After Entercom spent last year digesting its platform-changing merger with CBS Radio, 2019 has been marked by a focus on growing its digital business. Most notably, that’s included a rapid expansion into podcasting, by not only leveraging assets it already had but also spending tens of millions of dollars to acquire outside companies. Entercom says its podcast business is already break-even and now expects it will be a profitable endeavor beginning next year.
“Even though it is early, we see a great deal of momentum across our podcast business. In fact, our total podcast downloads grew by 72% during the third quarter,” CEO David Field said Friday. That’s translating into revenue. Entercom expects between $10 and $12 million in podcast-related revenue during the fourth quarter.
The podcast push has come as Entercom has rebooted the Radio.com app, which had languished under previous CBS ownership. That includes the Radio.com Sports Digital Network, which was launched in August with a mix of daily live sports talk programming and more than 75 hours of original podcast content weekly.
The launch of several owned podcasts like Campaign HQ and Long May They Run, and alliances with brands including HBO and Netflix, have also fed more on-demand audio content into Radio.com. The result is monthly active users of the app grew 60% during the third quarter compared to a year ago. The results are promising, Field said. “Digital, including podcasting, now represents 12% of our total revenues,” he told analysts.
Entercom has so far spent nearly $50 million to acquire outside assets to grow its podcasting business. In July it closed on an $18 million deal to buy the podcast studio Pineapple Street Media. And then in October it closed on a deal to buy the 55% of Cadence13 it did not already own.
Entercom did not initially disclose what it paid for Cadence13 but it has now shared that information with investors. The company said it paid $38.3 million as part of the latest deal. That’s in addition to the $9.7 million it handed over for a 45% stake in 2017. Field said the transactions came with a price multiple of one-time the projected 2019 revenue for the companies, which he noted was “well below” what a number of other recent podcast transactions have involved. “The combined transactions establish Entercom as one of the three largest podcast enterprises in the U.S. with aproximately150 million downloads per month of programming that we create or represent for ad sales,” he told analysts.
Forecasts the podcast market will exceed $1 billion in revenue by 2021 are giving Field confidence they have made the right decision by investing in podcasting. “The economics of the business are going to continue to improve, particularly for players like Entercom where we have a wealth of symbiotic advantages,” he said. “It is very much an extension of our core business.” CFO Richard Schmaeling also noted that among the top genres within the podcast space is sports, which fits nicely with Entercom’s portfolio of sports talk radio stations. “We see a lot of opportunity there to exploit and create more owned audio content,” he said. And Schmaeling told investors he expects podcasting to become a higher-margin business, even one day being comparable to broadcast radio’s high margins.
Like other radio group heads, Field believes podcasting will not only help deepen the company’s relationship with ad buyers but also help reinvigorate ad sales for AM/FM content. They’ll also be able to leverage a local sales force to sell medium, which he notes buyers are putting a “great value” on due to its relative scarcity.
“At a time when there is so much disruption across all forms of advertising, the appeal of podcasting is absolutely getting some advertisers to pay attention to audio,” said Field. “There is not that much fundamentally different between running an advertisement within a podcast and running an advertisement within a piece of really great over-the-air broadcast audio.”