Howard Stern remains the biggest talent on SiriusXM but his contract expires at year-end. Speaking during the satellite broadcaster’s second quarter earnings call Thursday, CEO Jim Meyer said he continues to be in talks with its star host about signing a new satellite radio deal. So far, the process is playing out much like it has for the last three contract renegotiations.
“I’ve been clear — I want Howard Stern to work at SiriusXM for as long as Howard Stern wants to work,” said Meyer. He said he has been in talks with Stern’s team since late last year, and after some delays to the negotiations because of the COVID-19 pandemic, the discussions have resumed. “I know what Howard wants and we’re trying to figure out [how] to make all those things work together,” said Meyer.
But while the process isn’t any different than when Meyer last negotiated with Stern five years ago, he also told analysts he doesn’t want to be “overly optimistic” that SiriusXM will be able to keep Stern’s show in its current three-day-a-week form. “At the end of the day it is going to come down to what does Howard want,” Meyer added. Even if SiriusXM isn’t able to work out a new deal with Stern or if the 66-year old host were to retire, the satellite broadcaster have the rights to air Stern’s library of shows for seven years.
“Howard is performing at the top of his game right now and he has been for a long time. I couldn’t be happier with the status of Howard’s show, in particular given the transition he’s made from doing everything in our studios in New York to doing it remotely,” said Meyer. “From everything that I can tell, Howard is very happy with what he is doing, and I can tell you it matters when Howard is happy, his shows are better.”
Satellite Radio Subscribers Slip
Despite adding about 254,000 self-paying subscribers during the second quarter, the satcaster’s total number of subscribers declined by 516,000 in second quarter, resulting in about 34.3 million total subs at the end of June. Still, CFO David Frear said the customer churn actually ticked lower during the quarter.
The company’s satellite radio revenue held steady at $1.5 billion. But when revenue from wholly owned subsidiary Pandora is factored in, overall Q2 revenue declined 5% to $1.9 billion. “Sirius XM’s business during this challenging period has been resilient,” said Meyer. The biggest drag has been in advertising, where revenue fell sharply with a 34% decline compared to a year ago. “The trend within the quarter was positive,” he told analysts, explaining April ad revenue was down 44%, May was off 38% and June was down 22%. While recovering, the outlook for ad revenue remains uncertain for the rest of the year, he said.
Car sales remain the biggest growth factor with SiriusXM’s penetration in new cars rising to 77% in the second quarter. On the car front, the company confirmed planned rollouts this year of its 360L receiver, which combines satellite and streaming content delivery into a single in-vehicle entertainment system. Automakers including Audi, BMW, Fiat Chrysler, Ford, GM’s Buick, Cadillac, Chevy and GMC brands and Volkswagen have pledged to put 360L into their dashboards.
Pandora Users Fall 8%
Pandora’s active monthly active users fell 8% during the second quarter to 59.6 million. And the total ad supported listener hours declined 6%. But the company did see at least a few bright spots, with the average monthly listening hours among those who tune to the ad-supported service increasing 2.4% during the second quarter compared to a year ago. The number of self-paid subscribers also increased 40,000 despite the pandemic and a hit to consumer wallets. Total Pandora subscribers at the end of the quarter were 6.3 million.
“We’re seeing gains in hours spent listening to consumer electronics devices mitigating declines on mobile and web,” said Meyer. “As important, Pandora ad hours are increasing for listeners 35 and older.”
Advertising revenue at Pandora fell 31% to $211 million during the second quarter. The company reported “numerous” categories of advertisers that cancelled or paused orders during the quarter in reaction to the COVID-19 pandemic. Still, the declines moderated as the months progressed. April was down 41%, May was off 36%, and June was down 18% versus the same months in 2019.
Yet the sharp decline in advertising revenue greatly exceeded a 6% reduction in costs of services, and Pandora’s gross profit margins were cut by 55% compared to a year ago.
First Inning For Podcasting
Podcasting remains an embryonic industry in the eyes of Meyer, who cautioned investors that they need to be a “little careful” as they try to predict the size the podcast business will ultimately be. “Podcasting is in the first inning,” he said. What Meyer is more certain about is that companies who have an ability to bundle audio products will have a leg up.
“Podcasting is a very important part of our audio bundle,” he said. “I don’t know what the viability is of podcasting as a standalone business. It takes an awful lot of investment and an awful lot of marketing,” said Meyer.
Scott Greenstein, President and Chief Content Officer at SiriusXM, said with a portfolio that also includes podcast distribution points like Pandora, Stitcher and SoundCloud, he sees the marketing of shows evolving. “I’m particularly excited about content not isolated as ‘podcasts’ but as audio content that can flow up and down,” he said.
No More Deals Imminent
In a headline-making move, SiriusXM this month struck a $325 million deal to buy Stitcher from the E.W. Scripps Co. “Stitcher produces a number of high-visibility podcasts, has a leading ad network, and sees about a 150 million downloads per month,” said Meyer. He said the company’s recent acquisition of Simplecast will also complement SiriusXM’s growing portfolio of ad tech companies such as AdsWizz. After a series of deals, SiriusXM is now focused on digesting what it has gobbled up. “I don’t think there’s anything missing,” said Greenstein.