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Insider: July 30, 2020

SiriusXM 2020Q2 earnings. The pandemic’s impact on drive-time has hurt companies with traditional radio at its core, and SiriusXM — the satellite radio company primarily controlled by Liberty Media, which owns Pandora and now owns Stitcher, plus an investment position in Soundcloud — is no different. That came through clearly enough in the company’s second quarter earnings report that dropped this morning.

Chiefly a paid subscription business, SiriusXM added 264,000 new “self-pay” subscribers through the second quarter, but lost 768,000 in promotional subs, leading to a loss of 516,000 subs overall. For reference, this time last year, the company saw a net gain in overall subs — +174,000 — not having had to deal with this deep drop in promotional subs.

The reason, as provided by the company, had to do with new car shipments: “Paid promotional subscribers decreased due to declines in shipments from automakers offering paid trial subscriptions with the purchase or lease of a vehicle.” SiriusXM, of course, is a product primarily oriented around drive-time, and its historical efforts to grow market share has largely been tethered to its relationship with car manufacturers. As such, when car sales hurt, SiriusXM’s capacity to grow its subscription base hurts.

And car sales have been hurting. From the Wall Street Journal: “Major auto makers reported sharp drops in second-quarter U.S. vehicle sales, as sweet discounts and financing deals weren’t enough to offset factory and dealership closures from the Covid-19 pandemic.” One imagines that this will likely continue the short-term, as the US continues to shit the bed on both the pandemic and economic response. But keep in mind that there may be long-term effects: we still don’t quite know whether we’ll see a genuine structural shift towards permanent remote and distributed work for large swathes of the American workforce (though there’s no lack of discussion around that), and so there’s a definite possibility that drive-time volumes won’t return to its pre-pandemic peaks once we get over to the other side.

Of course, SiriusXM is only really interesting to us for its podcast machinations. On the Pandora side — which, by the way, remains a podcast distributor, did you remember that? — the platform’s advertising revenue fell by 31% to $211 million. That metric accounts for all the sales that runs through AdsWizz (acquired in 2018), which moves money both for on-platform Pandora sales and a bunch of off-platform clients, including podcast publishers as well. The stated reason: COVID-19, obvs.

Here’s the line: “Numerous categories of advertisers cancelled or paused orders during the second quarter in reaction to the COVID-19 pandemic.” Nevertheless, the company notes that the decline smoothed out by the end of the quarter: April saw a 41% decline in revenue compared to the previous year, but June only saw an 18% decline. For what it’s worth, this specific digital advertising experience roughly mirrors what podcast advertising has seen on its own end, as represented in the latest IAB report we discussed a few weeks ago.

And there are the acquisitions of Stitcher and Simplecast. Here’s the line: “Sirius XM has also been active in acquiring and investing in complementary businesses, with $428 million of capital committed to acquire Simplecast and Stitcher and for a minority investment in Soundcloud… We are now poised to offer audio publishers content hosting, data analytics, ad insertion and sales representation services through programmatic and direct sales.”

I think that $428 million total number is new, and it gives us a sense of the Simplecast deal size, which was not disclosed when that acquisition was announced in June. Stitcher’s deal is valued up to $325 million, while the Soundcloud investment was valued at $75 million, which would leave us with around $28 million for Simplecast. Arithmetic, baby!

Anyway, the thinking around the Stitcher and Simplecast pick-ups is right there in the quote: it’s a bid to establish some integrated presence in all components of the podcast business. I’m guessing that we’ll presumably see some bundling up, particularly on the sales side, with the other parts of the SiriusXM audio sales business at some point. For now, SiriusXM’s story moving forward on the podcast front will likely be a story of the company trying to figure out staff and function integration, which may lead to some layoffs following the discovery of redundancies, and of course I’m assuming that SiriusXM has genuine interest in viewing podcast sales and advertising as a fundamentally different area and skill-set from its existing advertising operations — and that Stitcher had been genuinely good at selling podcast ads in the past. So it might be awhile before we see anything interesting, or meaningful, from them.

One last thing: Deadline wrote up the latest in the situation with the Howard Stern deal, which remains in negotiation, and which was brought in the earnings call. “I don’t want to be overly optimistic, but I want Howard here,” said SiriusXM CEO Jim Meyer. (I mean, obviously.)

But of course, there’s another player in the wings: Spotify. And the Swedish audio streaming company had their earnings call earlier this week, during which Spotify CEO Daniel Ek was asked about the possibility of signing Stern. Ek punted on speaking about Stern specifically, though he did launch into another version of the broader case that Spotify is trying to make towards creators more broadly. Here’s Deadline, again, on that.

(Which is just as well, I suppose. How much money left in the bank do they really have for someone like Stern?)

Speaking of Spotify earnings, let’s hit that too.Spotify 2020Q2 earnings. The Swedish audio streaming company announced second quarter earnings yesterday, and given the fact that we stick pretty close to the Spotify beat here in this newsletter, I’m not going to spend too much time on this one.

