ladies, Your Mom’s House, Hidden Brain and Conan O’Brien Needs a Friend.
The Sirius XM Business
Programming
Sirius XM offers a dynamic programming lineup of commercial-free music plus sports, entertainment, comedy, talk, and news, including an extensive selection of music genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin and classical; live play-by-play sports from major leagues and colleges; a multitude of talk, entertainment and comedy channels for a variety of audiences; a wide range of national, international and financial news; and exclusive limited run channels. The channel lineups for its services are available at siriusxm.com.
Streaming Service
Sirius XM’s streaming service includes a variety of music and non-music channels, including channels that are not available on its satellite radio service, and podcasts. Sirius XM offers applications to allow consumers to access its streaming service on smartphones, tablets, computers, home devices and other consumer electronic equipment.
Sirius XM’s streaming product features a range of music, sports, talk, news and entertainment channels available on satellite radio; access to over 200 additional music channels, which it refers to as Xtra Music Channels; and video content, including video from The Howard Stern Show and performances and interviews from Sirius XM’s archives, including in-studio performances and behind-the-scenes moments with artists, personalities and newsmakers.
Sirius XM’s service also includes a library of podcasts, some of which are exclusive to its service, and other on demand content. Sirius XM’s streaming service offers its subscribers the ability to choose their favorite podcast episodes from a catalog of content, as well as select material from a growing library of podcasts Sirius XM is assembling.
Sirius XM’s streaming service is included as part of the majority of Sirius XM’s packages, including the Music and Entertainment and Platinum plans. The Personalized Stations Powered by Pandora feature, which allows subscribers to create their own customized commercial-free music stations within the Sirius XM app, is offered to consumers as part of the price of Sirius XM’s Platinum and Platinum VIP plans. Sirius XM also offers its streaming service in several standalone packages, which does not include a satellite radio subscription. These packages, which include the Streaming Platinum Plan and the Streaming Music and Entertainment Plan, are available to consumers at various prices and include a variety of content.
Sirius XM has entered into agreements with third parties designed to increase the distribution and ease of use of its streaming service, including through connected devices. Sirius XM also has various arrangements with various services and consumer electronics manufactures to include the Sirius XM streaming functionality with their service and devices.
360L
Sirius XM’s next generation automotive platform, which it calls ‘360L’, combines Sirius XM’s satellite and streaming services into a single, cohesive in-vehicle entertainment experience. Sirius XM has agreements with many automakers to deploy its 360L interface in a variety of vehicles. 360L allows Sirius XM to take the advantage of advanced in-dash infotainment systems. 360L is intended to leverage the ubiquitous signal coverage and low delivery costs of Sirius XM’s satellite infrastructure with the two-way communication capability of a wireless streaming service to provide consumers seamless access to Sirius XM’s content, including Sirius XM’s live channels, on demand service, podcasts and more personalized music services. The wireless streaming connection included in 360L enables enhanced search and recommendations functions, making discovery of Sirius XM’s content in the vehicle easier. In certain cases, 360L also allows consumers to manage aspects of their subscriptions directly through their vehicles’ equipment and provides Sirius XM data on how subscribers use Sirius XM’s service.
Distribution of Radios
New Vehicles: Sirius XM distributes satellite radios through the sale and lease of new vehicles. Sirius XM has agreements with every major automaker to offer satellite radios in their vehicles. Satellite radios are available as a factory -installed feature in substantially all vehicle makes sold in the United States. Most automakers include a subscription to Sirius XM’s service in the sale or lease of their new vehicles. In certain cases, Sirius XM receives subscription payments from automakers in advance of the activation of its service. Sirius XM shares with certain automakers a portion of the revenue it derives from subscribers using vehicles equipped to receive its service. Sirius XM also reimburses various automakers for certain costs associated with the satellite radios installed in new vehicles, including in certain cases hardware costs, engineering expenses and promotional and advertising expenses.
