What changed in this filing

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Item 1A. Risk Factors

2023-02-02 compared with 2022-02-01 · 94 added, 71 removed, 317 unchanged (34% of the section changed)

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Risk Factors.

We have been, and may continue to be, adversely affected by supply chain issues as a result of the global semiconductor supply shortage.

The global semiconductor supply shortage is having wide-ranging effects across multiple industries, including direct and indirect effects on our business.

We have experienced, and may continue to experience, delays in securing certain application specific integrated circuits (which are commonly referred to as “chipsets”) that are essential components of our satellite radios.

In addition, automakers are experiencing, and may continue to experience, delays in securing certain chipsets that are essential components of new vehicles for a variety of reasons, including due to closures at semiconductor manufacturing facilities.

All of these affected automakers manufacture and sell vehicles that include our satellite radios.

For example, some automobile plants in North America and elsewhere have halted or reduced vehicle production due to the shortage of semiconductors used in the production of their vehicles.

As a result, the semiconductor supply shortage has had, and may continue to have, an impact on new vehicle production and deliveries, which in turn may affect our subscriber acquisition efforts.

The ongoing COVID-19 pandemic has introduced significant uncertainty to our business.

There is significant uncertainty around disruptions related to the ongoing COVID-19 pandemic and its continuing impact on the global economy.

The COVID-19 pandemic has also introduced significant uncertainties to our business, including possible changes to our sales and marketing practices as we react to shifts in the volume and mix of auto sales and the potential loss of sales and orders in our advertising business.

The extent to which the COVID-19 pandemic impacts our future results depends on future developments, which are highly uncertain and cannot be predicted with certainty, including new information which may emerge concerning the severity of the COVID-19 pandemic in the United States, actions taken to contain it or treat its impact, labor market constraints, the availability and efficacy of vaccinations, testing and vaccination mandates and the resurgence of COVID-19 and its variants (including the delta and omicron variants) that are occurring.

Another broad shutdown of businesses, either in the United States or globally, as a result of the COVID-19 pandemic would likely have an adverse effect on our business given the continuing weaknesses associated with the supply chain for new vehicles and the strong demand and inventory constraints for used vehicles.

We are monitoring and continue to assess the ongoing effects of the COVID-19 pandemic on our businesses and operations.

Almost all of employees have been working remotely since the COVID-19 pandemic began in March 2020.

The impact of these remote arrangements on our workforce are impossible to assess or predict.

Importantly, the continuing effects of the COVID-19 pandemic may also have a material adverse effect on third parties upon which we rely, and our ability to assess those effects in any meaningful manner are difficult at this time.

Risks Relating to our Business and Operations

We have been, and may continue to be, adversely affected by supply chain issues.

The issues associated with the global supply chain for parts and components is having wide-ranging effects across multiple industries, including direct and indirect effects on our business.

Automakers are experiencing, and may continue to experience, delays in securing certain components that are essential to the production of new vehicles for a variety of reasons, including due to the global semiconductor supply shortage and the war in Ukraine.

These affected automakers manufacture and sell vehicles that include our satellite radios.

For example, some automobile plants in North America and elsewhere have at times halted or reduced vehicle production due to the shortage of certain components used in the production of their vehicles.

As a result, these supply chain shortages have had, and may continue to have, an impact on new vehicle production and deliveries, which in turn may affect our subscriber acquisition efforts.

We also have experienced, and may continue to experience, delays in securing certain application specific integrated circuits (which are commonly referred to as “chipsets”) that are essential components of our satellite radios.

Delays or the unavailability of these components could have an adverse impact on our operations and financial conditions.

We may be adversely affected by the war in Ukraine.

The war in Ukraine, and any expansion of the war in Ukraine to surrounding areas, could adversely affect our business and operations.

The war in Ukraine could affect the supply of certain components that we rely on in connection with our business and operations, such as software and certain subsystems that may be planned to be integrated as part of our satellites currently under construction for our system.

