Less than a month after picking up Simplecast for its podcast distribution and analytics tools, SiriusXM today is announcing an even bigger acquisition to raise its game in the realm of streamed spoken-word content. The satellite radio company said it has reached a deal to acquire Stitcher from E.W. Scripps for $325 million, a return of more than double Scripps’ investment in podcasting, the companies reported this morning. Stitcher is a podcast pioneer that provides a popular one-stop platform to create, monetize (via advertising) and distribute podcasts to listen to via its app and on multiple platforms.
Stitcher brings to SiriusXM its own mobile listening app, acquired for $4.5 million in 2016. It also operates the Midroll Media network for podcast advertising, acquired for $55 million in 2015. And it creates original podcasts and runs multiple content networks, via Earworlf. The deal means thousands of podcasts will move to the SiriusXM stable, including popular titles like Freakonomics Radio, How Did This Get Made?, SuperSoul Sunday from The Oprah Winfrey Network, Office Ladies, Conan O’Brien Needs a Friend, Literally! with Rob Lowe, LeVar Burton Reads, Comedy Bang! Bang!, and WTF with Marc Maron.
Combining Stitcher with SiriusXM’s satellite radio audience and Pandora (which SiriusXM acquired in 2018), the company now have the largest addressable audience in the United States for digital audio, including music, sports, talk and podcasts, covering 150 million listeners.
“This sale is consistent with Scripps’ track record of growing businesses that capitalize on the evolution of consumers’ media habits and then unlocking shareholder value through spinoffs, exits and continued organic growth,” said Scripps President and CEO Adam Symson, in a statement. “Over and over, this strategy has proven effective as well as profitable for the company and its shareholders,” he added.
The sale price of $325 million includes $265 million of cash upfront with an earnout of up to $30 million based on 2020 financial results and paid in 2021, noted Scripps. It also includes an earnout of up to $30 million based on 2021 financial results and paid in 2022. All Stitcher employees will join SiriusXM as a part of the deal.
“The addition of Stitcher is an important next step as we continue to develop and strengthen our offering in the fast-growing podcasting market,” said Jim Meyer, Chief Executive Officer of SiriusXM, in a statement. “With Stitcher, we will expand our digital audio advertising presence and look to generate new ways for creators to find and connect with their audiences. Stitcher has a talented team with deep experience in the podcast space, and we look forward to working with them to better meet the needs of creators, advertisers, and listeners,” he said.
The deal underscores some key trends in the area of podcasting.
The first is that companies that are operating streaming businesses based around music are doubling down on the growing popularity of podcasting content to complement those businesses, both to expand their audiences, and their audience engagement.
Sirius — which, in addition to its subscription-based satellite radio service and Pandora, is also a shareholder of SoundCloud — joins its peers in that strategy: both Spotify and iHeartMedia have made notable acquisitions to acquire original podcasting content, as well as tools for podcasters to help run their businesses.
That strategy, in turn, has led to another shift: a previously open podcast ecosystem, where you can listen to any podcast on the app of your choice, has evolved into a world where platforms aim to have exclusive content. (A consequence, you might argue, of having companies that generate revenues from walled gardens, which essentially contain the same troves of music, getting involved in the business of podcasts.)
Thirdly, it’s not easy to build podcasting, even with all its popularity and future potential, into a big and profitable business.
SiriusXM is no less than Stitcher’s third owner, not counting the period it was an independent company. It was founded in 2008, then Deezer acquired it in 2014 for an unknown sum, and then Scripps acquired it less than two years later for about $4.5 million.
Under Scripps, Stitcher may have been one of the company’s fastest-growing businesses, but it was also unprofitable. And so, as Scripps faces investor pressure of its own — its losses widened in the last quarter, and that was with COVID-19 coming in only at the tail end of the period, meaning the impact may well be significantly more severe in its Q2 reported later this summer — parting with its valuable podcasting asset at a time when it is in hot M&A demand may have seemed like the right choice.
Deloitte estimated (in December 2019, pre-COVID) that podcasting will break $1.1 billion in revenues this year, but frankly we’re still in the early rounds of the podcasting industry. And today, it was SiriusXM’s turn to throw its hat into the ring.
The transaction is expected to close in the third quarter, pending Hart-Scott-Rodino clearance. LionTree Advisors acted as exclusive advisor to Scripps in the sale process, and BakerHostetler is serving as legal counsel.