Previously Owned Vehicles: Sirius XM also acquires subscribers through the sale and lease of previously owned vehicles with factory-installed satellite radios. Sirius XM has entered into agreements with many automakers to include a subscription to Sirius XM’s service in the sale or lease of vehicles, which include satellite radios sold through their certified pre-owned programs. Sirius XM also works directly with franchise and independent dealers on programs for non-certified used vehicles. Sirius XM has developed systems and methods to identify purchasers and lessees of previously owned vehicles, which include satellite radios and has established marketing plans to promote its services to these potential subscribers.
Retail: Sirius XM sells satellite radios directly to consumers through its website. Satellite radios are also marketed and distributed through national, regional and online retailers, such as Amazon.com.
Sirius XM’s Satellite Radio Systems
Sirius XM’s satellite radio systems are designed to provide clear reception in most areas of the continental United States despite variations in terrain, buildings and other obstructions. Sirius XM continually monitors its infrastructure and regularly evaluates improvements in technology.
Sirius XM’s satellite radio systems have three principal components, such as satellites, terrestrial repeaters, and other satellite facilities; studios; and radios.
Satellites, Terrestrial Repeaters and Other Satellite Facilities
Satellites: Sirius XM provides its service through a fleet of orbiting geostationary satellites. Two of these satellites, FM-5 and FM-6, transmit Sirius XM’s service on frequencies originally licensed by the Federal Communications Commission (FCC) to Sirius, and two of these satellites, XM-4 and SXM-8, transmit its service on frequencies originally licensed by the FCC to XM. Sirius XM’s XM-3 and XM-5 satellites serve as spares for the XM system.
The SXM-8 satellite was launched into a geostationary orbit on June 6, 2021 and was placed into service on September 8, 2021 following the completion of in-orbit testing. The SXM-8 satellite replaced the XM-3 satellite, which remains available as an in-orbit spare, along with XM-5.
In December 2020, the SXM-7 satellite was launched and in-orbit testing began in January 2021. During in-orbit testing of SXM-7, events occurred, which caused failures of certain SXM-7 payload units. The evaluation of SXM-7 concluded that the satellite will not function as intended. SXM-7 remains in-orbit at its assigned orbital location, but is not being used to provide satellite radio service.
Sirius XM has entered into agreements for the design, construction and launch of two additional satellites, SXM-9 and SXM-10. Construction of the SXM-9 and SXM-10 satellites is underway and those satellites are expected to be launched into geostationary orbits in 2024 and 2025, respectively.
Satellite Insurance: Sirius XM has procured insurance for SXM-8 to cover the risks associated with the satellite’s first year of in-orbit operation.
Terrestrial Repeaters: In some areas with high concentrations of tall buildings, such as urban centers, signals from Sirius XM’s satellites may be blocked and reception of satellite signals can be adversely affected. In other areas with a high density of next generation wireless systems, Sirius XM’s service may experience interference. In many of these areas, Sirius XM has deployed terrestrial repeaters to supplement and enhance its signal coverage and in many other areas, Sirius XM may deploy additional repeaters to mitigate interference. Sirius XM operates over 1,000 terrestrial repeaters across the United States as part of its systems.
Other Satellite Facilities: Sirius XM controls and communicates with its satellites from facilities in North America. Its satellites are monitored, tracked and controlled by a third party satellite operator.
Studios
Sirius XM’s programming originates from studios in New York City, Los Angeles and Washington, D.C., and to a lesser extent, from smaller studios in Nashville and a variety of venues across the country. Sirius XM provides equipment to artists and hosts to enable remote creation and transmission of programming.
Radios
Sirius XM does not manufacture radios. Sirius XM has authorized manufacturers and distributors to produce and distribute radios; and has licensed its technology to various electronics manufacturers to develop, manufacture and distribute radios under certain brands. Sirius XM manages various aspects of the production of satellite radios.