In addition, our AdsWizz subsidiary is headquartered in Romania and we rely on other contractors

in Eastern European countries, such as Poland.

An expansion of the war in Ukraine to other countries, particularly Romania, could materially affect our ability to deliver advertisements on our Pandora services and for third parties.

We face substantial competition and that competition is likely to increase over time.

We compete for the time and attention of our listeners with other content providers on the basis of a number of factors, including quality of experience, relevance, acceptance and perception of content quality, ease of use, price, accessibility, brand awareness, reputation and, in the case of our ad-supported Pandora service, perception of ad load, features and functionality.

Our ability to attract and retain subscribers and listeners depends on our success in creating and providing popular or unique programming.

As consumer tastes and preferences change on the internet and with mobile and other connected products, including cars, in-home, and wearable devices, we will need to enhance and improve our existing services, introduce new services and features, and attempt to maintain our competitive position with additional technological advances and adaptable platforms.

Neither the Sirius XM App nor the Pandora App has been significantly updated in several years.

If we fail to keep pace with technological advances or fail to offer compelling product offerings and state-of-the-art delivery platforms to meet consumer demands, our ability to grow or maintain the reach of our services, attract and retain users, and attract listeners and subscribers across our services will be adversely affected.

Our ability to attract and retain subscribers and listeners also depends on our success in creating and providing popular or unique programming.

A summary of certain services that compete with us is contained in the section entitled “Item 1.

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• our ability to respond to evolving consumer tastes;

• actions by our competitors, such as Spotify, Apple, Google, Amazon, Facebook and other audio entertainment and information providers.

• actions by our competitors, such as Spotify, Apple, Google, Amazon and other audio entertainment and information providers.

We engage in extensive marketing efforts and the continued effectiveness of those efforts is an important part of our business.

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Our ability to reach consumers with radio and television advertising, direct mail materials, email solicitations and telephone calls is an important part of our efforts and a significant factor in the effectiveness of our marketing.

If we are unable to reach consumers through email solicitations or telemarketing, including as a result of “spam” and email filters, call blocking technologies or "do-not-call" or other marketing regulations, our marketing efforts will be adversely affected.

If we are unable to reach consumers through email solicitations or telemarketing, including as a result of “spam” and email filters, call blocking technologies, consumer privacy regulations or "do-not-call" or other marketing regulations, our marketing efforts will be adversely affected.

A decline in the effectiveness of our marketing efforts could have an adverse impact on our operations and financial condition.

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• companies that manufacture and sell integrated circuits for satellite radios;

• third-party software that we incorporate in and include with our apps and service;

• third-party software that supports our apps and services;

• programming providers, including agreements with owners of various copyrights in music, and on-air talent;

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If one or more of these third parties do not perform in a satisfactory or timely manner, including complying with our standards and practices relating to business integrity, personnel and cybersecurity, our business could be adversely affected.

The operation of our apps and service offerings could be impaired if errors occur in the third party software that we use.

The operation of our apps and service offerings could be impaired if errors occur in the third party software that supports our apps and services.

It is difficult for us to correct any defects in third party software because the development and maintenance of the software is not within our control.

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Such third parties may not be able to perform their obligations to us in a timely manner, if at all, as a result of their financial condition or may be relieved of their obligations to us as part of seeking bankruptcy protection.

Failure to successfully monetize and generate revenues from podcasts and other non-music content could adversely affect our business, operating results, and financial condition.

Delivering podcasts and other non-music content involves risks and challenges, including increased competition and the need to develop new relationships with creators.

We have entered into multi-year commitments for original podcast content that is produced by third parties.

These agreements generally provide us the right to distribute the content and act as the exclusive agent for the sale of advertising in the podcasts.

Payment terms for certain podcast content typically requires more upfront cash payments, including minimum guarantees to the owner or creator of the podcast, than other content licenses or arrangements.

Given the multiple-year duration and largely fixed-cost nature of such commitments, if the attractiveness of such podcast content to our listeners and subscribers do not meet our expectations, our margins could be adversely impacted.

