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Six Takeaways From SiriusXM’s Latest Update To Investors.

Podcasting is a growing business for SiriusXM which has moved beyond just a satellite radio company during the past few years with a series of deals that brought Pandora, Stitcher and Simplecast under its wing. New CEO Jennifer Witz – who took control following the departure of Jim Meyer – told analysts Tuesday she sees that segment only expanding further, explaining that while they love the engagement podcasting drives, they are “business model-oriented.”

Here are six takeaways from the quarterly update –

No More Podcast Deals On Horizon

SiriusXM closed its $325 million acquisition of Stitcher in October giving it rights to shows like My Favorite Murder and Office Ladies. Earlier in the year it struck a $28 million deal to buy Simplecast, the podcast management and analytics platform. Witz told analysts their shopping is done for the moment. “We have the assets that we need, and we are very focused on integrating them and beginning to execute on our plans for podcasting and growing digital audio advertising,” she said.

But ANew Podcast Ad Solution Is Coming

SiriusXM plans to roll out a new advertising solution in the coming months that will leverage its Stitcher and Simplecast acquisitions by integrating enhanced targeting, transparent delivery and measurement, bespoke creative, and exclusive programing access. Witz told analysts it aims to snag a piece of podcasting’s continued growth. “It’s approaching $1 billion in advertising revenue, which is still relatively small when you look at something like terrestrial radio which is over $15 billion. But is growing at double-digits,” she said. “We expect to play a very active role in this market. The assets that we have with Pandora, plus ad sales and ad tech, will help us drive this.”

Pandora Users Drop Again. So Does Its Value

The addition of Stitcher and SiriusXM podcast debuts may help, but in the meantime users of Pandora continues to sag. Monthly active users were 58.9 million at the end of 2020, a decline of 7% from a year earlier. “We’re clearly focused on the decline in listenership,” said Witz. “We have been very focused on delivering new content features, like improving engagement on connected devices in the car. It has been harder than we expected.” Pandora added 133,000 subscribers last year, bringing its total to 6.3 million at year-end. The declining user base and anticipated higher music royalty costs are reasons SiriusXM wrote down the value of Pandora by a staggering $976 million. To put that into perspective, SiriusXM paid $3.5 billion for Pandora in 2018. The write-down is roughly 28% of the deal’s value.

Pandora’s Bright Side Is Ad Sales

Fewer Pandora users do not seem to be hurting advertising sales at the division. Fourth quarter ad revenue jumped 22% from a year earlier to $425 million. And full year ad revenue, which includes off-platform results such as the company's AdsWizz business, declined just 1% year-over-year to $1.18 billion, despite significant weakness in the marketplace related to the pandemic. “The monetization has been very strong at Pandora,” said Witz, who credited the Pandora sales team for innovating with new ad products and driving up CPMs.

SiriusXM Mining Content On Its Own Turf

The vast array of hosts and content brands already on SiriusXM may present the biggest opportunity for new podcast launches on Pandora, according to Scott Greenstein, President and Chief Content Officer at SiriusXM. “Our own brands are vital in this and we are just getting to the point in seeing where that will go,” he said. The new Inside Jokes comedy podcast could be a model. Hosted by comedian Kevin Hart, Inside Jokes premieres Wednesday nights on SiriusXM’s Laugh Out Loud Radio channel and is subsequently released as a podcast.

“Most big names and big brands are not in podcasting yet, and that’s where the opportunity is,” said Greenstein. He said several producers that have deals with the satellite radio side of the business are now also looking for a “full-service” opportunity. “What I am really interested in are brands that can work organically for us in all three platforms,” said Greenstein. “Because once you get into cross-promotion and cross-monetization, efficiency of production costs, it’s an entirely different model – so that’s where I think we’ll end up going.”

Revenue Tops $8 Billion

SiriusXM reported its total revenue exceeded $8 billion in 2020, a three percent growth rate despite the pandemic. It also turned a $131 million profit. It forecasts it will hit $8.35 billion in revenue this year, thanks largely to growing numbers of satellite radio users. SiriusXM added 909,000 self-pay subscribers last year.

“The key is to focus on increasing our owned and operated catalog of podcasts as well as those that we represent for ad sales and tech,” said Witz. “We believe there is a lot of opportunity for us to grow that. It is much smaller than the advertising revenue we derive out of Pandora, but it is very complementary.”

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