Connected Vehicle Services
Sirius XM provides connected vehicle services to several automakers. Sirius XM’s connected vehicle services are designed to enhance the safety, security and driving experience for vehicle operators while providing marketing and operational benefits to automakers and their dealers. Sirius XM offers a portfolio of location-based services through two-way wireless connectivity, including safety, security, convenience, maintenance and data services, remote vehicle diagnostics and stolen or parked vehicle locator services. Subscribers to Sirius XM’s connected vehicle services are not included in its subscriber count or subscriber-based operating metrics.
Other Services
Commercial Accounts: Sirius XM’s programming is available for commercial establishments. Commercial subscription accounts are available through providers of in-store entertainment solutions and directly from Sirius XM.
Satellite Television Service: Certain of Sirius XM’s music channels are offered as part of select programming packages on the DISH Network satellite television service.
Travel Link: Sirius XM offers Travel Link, a suite of data services that includes graphical weather, fuel prices, sports schedules and scores, and movie listings.
Real Time Traffic Services: Sirius XM offers services that provide graphic information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems.
Real Time Weather Services: Sirius XM offers several real-time weather services in vehicles, boats and planes.
Commercial subscribers are included in Sirius XM’s subscriber count. Subscribers to the DISH Network satellite television service are not included in its subscriber count and subscribers to Sirius XM’s Travel Link, real-time traffic services and real-time weather services are not included in its subscriber count, unless the applicable service is purchased by the subscriber separately and not as part of a radio subscription to Sirius XM’s service.
Sirius XM Canada Holdings Inc. (Sirius XM Canada)
Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, with the remainder of Sirius XM Canada’s voting and equity interests held by two shareholders.
Sirius XM entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, Sirius XM Canada pays Sirius XM 25% of its gross revenue on a monthly basis; and pursuant to the Advisory Services Agreement, Sirius XM Canada pays Sirius XM 5% of its gross revenue on a monthly basis.
As of December 31, 2021, Sirius XM Canada had approximately 2.5 million subscribers.
The Pandora Business
Pandora, which owns and operates the Pandora business, is a wholly owned subsidiary of Sirius XM Holdings.
Streaming Radio and On-Demand Music Services
Pandora offers a personalized audio entertainment platform for each listener. Users are able to create personalized stations and playlists and search and play songs and albums on-demand. The Pandora service utilizes content programming algorithms, data collected from listeners, and attributes of the music managed in the Music Genome Project - to predict user music preferences, play content suited to the tastes of each listener, and introduce each listener to music consistent with the consumer's preferences.
The Pandora service is available on iOS and Android mobile devices, web browsers and other internet connected devices. The Pandora application is free to download and use. The Pandora service is also available in vehicles in the United States with smartphone connectivity. Certain automakers provide embedded streaming connectivity that supports and makes available the Pandora service in vehicles without the need for smartphone connectivity. In addition, the Pandora service is integrated into consumer electronic, voice-based devices and smart speakers.
The Pandora service is available as an ad-supported radio service, a radio subscription service (Pandora Plus), or an on-demand subscription service (Pandora Premium). Local and national advertisers deliver targeted messages to Pandora’s listeners on the ad-supported service.
Ad-Supported Radio Service
Pandora offers an ad-supported radio service, which allows listeners to access its catalog of music, comedy, live streams and podcasts through personalized stations. This service is free across all platforms and generates stations specific to each listener. Each listener can personalize their stations by adding variety to the content.
Listeners of the ad-supported service are provided with the option to temporarily access on-demand listening, including certain features of the Pandora Premium service. Pandora refers to this temporary access as ‘Premium Access’.
Subscription Radio Service (Pandora Plus)
Pandora offers Pandora Plus - an ad-free, subscription version of the radio service that includes options for replaying songs, skipping songs, offline listening and higher quality audio on supported devices. Content provided to each listener of Pandora Plus is tailored when the listener interacts more with the platform. Premium Access is also available to Pandora Plus listeners.