In addition, the advertising market for podcasts is still developing, including the advertising technology necessary to efficiently sell podcast advertising at scale.

As a result, our ability to profitably monetize the available advertising opportunities in podcasts remains uncertain.

Growing our podcasting business may require additional changes to our business model and cost structure, modifications to our infrastructure, and could expose us to new regulatory, legal and reputational risks, including infringement liability.

There is no guarantee that we will be able to generate sufficient revenue from podcasts to offset the costs of creating or acquiring this content.

Our failure to successfully monetize and generate revenues from such content, including failure to obtain or retain rights to podcasts or other non-music content on acceptable terms, or at all, or to effectively manage the numerous risks and challenges associated with such expansion, could adversely affect our business, operating results, and financial condition.

We may not realize the benefits of acquisitions or other strategic investments and initiatives.

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The success of any acquisition depends upon effective integration, cultural assimilation and management of acquired businesses and assets into our operations, which is subject to risks and uncertainties, including realizing the growth potential, the anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of management’s attention for other business concerns, and undisclosed or potential legal liabilities of the acquired business or assets.

We are devoting significant management attention and resources to integrate the businesses and operations of certain acquisitions.

The integration process could distract our management, disrupt our ongoing business or result in inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the acquisition.

The ongoing COVID-19 pandemic has introduced significant uncertainty to our business.

The COVID-19 pandemic has introduced uncertainties to our business.

The extent to which the COVID-19 pandemic may impact our results depends on future developments, which are highly uncertain and cannot be predicted with certainty, including the resurgence of COVID-19 and its variants that may be occurring.

Another broad shutdown of businesses, either in the United States or globally, as a result of the COVID-19 pandemic would have an adverse effect on our business.

The impact of economic conditions may adversely affect our business, operating results, and financial condition.

Our success depends to a significant extent on discretionary consumer spending.

Some of the factors that may influence consumer spending on entertainment include general economic conditions, the availability of discretionary income, consumer confidence, interest rates, inflationary pressure, and general uncertainty regarding the overall economic environment.

The demand for entertainment generally is sensitive to downturns in the economy and the corresponding impact on discretionary consumer spending.

Any actual or perceived deterioration or weakness in general, regional or local economic conditions, as well as other adverse economic or market conditions due to COVID-19 or otherwise, could reduce our subscribers’ or potential subscribers’ discretionary income.

To the extent that overall economic conditions reduce spending on discretionary items, our ability to attract and retain subscribers could be hindered, which could reduce our subscription revenue and negatively impact our business.

Additionally, our financial performance is subject to economic conditions and their impact on levels of advertising spending.

Expenditures by advertisers generally tend to reflect overall economic conditions, and reductions in spending by advertisers could have an adverse impact on our revenue and business.

See “ Our Pandora business generates a significant portion of its revenues from advertising, and reduced spending by advertisers could harm our business .

Risks Relating to our Sirius XM Business

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We cannot predict how successful we will be at retaining customers who purchase or lease vehicles that include a subscription to our Sirius XM service.

A substantial percentage of our Sirius XM subscribers are on discounted pricing plans and our ability to retain these subscribers or migrate them to higher priced plans is uncertain.

Our discounted pricing strategy is

widely known, and this may interfere with our ability to collect our ordinary subscription prices.

A substantial percentage of our Sirius XM subscribers are on discounted pricing plans

and our ability to retain these subscribers or migrate them to higher priced plans is uncertain.

Our discounted pricing strategy is widely known, and this may interfere with our ability to collect our ordinary subscription prices.

In addition, a substantial number of those subscribers periodically cancel their subscriptions when offered a subscription at a higher price.

Our ability to profitably attract and retain subscribers to our Sirius XM service as our marketing efforts reach more price-sensitive consumers is uncertain.

Our efforts to acquire subscribers purchasing or leasing used vehicles may attract price sensitive consumers.

For example, consumers purchasing or leasing used vehicles may be more price sensitive than consumers purchasing or leasing new vehicles, may convert from trial subscribers to self-paying subscribers at a lower rate, and may cancel their subscriptions more frequently than consumers purchasing or leasing new vehicles.

