Pandora buys Ticketfly in move to challenge Ticketmaster

Pandora, the largest Internet radio service, is buying its way into the concert ticketing business in a move to shore up relationships with artists and record labels. 

The Oakland music-streaming service on Wednesday said it would pay $450 million for Ticketfly, an online seller of concert passes that competes with Live Nation's Ticketmaster

The acquisition marks a big change for Pandora, which has previously generated revenue almost entirely from advertising and subscriptions to its online radio stations, which count roughly 80 million listeners a month. Ticketfly last year sold 16 million passes to more than 90,000 live events, generating more than $500 million in sales, the companies said. 

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In the Los Angeles area, concert venues such as the Troubadour in West Hollywood and the Echo in Echo Park make their tickets available on Ticketfly. 

In a statement, Pandora Chief Executive Brian McAndrews called the deal a "game changer." 

Pandora has long used listener data to suggest music for -- and target ads at -- its users through its stations.

The decade-old company has made moves to improve its use of data to help fend off competitors in the music-streaming field such as Spotify, Tidal and Apple Music. Pandora acquired the music analytics start-up Next Big Sound in May. 

Now Pandora says it wants to use its data to help touring artists better find their fans and sell more tickets. The move comes as Pandora has tried to improve its relationships with artists after coming under fire for the paltry royalty rates generated from streaming. 

Analysts said building alliances with artists and labels is crucial for Pandora as it tries to hammer out deals that will allow it to expand beyond the United States. 

"Behind the scenes we see Pandora's management actively seeking ways to add value to artists and labels beyond royalty payments," said Piper Jaffray analyst James Marsh, in a note to clients. "We expect these initiatives to help pave the way for direct licensing deals that could enable Pandora to offer its service in markets outside the U.S."

Pandora's shares nonetheless fell 5% in midsession trading on Wall Street. 

Andrew Dreskin, cofounder and CEO of Ticketfly, in a blog post, described the transition as "bittersweet."

"Selling your baby is never easy ... but I trust my friends at Pandora and believe that they have Ticketfly’s best interests at heart and won’t do anything to change what makes us so special," Dreskin said.    

Follow Ryan Faughnder on Twitter for more entertainment business coverage: @rfaughnder

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