On-Demand Subscription Service (Pandora Premium)
Pandora offers Pandora Premium - an on-demand subscription service that combines the radio features of Pandora Plus with an on-demand experience. The on-demand experience provides listeners with the ability to search, play and collect songs and albums, download content for offline listening, build playlists, listen to curated playlists and share playlists on social networks. Listeners can also create partial playlists that Pandora can complete based on the listener’s activity and the Music Genome Project. Listeners through mobile devices have access to customized profiles, which identify information specific to each listener, such as recent favorites, playlists and thumbs.
Pandora Premium incorporates social networking features, including a centralized stream where listeners can view the music that their social connections are experiencing and provide and receive recommendations for songs, albums and playlists. Pandora Premium also includes a ‘share’ feature where consumers can share their stations, songs, albums, podcasts or playlists through social media, messaging applications and email.
Advertising Revenue
Pandora’s primary source of revenue is the sale of audio, display and video advertising for its connected device platforms, including computers and mobile devices. Pandora maintains a portfolio of proprietary advertising technologies, which include order management, advertising serving and timing, native advertising formats, targeting and reporting. Pandora provides advertisers with the ability to target and connect with listeners based on various criteria, including age, gender, geographic location and content preferences. Pandora also has agreements to sell the available advertising inventory in the United States for SoundCloud Holdings, LLC (SoundCloud), an open audio platform, and other third parties.
Stitcher
Stitcher licenses from creators original podcasts and operates content networks. Stitcher also provides podcast advertising services that generate revenue from approximately 400 shows and offers a mobile app listening platform where consumers can stream the latest in news, sports, talk, and entertainment on demand.
Stitcher earns revenue by distributing advertising on specific podcasts created by third parties, including placement based on an advertiser’s desired target audience, and from the sale of advertising on its owned podcasts and podcasts offered within the Stitcher app. Stitcher creates and distributes original podcasts through platforms, such as its Stitcher app and the iPhone podcast app.
Stitcher also earns subscription revenue from its Stitcher Premium subscription service. Users pay a monthly or annual fee for access on Stitcher Premium to premium content and ad-free archived podcast episodes.
AdsWizz
Through its AdsWizz, Inc. (AdsWizz) subsidiary, Pandora engages in digital audio advertising technology. AdsWizz operates a digital audio advertising market with an end-to-end technology platform, including a digital audio software suite of solutions that connect audio publishers to the advertising community. AdsWizz offers a range of products - from dynamic ad insertion to advanced programmatic platforms to innovative new audio formats. AdsWizz’s advertising technology also includes ad campaign monitoring tools and other innovative audio advertising products, such as audio formats that can let consumers trigger an action while listening to an ad, as well as other personalization-based technology.
AdsWizz’s technology is employed by Pandora in its ad-supported business, as well as by third party customers. AdsWizz’s third party customers include well-known music platforms, podcasts and broadcasting groups worldwide.
Simplecast
Pandora, through its Simplecast business, also offers a podcast management and analytics platform. Simplecast complements AdsWizz’s advertising technology platform, offering podcasters a solution for management, hosting, analytics and advertising sales.
Copyrights to Programming
In connection with its businesses, Sirius XM Holdings must enter into royalty arrangements with two sets of rights holders, such as holders of musical compositions copyrights (that is, the music and lyrics) and holders of sound recordings copyrights (that is, the actual recording of a work). Sirius XM and Pandora use both statutory and direct music licenses as part of their businesses. Sirius XM Holdings licenses varying rights, such as performance and mechanical rights - for use in its Sirius XM and Pandora businesses based on the various radio and interactive services they offer.
Musical Compositions: Performance Rights and Mechanical Rights
The holders of performance rights in musical compositions, songwriters and music publishers, are represented by performing rights organizations, such as the American Society of Composers, Authors and Publishers (ASCAP); Broadcast Music, Inc. (BMI); SESAC, Inc. (SESAC); and Global Music Rights LLC (GMR). These organizations negotiate fees with copyright users, collect royalties and distribute them to the rights holders.