Our ability to profitably attract and retain subscribers to our Sirius XM service is uncertain.

A number of factors may affect our ability to attract and retain subscribers to our Sirius XM service.

Over time the changing demographics of our subscriber base, such as the increase in “Millennial generation customers,” may increase the number of subscribers accustomed to consuming entertainment through ad-supported products.

These changing demographics may affect our ability to convert trial subscribers into self-paying subscribers.

Similarly, our efforts to acquire subscribers purchasing or leasing used vehicles may attract price sensitive consumers.

Consumers purchasing or leasing used vehicles may be more price sensitive than consumers purchasing or leasing new vehicles, may convert from trial subscribers to self-paying subscribers at a lower rate, and may cancel their subscriptions more frequently than consumers purchasing or leasing new vehicles.

Some of our marketing efforts may also attract more price sensitive subscribers, and our efforts to increase the penetration of satellite radios in new, lower-priced vehicle lines may result in the growth of more economy-minded subscribers.

In addition, over time the changing demographics of our subscriber base, such as the expected increase in “Millennial generation customers,” may increase the number of subscribers accustomed to consuming entertainment through ad-supported products.

Each of these factors may harm our revenue or require additional spending on marketing efforts to demonstrate the value of our Sirius XM service.

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We have agreements with major automakers to include satellite radios in new vehicles, although these agreements do not require automakers to install specific or minimum quantities of radios in any given period.

Our business could be adversely affected if automakers do not continue to include our Sirius XM service in their products.

These agreements also require automakers to provide us data on sales of satellite radio enabled vehicles, including in many cases the consumer’s name and address.

Our business could be adversely affected if automakers do not continue to include our Sirius XM service in their products or provide us with such data.

Automotive production and sales are dependent on many factors, including the availability of vehicle components, consumer credit, general economic conditions, consumer confidence and fuel costs.

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Our XM network of terrestrial repeaters communicates with a single XM satellite.

If the satellites communicating with the applicable repeater network fail unexpectedly, the services would be disrupted for several hours or longer.

If the satellites

communicating with the applicable repeater network fail unexpectedly, the services would be disrupted for several hours or longer.

Any material failure of our operating satellites could cause us to lose customers for our Sirius XM service and could materially harm our reputation and our operating results.

With the exception of the insurance we have purchased covering the

launch and the first year of in-orbit operation of our SXM-8 satellite, we do not have insurance for our in-orbit satellites.

We do not have insurance for our in-orbit satellites.

Additional information regarding our fleet of satellites is contained in the section entitled “Item 1.

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Our Pandora ad-supported business has suffered a substantial and consistent loss of monthly active users, which may adversely affect our Pandora business.

The number of monthly active users to our ad-supported Pandora business has declined consistently for several years, including in 2021, and may further contract in the future.

The number of monthly active users to our ad-supported Pandora business has declined consistently for several years, including in 2022, and is likely to further contract in the future.

The size of our ad-supported listener base is an important element of our Pandora business.

The decline in our listener base has resulted in fewer listener hours and available advertising spots on our Pandora service, which ultimately may result in declines in our advertising revenue, and adversely affect our Pandora business.

The contraction of our ad-supported listener base also decreases the size of demographic groups targeted by advertisers, which may hurt our ability to deliver advertising in a manner that maximizes advertisers’ return on investment and compete with other digital advertising platforms.

Our Pandora business generates a significant portion of its revenues from advertising, and reduced spending by advertisers could harm our business.

Our Pandora business currently generates a majority of its revenues from third parties advertising on its ad-supported service.

As is common in the audio entertainment industry, Pandora’s advertisers do not have long-term advertising commitments with us and can terminate their contracts at any time.

Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns.

Adverse macroeconomic conditions have affected, and may in the future affect, the demand for audio advertising, resulting in fluctuations in the amounts advertisers spend on advertising, which could harm our financial condition and operating results.

