Why SiriusXM Will Pay $325 Million to Acquire Stitcher

Satellite radio operator SiriusXM Holdings will pay $325 million to acquire podcast network Stitcher Radio from E.W. Scripps Co. in a deal that bolsters SiriusXM’s slate of podcasting talent and gives it access to valuable advertising technology. Stitcher operates Midroll Media, a podcast advertising network that connects advertisers to podcasts based on the advertiser’s target audience. Midroll is a valuable addition to SiriusXM’s portfolio because it tracks specific listener information in order to cater ads to them, such as what devices people listen on, how long a person listened to an ad, when they turned it off, or which ads listeners skip. SiriusXM wouldn’t comment on the company’s decision to acquire Stitcher but a spokesman noted that Sirius already owns two software companies — radio ad tracking service AdsWizz and Simplecast, a podcast analytics and publishing platform. If SiriusXM wants to further increase its podcast advertising intelligence, acquiring Stitcher is an easy leg up. “This Stitcher deal is a huge expansion of their efforts” in advertising intelligence, Dave Zohrob, chief executive of podcast tracking site Chartable, told TheWrap. “We work with AdsWizz when we do ad attribution, and they represent a big slice of dynamically inserted ads,” Zohrob said. “Simplecast is where people can publish their podcasts. A lot of podcasts are published on Simplecast and it does include some analytics tools as well.” Zohrob added that the Stitcher app also includes “client-sized analytics” to track basic podcast engagement. The ability to track what listeners are tuning into — and when — is extremely valuable for podcast networks, he said. “People can listen to shows on any number of devices. That’s what makes podcasting awesome — but it also makes it difficult to know if the person actually listened to it or not. Stitcher has the stats of what people listen to and how long, which is a pretty special kind of data that very few people have,” Zohrob said. “The Stitcher app isn’t gigantic, but it’s certainly large enough to have an interesting swath of data across lots of different shows on what is actually holding people’s attention, so I imagine that was a significant part of the acquisition.” E.W. Scripps bought Midroll in April 2015 and Stitcher in June 2016. In its 2019 annual report released last March, Scripps reported Stitcher’s revenue grew roughly 42% year-over-year to $72.5 million. Scripps said in its earnings report Stitcher’s revenue growth was “due to advertising growth from existing podcasts, as well as the addition of new titles to its portfolio,” but did not specify how much of Stitcher’s revenue was generated by Midroll. SiriusXM chief executive Jim Meyer acknowledged Sirius’ plans to capitalize on the Midroll advertising network in a statement July 13. “The addition of Stitcher is an important next step as we continue to develop and strengthen our offering in the fast-growing podcasting market,” Meyer said. “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.” Another potential motivating factor for SirusXM buying Stitcher is the possibility that Howard Stern could leave the network this year. SiriusXM did not return TheWrap’s request for comment about Howard Stern’s deal. Stern signed a five-year contract with SiriusXM for “The Howard Stern Show” in 2015, and the agreement expires this December. Stern hasn’t said if he plans to continue working with SiriusXM or take “The Howard Stern Show” elsewhere. In April, the host told Bloomberg he hadn’t had any “real serious” conversations about contract renewals since the pandemic began but added he was “open to ideas” about the show’s future placement. “The Howard Stern Show” is one of SiriusXM’s top programs. “Stern’s contract is up in December of this year, so who knows if that was part of (the deal),” Zohrob said. “Stern was the (Joe) Rogan before Rogan, and longtime radio folks know the power of the cult of personality and the staying power of those audiences.” By acquiring Stitcher, SiriusXM gains a vast catalog of celebrity podcast content that could fill Stern’s shoes if he decided to take his show elsewhere — including programs like “Office Ladies” from “The Office” actresses Jenna Fischer and Angela Kinsey; comedian Marc Maron’s podcast “WTF”; and “Conan O’Brien Needs a Friend.” True crime podcast “My Favorite Murder,” “LeVar Burton Reads,” and “Literally! With Rob Lowe” also join SiriusXM following the deal. SiriusXM agreed to acquire Stitcher with $265 million paid upfront and an additional $60 million awarded if Stitcher meets certain undisclosed financial targets within the next year. Stitcher is the second podcast outfit SiriusXM has bought — it acquired radio streaming service Pandora Media for $3.5 billion in early 2019. “Pandora’s podcasting efforts until recently was a small number of publishers,” Zohrob said. “They had an exclusive deal with This American Life, but not that many people are listening to podcasts on Pandora until recently.” Zohrob said that although podcast advertising revenues are growing at a rapid clip, shows aren’t often monetized or valued as high as television programming. The International Advertising Bureau’s annual report on podcast advertising revenues released this month found that year-over-year ad revenue from podcast companies increased roughly 48% to $708 million in 2019, up from $479 million the prior year. Despite the pandemic, the IAB predicts that podcasting advertising revenue will grow 14.7% in 2020. “Overall, the podcast industry has been under-monetized for a long time,” Zohrob said. “If you look at the amount of attention paid, the size of the audience in the U.S. and worldwide, it’s huge and yet the monetization level per minute of attention is way low compared to radio, let alone TV. I think the initial interest is hopefully a sign that the monetization gap is going to decrease.”