The big picture narrative for the quarter — here’s the CNBC version, which I found most pithy — is that Spotify is still grappling with the negative impacts of the pandemic despite the general increases in usage within the lockdown context as well as its various efforts to act on its podcast ambitions. The company missed revenue expectations, largely attributable to pandemic-related hits to ad revenue, though it continues to grow monthly active users and paid subscribers.

Assuming the world persists into 2021 and beyond, keep an eye on the long game. Though I’ve seen some argumentation that Spotify’s paid subscription revenue should be viewed as being more important than its advertising revenue — keeping in theme with what we’ve been seeing with media businesses — it seems more true that Spotify remains expressly interested in advertising revenue, which at this point is probably how they’re going to most effectively make money off whatever podcast listenership happens on the platform. (See: streaming ad insertion.) Which is to say, Spotify seems to very much want to maintain its dual subscription-advertising business model.

Anyway, the podcast-specific metrics:

(1) Couching the ad revenue losses, Spotify noted that its seeing “double-digit growth” with self-serve Ad Studio platform and Podcast channel, along with “positive growth” for its Streaming Ad Insertion product. It also mentioned that “Overall, podcast advertising outperformed in the quarter with momentum continuing into July.” No exact numbers, however.

(2) Here’s the chunk on podcast listenership: “Today, 21% of our Total MAUs engage with podcast content, up from 19% of MAUs in Q1 2020, and consumption continues to grow at triple digit rates Y/Y. We see strong MAU growth in podcast content across all regions for Spotify.”

(3) I don’t tend to take podcast supply metrics super seriously, but if you’re interested:

Overall supply of new podcast content recovered in Q2 after a slight impact related to COVID-19 in the previous quarter. There have been a healthy number of releases for Catalog, as well as Spotify Originals within the quarter. We launched 110 podcast playlists across 6 markets (including 49 new O&E podcasts outside the US) on a variety of themes and topics to continue to drive podcast discovery for users. Currently, Spotify’s podcast catalog has over 1.5 million shows, 50% of which launched in 2020.

More curious, however:

Our acquisition of Anchor last year has helped accelerate content growth on the platform with approximately three quarters of new podcast releases being powered by Anchor.

I think this supports my earlier read of Anchor’s current value to Spotify’s podcast narrative: it really is the engine powering that supply metric. Also, if you’re in the “I’m worried about Spotify becoming YouTube camp,” the Anchor component is the most important piece to watch, much more so than the eye-catching exclusive deals.

Speaking of which, the earnings report dropped on the same day that The Michelle Obama Podcast dropped its first episode, which is a touch of showmanship to keep the positive narrative going, I suppose.

Anyway, two last thoughts:

Firstly, for what it’s worth, I would love to see a “average total time spent with podcasts on platform per user” metric, even though that’s proooobably not going to happen. But hey you never know.

Secondly, I’m pretty sure this line of discussion is still in the simmering phase, but I reckon there will come a time where folks are going to have to talk about getting hit with Spotify-produced podcast ads even though you’re a premium subscriber. (Hell, this might even apply to hearing podcast ads on shows merely distributed over Spotify.) It remains the case that paid subscriptions are still broadly associated with ad-free experiences — at least outside of the text web — and so my sense is that there might be some movement here at this point. Maybe another subscription tier? Hmm.

Okay, let’s do a quick sweep of some other stories and call it a week.ICYMI: Westwood One struck a partnership deal with Imperative Entertainment’s podcast division to “monetize, market, and distribute all Imperative Entertainment’s existing and forthcoming podcasts.” Press release here.Pod-to-Pod Attribution. This week, Chartable rolled out something called “SmartPromos,” meant to help folks measure the impact of podcast ad campaigns. As in, ad campaigns promoting new podcasts. Can’t you just use existing ad measurement tools and apply it to podcasts as a category? But what do I know about ad tech.Interesting, but unsettling.From The Verge:

Descript, the maker of artificial intelligence-powered audio editing software, is launching a new tier of subscription today called Descript Pro that features access to its Overdub feature.

Overdub, first released in beta last year, is a synthesis tool that lets you effectively create an AI voice double for yourself. That way, if you made a mistake in a recording, the software can fix it while the end result still feels natural and organic. It’s a bit like creating an audio-only deepfake, except you’re doing it to fix your own mistakes instead of trying to impersonate someone else.

I dunno, man. This feels like something that could start World War III.Two more reads.

From BuzzFeed News: “How will the Black Lives Matter movement influence true crime?”

From Taylor Lorenz, over at the New York Times: “As the pandemic has upended school, summer plans, and daily life for millions of teenagers, many are turning to a podcast to cope. ‘Teenager Therapy,’ hosted by five rising seniors at Loara High School in Anaheim, Calif., has become a lifeline for kids and a breakout hit.”