Our failure to convince advertisers of the benefits of our Pandora ad-supported service could harm our business.

We derive substantial revenue on our Pandora service from the sale of advertising.

Our ability to attract and retain advertisers, and ultimately to sell our advertising inventory, depends on a number of factors, including:

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• keeping pace with changes in technology and our competitors, some of which have significant influence over the distribution of our Pandora app;

• competing effectively for advertising with other dominant online services, such as Spotify, Google and Facebook, as well as other marketing and media outlets, some of which provide services to us that we depend upon to fulfill the advertising we sell;

• competing effectively for advertising with other dominant online services, such as Spotify, Google and Facebook, as well as other marketing and media outlets;

• successfully competing for local radio advertising;

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• adapting to technologies designed to block the display of our ads.

Our agreements with advertisers are generally short-term and may be terminated at any time by the advertiser.

Advertisers may leave us for competing alternatives at any time.

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Privacy and data security laws and regulations may hinder our ability to market our services, sell advertising and impose legal liabilities.

We receive a substantial amount of data on purchasers and lessees of new and used vehicles from third parties.

We use this data to market our services.

We collect and use demographic and other information, including location information, from and about our listeners through the internet.

We receive a substantial amount of personal data on purchasers and lessees of new and used vehicles from third parties.

We use this personal data to market our services.

We collect and use demographic, service usage, purchase history and other information, including location information, from and about our listeners through the internet.

Further, we and third parties use tracking technologies, including “cookies” and related technologies, to help us manage and track our listeners’ interactions with our services and deliver relevant advertising.

Various federal and state laws and regulations, as well as the laws of foreign jurisdictions, govern the collection, use, retention, sharing and security of the data we receive.

Privacy groups and government authorities have increasingly scrutinized the ways in which companies collect and share data, including linking personal identities and data associated with particular

users or devices with data collected through the internet, and we expect such scrutiny to increase.

Alleged violations of laws and regulations relating to privacy and data may expose us to potential liability, may require us to expend significant resources in responding to and defending such allegations and claims and could in the future result in negative publicity and a loss of confidence in us by our subscribers, listeners and advertisers.

Various federal and state laws and regulations, as well as the laws of foreign jurisdictions, govern the collection, use, retention, sharing and security of the personal data we receive.

Privacy groups and government authorities have increasingly scrutinized the ways in which companies collect and share personal data, including linking personal identities and data associated with particular users or devices with data collected through the internet, and we expect such scrutiny to increase.

Alleged violations of laws and regulations relating to privacy and personal data may expose us to potential liability, may require us to expend significant resources in responding to and defending such allegations and claims and could in the future result in negative publicity and a loss of confidence in us by our subscribers, listeners, advertisers and other third parties with whom we do business.

Privacy-related laws and regulations, such as the California Consumer Privacy Act and the European General Data Protection Regulation, are evolving and subject to potentially differing interpretations.

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New laws, amendments to or re-interpretations of existing laws and contractual obligations, as well as changes in our listeners’ expectations and demands regarding privacy and data security, may limit our ability to collect and use consumer data.

Restrictions on our ability to collect, access and harness listener data, or to use or disclose listener data or profiles that we develop using such data, could limit our ability to deliver personalized content to our listeners and offer targeted advertising opportunities to our advertisers, each of which are important to the success of our business.

Increased regulation of data utilization and distribution practices could increase our costs of operation or otherwise adversely affect our business.

Restrictions on our ability to receive, collect and use consumer data could limit our ability to attract and retain subscribers and listeners to our services.

In addition, restrictions on our ability to collect, access and process listener data, or to use or disclose listener data or profiles that we develop using such data, could limit our ability to market our content and services to our potential listeners and offer targeted advertising opportunities to our advertisers, each of which are important to our business.

Increased regulation of personal data utilization practices and compliance administration could increase our costs of operation or otherwise adversely affect our business.

Consumer protection laws and our failure to comply with them could damage our business.

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However, the techniques used to gain unauthorized access to data systems are constantly evolving and may be difficult to detect for long periods of time.

