Annual report pursuant to Section 13 and 15(d)

Business Combinations

v3.8.0.1
Business Combinations
 12 Months Ended
Dec. 31, 2017
Business Combinations [Abstract]  
Business Combinations Business Combinations

Year Ended December 31, 2017

We had no business combinations during the year ended December 31, 2017.

Year Ended December 31, 2016

During the year ended December 31, 2016, we completed a business combination that was not material to our consolidated financial statements. We had no material business combinations during the period.

We included the financial results of the acquired business in our consolidated financial statements from the respective date of acquisition through the disposition on September 1, 2017. Pro forma results of operations related to this acquisition
during the year ended December 31, 2016 were not presented because they were not material to our consolidated statements of operations.

The fair value of assets acquired and liabilities assumed from our acquisition were based on a preliminary valuation.

Year Ended December 31, 2015

Ticketfly

On October 31, 2015, we completed the acquisition of Ticketfly, a leading live events technology company that provides ticketing and marketing software and services for venues and event promoters across North America, for an aggregate purchase price of $335.3 million of common stock and cash, including 11,193,847 shares of the Company’s common stock and approximately $191.5 million in cash paid by the Company. In addition to the purchase price, unvested options and unvested RSUs of Ticketfly held by Ticketfly employees were converted into unvested options to acquire our common stock and unvested RSUs in our common stock. On September 1, 2017, we completed the sale of Ticketfly. Refer to Note 5 "Dispositions" in the Notes to Consolidated Financial Statements for further details on the disposition.

Upon acquisition, Ticketfly became a wholly owned subsidiary of Pandora. The acquisition was accounted for as a business combination, and the financial results of Ticketfly were included in our consolidated financial statements from the date of acquisition through the date of disposition.

Rdio, Inc. ("Rdio")

On December 23, 2015, we completed the acquisition of technology and intellectual property from Rdio for $77.5 million, which includes $2.5 million in additional purchase consideration transferred prior to the closing of the acquisition. Goodwill generated from the assets acquired was primarily attributable to synergies that allowed us to broaden our subscription business and roll out our new subscription services, Pandora Plus and Pandora Premium. Pandora Plus launched in September 2016 and Pandora Premium launched in April 2017. We have accounted for this acquisition as a business combination, and the financial results of Rdio are included in our consolidated financial statements from the date of acquisition. As a result of the sale of assets, Rdio discontinued its service as of December 22, 2015.

Other acquisitions

During the year ended December 31, 2015, we completed the acquisitions of Next Big Sound ("NBS") and KXMZ-FM ("KXMZ"). These acquisitions were not material to our consolidated financial statements, either individually or in the aggregate. We completed the sale of KXMZ on August 31, 2017. Refer to Note 5 "Dispositions" in the Notes to Consolidated Financial Statements for further details on the disposition.

We have included the financial results of Ticketfly, Rdio, NBS and KXMZ in our consolidated financial statements from their respective dates of acquisition and through the respective disposition dates of Ticketfly and KXMZ. Pro forma results of operations related to our acquisitions, other than Ticketfly, during the year ended December 31, 2015 have not been presented because they are not material to our consolidated statements of operations, either individually or in the aggregate.

The following table summarizes the allocation of estimated fair values of the net assets acquired during the year ended December 31, 2015, including the related estimated useful lives, where applicable. Intangible assets acquired from Ticketfly and KXMZ were disposed of during the year ended December 31, 2017.

 
 
Ticketfly
 
Rdio
 
Other
 
 
Estimated fair value
 
Estimated useful life in years(1)
 
Estimated fair value
 
Estimated useful life in years
 
Estimated fair value
 
Estimated useful life in years(1)
 
 
(in thousands, except for estimated useful life)
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
   Customer relationships—clients
 
$
37,300

 
8
 
$
—

 
 
 
$
—

 
 
   Developed technology
 
28,100

 
5
 
26,400

 
2-5
 
1,550

 
4
   Tradename
 
10,400

 
8
 
1,000

 
3
 
320

 
2
   Customer relationships—users
 
1,000

 
2
 
—

 
 
 
940

 
2
   FCC license—broadcast radio
 
—

 
 
 
—

 
 
 
193

 
 
Tangible assets acquired, net
 
27,640

 
 
 
1,969

 
 
 
(490
)
 
 
Deferred tax liabilities
 
(1,738
)
 
 
 
—

 
 
 
(49
)
 
 
Net assets acquired
 
$
102,702

 
 
 
$
29,369

 
 
 
$
2,464

 
 
Goodwill
 
232,641

 
 
 
48,131

 
 
 
23,103

 
 
Total fair value consideration
 
$
335,343

 
 
 
$
77,500

 
 
 
$
25,567

 
 
(1) Estimated useful lives reflect the useful lives as of the date of acquisition, and does not take into consideration the disposition of intangible assets

Goodwill generated from the Ticketfly acquisition was primarily attributable to expected synergies from growth and strategic advantages in the ticketing industry. Goodwill generated from Rdio is primarily attributable to expected synergies from future growth and strategic advantages in the online streaming music industry. Goodwill generated from all other business acquisitions during the year ended December 31, 2015 is primarily attributed to expected synergies from future growth and, also for NBS, the potential to expand our Artist Marketing Platform. Goodwill generated during the period related to Ticketfly and NBS is not deductible for tax purposes and goodwill generated during the period related to Rdio and KXMZ is deductible for tax purposes.