Podcasting remains an embryonic industry in the eyes of SiriusXM CEO Jim Meyer, who fresh from striking the biggest podcast acquisition to date, cautioned investors Thursday that they need to be a “little careful” as they try to predict what the size of the podcast business will 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. During his company’s quarterly earnings call, he said SiriusXM isn’t approaching its podcast business as a strategy that seeks to grab exclusive rights to shows. “The way I look at it is primarily, what content can we add to our platform that significantly increases our value or our customer engagement. That’s the way we look at it.” Meyer said that will mean SiriusXM will embrace a “wide variety” of content, not seeing any individual show as driving its podcast business.

Scott Greenstein, President and Chief Content Officer at SiriusXM, said with a portfolio that includes not only a satellite radio company but 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. 

Greenstein also said the terrestrial radio model may offer a map of how big podcasting will be, with 85% of AM-FM listening going to music stations, with the remaining 15% share going to talk. “We’ve always believed in non-music content,” added Meyer, who pointed out SiriusXM has distributed live sports play-by-play for years.

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. The deal included Stitcher’s podcast portfolio — which encompasses such owned-and-operated podcast networks as the comedy-focused Earwolf and the Midroll advertising rep firm — with SiriusXM’s growing podcast business that already includes Pandora and its monetization platform AdsWizz and the just-acquired ad tech business Simplecast. “Stitcher produces a number of high-visibility podcasts, has a leading ad network, and sees about a 150 million downloads per month,” said Meyer. “We look forward to closing Stitcher later this year and for the opportunity to drive growth with investments in this space.” He said the company’s recent acquisition of Simplecast will also complement SiriusXM’s growing portfolio of ad tech companies such as AdsWizz. “Simplecast, a leading platform for podcast creators, strengthens our capability in content management and analytics,” he said.

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. He said that’s especially true in the monetization of digital audio. “We have a stack of products for the marketplace to buy if they’re interested in buying,” he told analysts.

Meyer said the combination of content, technology and sales capabilities across all the satcaster’s various sister companies will also allow advertisers the opportunity to executive audience-based buys “with unprecedented skill and efficiency.” Meyer said he is also happy to see SiriusXM to participate more in the growing podcast segment.

Pandora Users Falls 8% In Q2

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 was 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 cancelled or paused orders during the second 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 six percent reduction in costs of services, and Pandora’s gross profit margins were cut by 55% compared to a year ago.

Satellite Radio Subscribers Slip By Half Million

SiriusXM said despite adding about 254,000 self-paying subscribers during the second quarter, the total number of satellite radio subscribers declined by 516,000 resulting in about 34.3 million total SirirusXM subscribers at the end of June. Still, CFO David Frear said the customer churn actually ticked lower during the quarter. “It’s something that we never would have guessed going into an economically sensitive period,” he said. He one factor could be tied to more subscribers racking up their credit card bills.

SiriusXM’s satellite radio revenue held steady at $1.5 billion. But when the Pandora revenue is factored in, the company’s overall second quarter 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%. “Although recovering, the outlook for adverting revenue remains uncertain for the rest of the year, he said.

Car sales remain the biggest factor in the growth of satellite radio, 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, GMC brands and Volkswagen have pledged to put 360L into their dashboards.

Howard Stern Fate Still Unsettled

The biggest talent on SiriusXM remains Howard Stern, but his contract expires at year-end and Meyer said he continues to be in talks with the host about signing a new satellite radio deal. “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 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 is not “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, under the terms of its current agreement the satellite radio company has the right to five years of live shows and then if the 66-year old host were to retire it would 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.”