We may be unable to anticipate or prevent unauthorized access to data pertaining to

our customers, including credit card and debit card information and other personally identifiable information.

Our services, which are supported by our own systems and those of third-party vendors, are vulnerable to computer malware and attacks as well as to catastrophic events (such as fires, floods, hurricanes, or tornadoes), any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information.

For many companies, remote and/or hybrid in-office work arrangements resulting from the COVID-19 pandemic have made their network and communication systems more vulnerable to cyberattacks and incursions, and there has been an overall increase in both the frequency and severity of cyber incidents as such vulnerabilities have been exploited.

Continued implementation of a full or partial remote work environment may subject us to a heightened and ongoing risk of cyberattacks, unauthorized access or other privacy or data security incidents, both directly as well as indirectly through third-party intermediaries, service providers and vendors that have access or other connections to our systems.

We may be unable to anticipate or prevent unauthorized access to data pertaining to our customers, including credit card and debit card information and other personally identifiable information.

Our services, which are supported by our own systems and those of third-party vendors, could be subject to computer malware and attacks as well as to catastrophic events (such as fires, floods, hurricanes, or tornadoes), any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information.

If we fail to protect the security of personal information about our customers or if an actual or perceived breach of security occurs on our systems or a vendor’s systems, we could be exposed to costly government enforcement actions and private litigation and our reputation could suffer.

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In addition, our subscribers and listeners, as well as potential customers, could lose confidence in our ability to protect their personal information, which could cause them to discontinue the use of our services.

This loss of confidence would also harm our efforts to attract and retain advertisers, and unauthorized access to our programming would potentially create additional royalty expense with no corresponding revenue.

This loss of confidence would also harm our efforts to attract and retain advertisers and to obtain personal information from third parties, and unauthorized access to our programming would potentially create additional royalty expense with no corresponding revenue.

Such events could adversely affect our results of operations.

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We may integrate the Pandora service with apps provided by third parties.

In such case, we may not be able to control such third parties’ use of listeners’ data, ensure their compliance with the terms of our privacy policies, or prevent unauthorized access to, or use or disclosure of, information, any of which could expose us to potential liability and negative publicity and could cause our listeners and advertisers to discontinue use of our services.

In such case, we may not be able to control such third parties’ use of listeners’ data, ensure their compliance with the terms of our contracts and our privacy policies, or prevent unauthorized access to, or use or disclosure of, information, any of which could expose us to potential liability and negative publicity and could cause our listeners and advertisers to discontinue use of our services.

To date, we are not aware that we have had a significant cyber-attack or breach that has had a material impact on our business or results of operations.

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Although we have implemented practices designed to maintain the availability of the information technology systems we rely on and mitigate the harm of any unplanned interruptions, we cannot anticipate all eventualities.

We occasionally experience unplanned outages or technical difficulties.

We occasionally experience unplanned outages or

technical difficulties.

We could also experience loss of data or processing capabilities, which could cause us to lose customers and could harm our reputation and operating results.

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We must maintain music programming royalty arrangements with, and pay license fees to, owners of rights in musical works in order to operate our services.

Traditionally, BMI, ASCAP and SESAC have negotiated for these copyright users, collected royalties and distributed them to songwriters and music publishers.

Traditionally, BMI, ASCAP, SESAC and GMR have negotiated for these copyright users, collected royalties and distributed them to songwriters and music publishers.

These traditional arrangements are changing.

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antitrust laws and exercises significant market power in the licensing of sound recordings.

Under the terms of the Copyright Royalty Board’s existing decision governing sound recording royalties for satellite radio, we are required to pay a royalty based on our gross revenues associated with our satellite radio service, subject to certain exclusions, of 15.5% per year for each of the next six years.

Our Pandora services depend upon maintaining complex licenses with copyright owners, and these licenses contain onerous terms.

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These provisions have caused, and may in the future cause, our payments under those agreements to escalate substantially.