The holders of the mechanical rights in musical compositions, generally songwriters and their music publishers, have traditionally licensed these rights through the statutory license set forth in Section 115 of the United States Copyright Act (the Copyright Act); however, mechanical rights can also be licensed directly.
Sirius XM has arrangements with ASCAP, BMI, SESAC and GMR to license the musical compositions it uses on its satellite radio and streaming services. Sirius XM does not require a mechanical license.
Pandora has arrangements with ASCAP, BMI, SESAC, GMR and a variety of other copyright owners to license the musical compositions performance rights used on Pandora services.
Pandora must also license ‘reproduction rights’ or ‘mechanical rights’ to offer the interactive features of the Pandora services. For the Pandora subscription services, copyright holders receive payments for these rights at the rates determined in accordance with the statutory license set forth in Section 115 of the Copyright Act.
Sound Recordings
Operators of a non-interactive satellite radio or streaming service are entitled to license sound recordings under the statutory license contained in Section 114 of the Copyright Act (the ‘statutory license’). Under the statutory license, Sirius XM Holdings may negotiate royalty arrangements with the owners of sound recordings, or if negotiation is unsuccessful, the royalty rate is established by the Copyright Royalty Board.
Sirius XM Business: For the ten-year period commencing January 1, 2018 and ending on December 31, 2027, the Copyright Royalty Board (CRB) set the royalty rate payable by Sirius XM under the statutory license covering the performance of sound recordings over Sirius XM’s satellite radio service, and the making of ephemeral (server) copies in support of such performances, to be 15.5% of gross revenue, subject to exclusions and adjustments. The revenue subject to royalty includes subscription revenue from Sirius XM’s U.S. satellite digital audio radio subscribers, and advertising revenue from channels other than those channels that make only incidental performances of sound recordings.
Pandora Business: Pandora has entered into direct license agreements with major and independent music labels and distributors for a significant majority of the sound recordings that stream on the Pandora ad-supported service, Pandora Plus and Pandora Premium.
Trademarks
Sirius XM has registered, and intends to maintain, the trademarks Sirius, XM, SiriusXM and SXM with the United States Patent and Trademark Office in connection with the services it offers. Sirius XM is not aware of any material claims of infringement or other challenges to its right to use the Sirius, XM, SiriusXM or SXM trademarks in the United States. Sirius XM also has registered, and intends to maintain, trademarks for the names of certain of its channels. Sirius XM has also registered the trademarks Sirius, XM and SiriusXM in Canada. Sirius XM has granted a license to use certain of its trademarks in Canada to Sirius XM Canada.
Pandora has registered, and intends to maintain, the trademarks Pandora, Ampcast and Music Genome Project, in addition to a number of other Pandora logos and marks, with the United States Patent and Trademark Office in connection with the services it offers. Pandora also has registered the trademark ‘Pandora’ in Australia, Canada, Chile, the European Union, India, Israel, Mexico, New Zealand, Switzerland, Taiwan and other countries, and the trademark ‘Music Genome Project’ in Australia, Canada, China and New Zealand.
Regulation
Certain of Sirius XM Holdings’ services are also subject to laws in the United States and abroad pertaining to privacy of user data and other information, including the California Consumer Protection Act and the European General Data Protection Regulation.
As an operator of a privately owned satellite system, Sirius XM is regulated by the FCC under the Communications Act of 1934. Any assignment or transfer of control of Sirius XM’s FCC licenses must be approved by the FCC.
Competition
Sirius XM Holdings also faces competition from streaming and on-demand services, including Amazon Prime, Apple Music, Spotify, and YouTube.
Sirius XM Holdings’ competition for advertisers include large scale online advertising platforms, such as Amazon, Facebook, and Google.
Competition for Pandora’s services are primarily offered by entities that provide music and entertainment services as a small part of a larger business, such as Apple, Google, and Amazon.
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