In addition, many record labels, music

publishers and performing rights organizations have the right to audit our royalty payments, and these audits often result in disputes over whether we have paid the proper amounts.

In addition, many record labels, music publishers and performing rights organizations have the right to audit our royalty payments, and these audits often result in disputes over whether we have paid the proper amounts.

As a result of such audits, we could be required to pay additional amounts, audit fees and interest or penalties, and the amounts involved could adversely affect our business, financial condition and results of operations.

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Pandora has direct licenses with thousands of music publishers.

Those licenses provide that the royalty rate for “reproduction rights” or “mechanical rights”, which are required to offer the interactive features of our Pandora services, are determined by the rate formula set by the Copyright Royalty Board for the compulsory license made available by Section 115 of the Copyright Act.

Those licenses provide that the royalty rate for “reproduction rights” or “mechanical rights”, which are required to offer the interactive features of our Pandora services, are determined by the rate formula set by the CRB for the compulsory license made available by Section 115 of the Copyright Act.

These royalty rates also apply to Pandora’s use of musical works for which we do not have a direct license with the copyright owners.

The Copyright Royalty Board has issued a rate formula for the period from January 1, 2018 through December 31, 2022.

Pursuant to that decision, the rate for the mechanical rights and performance rights needed in connection with interactive streaming would have increased annually between 2018 and 2022.

On August 11, 2020, the United States Court of Appeals for the District of Columbia Circuit concluded that the CRB failed to provide adequate notice of the rate structure it adopted, failed to explain its rejection of a past settlement agreement as a benchmark for going forward, and never identified the source of its asserted authority to substantively redefine a material term of its initial determination.

For these reasons, the Court of Appeals overturned the CRB’s adopted rate structure and percentage rates and remanded the proceeding to the CRB for further proceedings.

The CRB has proceedings underway to consider and address the Court of Appeals’ decision.

The CRB significantly increased the rates for these rights for the period commencing January 1, 2018 through December 31, 2022, and the participating music publishers and digital music services, including Pandora, have reached a settlement for the period commencing January 1, 2023 through December 31, 2027 which will further significantly increase these rates.

These higher rates for mechanical rights may have an adverse effect the business, financial condition and results of operations of Pandora.

For additional information on these mechanical royalty rates, See “Business – Copyrights to Programming – Sound Recordings – Pandora Business.”

Failure to protect our intellectual property or actions by third parties to enforce their intellectual property rights could substantially harm our business and operating results.

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Few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to uncertainty.

In the event that portions of our proprietary technology are determined to be subject to an open source license, we may be required to publicly release portions

of our source code, be forced to re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could adversely affect our ability to sustain and grow our business.

In the event that portions of our proprietary technology are determined to be subject to an open source license, we may be required to publicly release portions of our source code, be forced to re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could adversely affect our ability to sustain and grow our business.

Rapid technological and industry changes and new entrants could adversely impact our services.

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and may limit our flexibility in planning for, or reacting to, changes in our business and the audio entertainment industry.

In addition, our borrowings under our Senior Secured Revolving Credit Facility carry a variable interest rate based on London Inter-bank Offered Rate (“LIBOR”) as a benchmark for establishing the rate of interest (except for the Incremental Term Loan which carries a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”)).

LIBOR is the subject of national, international and other regulatory guidance and proposals for reform.

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The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate.

The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years.

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We believe that our success depends on our continued ability to attract and retain qualified management, sales, technical and other personnel.

During 2021, we experienced a significant amount of employee turnover.

All of our employees, including our executive officers, are free to terminate their employment with us at any time, and their knowledge of our business may be difficult to replace.

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The unfavorable outcome of pending or future litigation could have an adverse impact on our operations and financial condition.

We are parties to several legal proceedings arising out of various aspects of our business, including class actions arising out of our marketing practices.

We are parties to several legal proceedings arising out of various aspects of our business, including possible class actions arising out of our marketing practices.

The outcome of these proceedings may not be favorable, and one or more unfavorable outcomes could have an adverse impact on our financial condition.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors