Category: Media and Marketing

Senior Media Analyst at Noble Capital Markets Discusses the Pandemic’s Impact on Ad Revenue – He Details a Company Investors May be Overlooking

 

Michael Kupinski, Director of Research and Senior Media and Entertainment Analyst at Noble Capital Markets, discusses with Proactive Investors how the media industry is faring during the pandemic. He breaks down the pandemic’s impact on various mediums and looks forward to the political advertising season.

Kupinski then looks past the pandemic and details a particular marketing services company that investors may be overlooking.

Click on the video below to see the interview.

 

 

Friday, August 14, 2020

Harte-Hanks Inc. (HRTH)

Recovering Better Than Expected

Harte-Hanks is a marketing services company that provides multichannel marketing solutions as well as consulting, data analytics, and strategic assessment. The company’s offerings focus on business-to-business, retail, finance, and automotive segments through digital, social, mobile, and print media offerings. Harte-Hanks strives to develop better customer relationships through its marketing and analytical services for clients. The majority of its revenue is derived from its marketing services in the retail, technology, and consumer brand segments.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Overachieves Q2 results. Revenues of $41.6 million was better than our $38.5 million estimate and reflected a 23.9% year-over-year quarterly revenue decline, better than many traditional media companies in Q2. Cash flow, as measured by Adj. EBITDA, was a better than expected $480,000 versus our estimate of $150,000. We believe that the results reflect that the company’s transition toward revenue growth is on track.


Stabilizing revenues? We believe that Q2 revenues may reflect a stabilization in the company’s revenues, possibly the first time since 2016. Q2 revenues showed a sequential quarterly improvement from $40.5 million in Q1 and we estimate that Q3 revenues will …









Click to get the full report

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

 

Ten years ago 15% of Ad Money was Spent on Internet Ads, Guess what that Percentage is Today?

 

Soap operas, magazines, TV sports, local radio; they all allow niche target-advertising.  But, their slice of the advertising-dollar pie is shrinking precipitously. This trend has been in place for a while and still accelerating. Traditional ways to reach motivated buyers are losing out to the newer competitors for ad-dollars. In 2020, this has become even more complicated.

 

The days of scanning through newspapers for sales or dentist office magazines to learn more about a product are almost nostalgic. Ad-Targeting is much more refined in the new digital world. With a more accurate dataset of consumer likes and dislikes, online advertising has leaped to the forefront of marketing strategies. Marketers have recognized the consumer trends and have adapted to meet them; targeted digital advertisements allows them to be significantly more strategic.

 

Advertising Spending Trends

A bit over a decade (2009), the internet represented only 15% of all U.S. ad spending.

               Total dollars spent: $117 Billion

               TV: 39% of ad spending

               Print Media: 34% of ad spending

               Internet: 15%

 

Today (2020), more is spent on internet advertising alone than all U.S. ad spending of ten years earlier.

               Total dollars spent: $263 Billion (est.)

               TV: 28%

               Print Media: 11%

               Internet: 53%

 

Share of U.S. Ad Spending by Medium, 2009 (left) vs. 2019 (right)

Internet ad spending captured nearly half of ad dollars in 2019, up from about 15 percent a decade ago.

 

2020 and Beyond

The average social media user spends 2-plus hours a day browsing their feeds. The larger social media providers are monitoring people’s usage, likes, and dislikes. This creates a massive smart-platform for target-marketing products. The platforms continue to update and improve their methods, including increasingly higher levels of sophisticated algorithms—essentially artificial intelligence to connect a to users in their niche. The relevance of ads that users encounter is now superior to that they would see or hear from more traditional outlets. The big providers, Facebook, Snapchat, Twitter, and Instagram, all offer promoted advertisements that pop up on users’ pages while they scroll their feed. On average, users connect with three or more of their social media accounts a day.

 

Social Media ad spending is forecast to increase by 20% to $43 billion in 2020. Television advertising has been hard hit, not by social media competition, but by the lack of aired sports competitions. With the postponement of 2020 Summer Olympics $1.2 billion, the cancellation of March Madness and sports in general, the NBA and NHL playoff cancellation could cost $2 billion, and the seasons could cost around $700 million.    New estimates forecast that U.S. TV advertising spending will decline between 22.3% and 29.3%, mostly due to the curtailment of sports programs.

 

Google ad revenue is projected to be $39.5 Billion in 2020; this is down by 5.3% from 2019. The decrease is a direct result of the steps to curtail the coronavirus, which shut many businesses down and caused others to go into “safety mode” by cutting their spending. However, spending is expected to rebound at unprecedented rates, up 20% in 2021 as businesses begin to restart.

 

Ad spending on podcasts is forecast to grow 15% from 2019 to around $3.4 B by year-end. Around 40% of Americans now listen to podcasts on a monthly basis. Companies are adapting to new sectors to reach new markets.

 

Take-Away

Although 2020 has provided some one-time reshuffling of ad-dollar resources, the trend toward social media platforms is firmly in place. This is worth noting if you manage a media company, adapting and changing business models may put you in a position to take advantage of these changes. Investors may find undervalued traditional media companies that have been tossed out with others– those that a bit of research indicate are making smart moves. As for social media outlets, it looks like advanced data-driven technology is giving them their day in the sun.

 

Suggested Reading:

Will Broadcast Mergers and Acquisitions Surge?

More Accurate than Polls to Gauge Election Outcomes

Cashing In

 

Enjoy the Benefits of Premium Channelchek Content at No Cost

Each event in our popular Virtual Road Shows Series has maximum capacity of 100 investors online. To take part, listen to and perhaps get your questions answered, see which virtual investor meeting intrigues you here.

 

Sources:

https://adage.com/article/year-end-lists-2019/internet-medias-share-us-ad-spending-has-more-tripled-over-past-decade/2221701

https://en.wikipedia.org/wiki/Television_consumption

https://www.mediapost.com/publications/article/350281/us-tv-average-ad-spending-to-sink-25-in-the-fir.html

Picture: Etrade advertisement from the day after Superbowl February 2009.

Thursday, August 13, 2020

QuoteMedia (QMCI)

Keeping The Foot On The Pedal

QuoteMedia, based in Fountain Hills, Arizona, provides cloud-based financial data, market news feeds, and financial software solutions.  Its customers include financial service companies, online brokerages, clearing firms, banks, media portals, public corporations and individual investors.  The company provides a single source solution providing products such as streaming quotes, charting, historical data, technical analysis, news and research.  Information can customized and provided to multiple platforms including terminals and mobile devices.

Michael Kupinski, DOR, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Q2 results softer than expected. Q2 revenues were relatively stable in a very difficult operating environment and against tough year earlier comparisons. Revenues were $3.029 million, a new quarterly record for the company, in line with our $3.050 million estimate. Operating cash flow, as measured by adjusted EBITDA, was $214,000, below our $486,000 estimate, reflecting investments in new products to be launched later in the year.

Keeping the foot on the pedal. Management indicated that it plans to maintain its investment spending on new products and and features to be launched late in the current quarter. It may back off investment spend if the operating environment deteriorates. But, in our view, the company has enough liquidity and runway for the heightened spending. We believe that the new products and features should …









Click to get the full report

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Wednesday, August 12, 2020

Cumulus Media Inc. (CMLS)

Planned Asset Sales Enhance Investment Appeal

CUMULUS MEDIA, Inc. (NASDAQ: CMLS) is a leading audio-first media and entertainment company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. CUMULUS MEDIA engages listeners with high-quality local programming through 428 owned-and-operated stations across 87 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands including the NFL, the NCAA, the Masters, the Olympics, the GRAMMYS, the American Country Music Awards, and many other world-class partners across nearly 8,000 affiliated stations through Westwood One, the largest audio network in America; and inspires listeners through its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. CUMULUS MEDIA provides advertisers with local impact and national reach through on-air, digital, mobile, and voice-activated media solutions, as well as access to integrated digital marketing services, powerful influencers, and live event experiences. CUMULUS MEDIA is the only audio media company to provide marketers with local and national advertising performance guarantees.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Overachieves cash flow on softer revenue. Q2 total company revenues of $146.0 million, down 46.6% yoy, was lighter than our $151.5 million estimate. Adjusted EBITDA loss of $6.3 million was better than our loss estimate of $12.6 million. The better than expected loss estimate reflected the company’s earlier $85 million annualized cost reductions.


Not flowing through the upside to full year. Radio advertising trends are improving, but not at the pace we originally expected. We are tweaking lower our Q3 revenue and cash flow estimate in an abundance of caution. We are tweaking lower our Q3 revenue from $196.0 million to $193.0 million and our Q3 cash flow estimate from …









Click to get the full report.

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report.  NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision. 

Tuesday, August 11, 2020

Townsquare Media Inc (TSQ)

Reaffirms Its Favorable Digital Revenue Outlook

Townsquare Media Inc is an entertainment and media company offering digital marketing solutions in the United States and Canada. It owns and operates radio stations, social media properties focusing the small and mid-cap companies. Services offered to the clients include live events, local advertising, digital advertising, e-commerce offerings, few others. The segments through which the company operates its businesses are classified into Local marketing solutions and Entertainment segments. Revenues are generated from commercials through broadcasts and sale of internet based advertisements.

Michael Kupinski, DOR, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Solid Digital performance. Both revenues and cash flow were above expectations for what was one of the its most difficult quarters in its history given the Covid pandemic. Revenues declined 34.5% to $74.05 million, which was better than our $69.95 million estimate, and better than its peers, with many reporting revenue declines of as much as 60%. Q2 operating cash flow, as measured by adjusted EBITDA, was better than expected as well, $2.08 million versus our $1.10 million estimate.

Why we view the filing favorably.  Its subscription, digital marketing services business, Townsquare Interactive, increased revenues a strong 10.5% in Q2, demonstrating its recession resistant qualities. Both its Townsquare Interactive and its programmatic business, Ignite, are expected to …








Click to get the full report

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Monday, August 10, 2020

E.W. Scripps Company (SSP)

Dish, The Dirt On The Quarter

The E.W. Scripps Co. (www.scripps.com) serves audiences and businesses through a growing portfolio of television, print and digital media brands. After approval of its acquisition of two Granite Broadcasting stations later this year, Scripps will own 21 local television stations as well as daily newspapers in 13 markets across the United States. It also runs an expanding collection of local and national digital journalism and information businesses including digital video news service Newsy. Scripps also produces television programming, runs an award-winning investigative reporting newsroom in Washington, D.C., and serves as the longtime steward of one of the nation�s largest, most successful and longest-running educational programs, Scripps National Spelling Bee. Founded in 1879, Scripps is focused on the stories of tomorrow.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Q2 revenue misses, but cash flow much better than expected.  Q2 revenues of $358.9 million were below our expectations of $372.0 million. The revenue variance was virtually all related to Retrans negotiations with Dish TV, which carried the Scripps stations at the old rate until it took them off its service as of July 25th. Cash flow, as measured by adj. EBITDA, was above expectations, $33.7 million versus our estimate of $22.5 million.


Revenue and cash flow trends better than expected for Q3. Management indicates significantly improving advertising revenue trends in Q3, with strong Political advertising, moderating core advertising trends, and favorable Retrans revenue growth, despite the Dish dispute. The favorable revenue trends combined with …









Click to get the full report.

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Monday, August 10, 2020

Gray Television Inc. (GTN)

Outshining Many Of Its Peers

Gray Television, Inc. operates as a television broadcast company in the United States. As of April 6, 2010, it operated 36 television stations in 30 markets, including 17 affiliated with CBS Inc.; 10 affiliated with the National Broadcasting Company, Inc.; 8 affiliated with the American Broadcasting Company (ABC); and 1 affiliated with FOX Entertainment Group, Inc. (FOX). The company also operated 39 digital second channels comprising 1 affiliated with ABC, 4 affiliated with FOX, 7 affiliated with CW Network, LLC, 18 affiliated with Twentieth Television, Inc., 2 affiliated with Universal Sports Network, and 7 local news/weather channels. Gray Television, Inc. was founded in 1897 and is headquartered in Atlanta, Georgia.

Michael kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Q2 results overachieve our expectations.  Total company revenues of $451.0 million were better than our $432.0 million estimate, with core advertising the largest upside variance to our estimate. Operating cash flow, as measured by adj. EBITDA, was better than expected, $108.0 million versus our $86.0 million estimate.


Q3 appears to be pacing better than we thought. Management indicated that core advertising is pacing down a moderate 10% to 15%, much better than our original expectations. With strong Political advertising moderating core advertising trends and moderate expense growth, cash flow is expected to be …









Click to get the full report

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Friday, August 7, 2020

Salem Media (SALM)

Overachieves Cash Flow Expectations; Raising Estimates

Salem Media Group is America’s leading radio broadcaster, Internet content provider, and magazine and book publisher targeting audiences interested in Christian and family-themed content and conservative values. In addition to its radio properties, Salem owns Salem Radio Network, which syndicates talk, news and music programming to approximately 2700 affiliates; Salem Radio Representatives, a national radio advertising sales force; Salem Web Network, a leading Internet provider of Christian content and online streaming; and Salem Publishing, a leading publisher of Christian themed magazines. Salem owns and operates 115 radio stations, with 73 stations in the nation’s top 25 top markets – and 25 in the top 10. Each of our radio properties has a full portfolio of broadcast and digital marketing opportunities.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Over delivers on expectations. Second quarter revenues of $52.9 million were better than our $50.6 million estimate. Notably, the 18.3% revenue decline is among the better performances among multi media companies. More importantly, the company significantly exceeds cash flow expectations on aggressive cost cutting, $6.2 million versus our loss estimate of $2.9 million. Each of the company’s operating segments performed better than expected.

Significant sequential improvement. Management highlighted that July revenues reflected significant sequential monthly improvement with total company revenues modestly down. We are reticent to revise our Q3 revenue estimate, which reflects a 10% yoy decline, due to …









Click to get the full report

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Thursday, August 6, 2020

Tribune Publishing Company (TPCO)

Are The Shares Too Cheap To Ignore?

Tribune Publishing Co is a print and online media company that publishes various newspapers and websites. It creates and distribute content across its media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities. The company manages its business as two distinct segments, M and X. Segment M is comprised of the company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. Segment X includes the company’s digital revenues and related digital expenses from local Tribune websites, third party websites, mobile applications, digital only subscriptions, Tribune Content Agency and BestReviews.

Michael Kupinski, DOR, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Overachieves Q2 expectations. Q2 revenues of $183.1 million was slightly better than our $182.4 million estimate. Strong cost cutting actions allowed it to significantly overachieve our cash flow estimate, as measured by adjusted EBITDA, $18.8 million versus our $7.1 million estimate.

Q3 guidance better than expected. Management’s Q3 revenue guide of $188 million to $193 million is much better than our $181 million estimate. The prospective revenue decline is in line with other traditional media companies and illustrates the strength of its Digital businesses. The Q3 cash flow guide is …






Click to get the full report

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Wednesday, August 5, 2020

Entravision Communications Corporation (EVC)

Why We Are Raising Our 2020 Cash Flow Estimate By Over 50%

Entravision Communications Corporation is a diversified Spanish-language media company utilizing a combination of television and radio operations to reach Hispanic consumers across the United States, as well as the border markets of Mexico. Entravision owns and/or operates 53 primary television stations and is the largest affiliate group of both the top-ranked Univision television network and Univision’s TeleFutura network, with television stations in 20 of the nation’s top 50 Hispanic markets. The Company also operates one of the nation’s largest groups of primarily Spanish-language radio stations, consisting of 48 owned and operated radio stations.

Michael Kupinski, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Q2 results better than expected. Adj. EBITDA was $1.7 million versus our loss estimate of $550,000. Revenues were largely in line with expectations ($45.1 million versus our $45.9 million estimate).


Improving Q3 revenue trends, while cost cuts are kicking in. Q3 revenue pacing is better than our estimates, as cost cuts are kicking in. We are raising our Q3 revenue estimate to $56.9 million from $51.4 million and our Q3 adj EBITDA estimate is revised from …









Click to get the full report

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Double and Triple-Digit Returns Despite the Pandemic

Digital Media & Technology stocks have been on a tear after a soft pullback early in the second quarter. As Q2 progressed, the S&P 500 increased by 20%, while Digital Media & Technology stocks soared, with digital media stocks up 24%, social media stocks up 37%, marketing tech stocks up 48%, and ad tech up a whopping 94%. These all significantly outperformed the market.  In fact, not a single stock in the four sectors was down in the second quarter. Not only did no stock in this universe decline, but many saw double and triple-digit returns. Including the Leaf Group (LEAF,
+173%), Inuvo (INUV, +126%), Spotify (SPOT, +113%), The Trade Desk (TTD, +111%), and Cardlytics (CDLX, +100%).  Snapchat (SNAP, +97%) nearly doubled as well. 

Through the first half of the year, the S&P 500 finished down 4%, while the larger cap, but more narrowly focused, Dow 30 Industrial Index decreased by 10%.  During the same time, the FAANG stocks all finished up in the first half of the year:  the stocks of Facebook, Apple, Amazon, Netflix, and Google finished +11%, +24%, +49%, +41%, and +6%, respectively. 

Gainers

Are the Digital Media & Technology stocks headed for a bubble, or can the momentum keep going? Noble Capital Market’s Media Analyst, Michael Kupinski, indicated that the strong performance thus far has been fueled by fundamentals. Marketing tech stocks, with their recurring revenue business models, fared best in the first quarter and first half of the year.  Of the 11 companies in the marketing tech sector he follows, 9 of the stocks finished up in the first half of the year, led by Hubspot (HUBS, +42%), Adobe (ADBE, +32%) and SVMK Inc. (a.k.a. Survey Monkey (SVMK, +32%).  He expects this group to post the strongest year-over-year revenue results compared to the advertising-based businesses that make up the ad tech, social media, and digital media sectors.

Losers

On the other end of the spectrum, 7 of 11 ad tech stocks finished down in the first half of the year.  Investors are likely wary of the growth prospects for companies whose businesses are based on ad spend.  Digital advertising declines in the 30%-40% range were common in the month of April, slightly better than traditional media advertising declines.  However, it would appear that digital advertising trends improved significantly in May and June, far better than the advertising improvements at traditional media companies. 

Looking Forward

Can the strong performance in these sectors continue? Kupinski indicated that as revenue visibility improves, so too should M&A.  If visibility doesn’t improve and fundamentals remain tepid, it may accelerate consolidation trends, as companies realize they need to get bigger to compete with the walled gardens of Google, Facebook, and Amazon.  According to Mergermarket’s, Global & Regional M&A Report, the number of M&A deals fell by 39% sequentially to 2,630 deals in 2Q20 from 4,308 deals in 1Q20, and deal values fell by 48% to $308.9B in 2Q20 from $592.6B in 1Q20.  This is not too surprising given the onslaught of the Covid-19 pandemic, which caused most companies to focus on preserving cash rather than spending it.  M&A is a tricky proposition in any economic environment, but especially so in one where there is very little visibility. 

Where There was Consolidation

While deal volume fell considerably, it is interesting to note that M&A deal value actually increased in 2Q 2020 despite significantly fewer deals where purchase price information was available.  Noble tracked 36 deals in 1Q 2020 with purchase prices available compared to only 15 deals where purchase prices were available in 2Q 2020.  However, there were significantly larger deals in 2Q 2020 than in 1Q 2020:  total deal value in 2Q 2020 was $12.9B vs. $6.4B in 1Q 2020.  More than half of the deal value in 2Q 2020 was attributable to the $7.5B acquisition of GrubHub by Just Eat Takeaway.  Other large deals included Zynga’s $1.9B acquisition of Peak Games and The Stagwell Group’s $1.6B acquisition of ad agency MDC Partners.  Noble did not track any deals greater than $1B in 1Q 2020.

In their second-quarter commentary on broader U.S. M&A activity, MergerMarket noted that M&A in the technology sector started to rebound in May and June.  With fundamentals showing signs of improvement in the Digital Tech sector, Kupinski expects mergers and acquisitions to increase in the second half of 2020, which should continue to keep investors interested in the sector and lead to good stock performance for the balance of the year.   

 

Suggested Reading:

Will Broadcast Mergers and Acquisitions Surge?

More Accurate than Polls to Gauge Election Outcomes

Cashing In

 

Enjoy the Benefits of Premium Channelchek Content at No Cost

 

Sources:

Are Media Investors Too Pessimistic?

Global and Regional M&A Report

 

Photo Credit: blogtrepreneur.com

As Listeners Tune in to Radio Frequencies Less Frequently M&A Activity in Alternatives Abound

Recently we’ve become accustomed to seeing waves of merger and acquisition activity in brokerage firms, healthcare, fintech, and social media. However, there’s one media sector getting less attention despite its own wave of M&A. Technology means choice, and the growing array of audio platforms provide us with more alternatives every day. Audio news, education, and entertainment options are almost limitless and growing. The hit-or-miss days of flipping through radio stations in your car, hoping to find entertainment, are now in the rear view mirror. Podcasts, which are digital audio files made accessible through streaming platforms and downloads to personal electronic devices, are still on the rise. Whatever the listener is interested in, whether it’s a comedic reprieve after a laughter-less workday or an informative discussion on an upcoming election, it is now available to listeners wherever they are. If there is an audience, chances are there is someone looking to reach out to that audience. As consumers’ choices are evolving, the power of traditional radio is being drowned out by podcasts.

Turning Up The Volume

The upward trending use of podcasts in the U.S. now adds to more than 75% of Americans regularly exposed. This is a 25% increase in just five years; it is expected that those numbers will rise as adoption reaches full saturation. With over 1,000,000 podcasts available, nearly 40% of Americans listen to podcasts on a monthly basis. Traditional radio listenership has declined by 5% over the past year, while podcasts have gained 5% of listeners. As Gen Z begins to take up a larger portion of entertainment consumption, the audio industry is evolving along with the consumer market. Companies are recognizing these trends, and Mergers & Acquisitions (M&A) for podcasts and audio platforms are increasing in frequency and size. Content is king, and as the audience preference shifts towards podcasts, large audio platforms such as Spotify and Sirius XM are making their moves.

Where do we stand now? What is driving this move towards podcasts? What are the effects of the current lockdown on podcast growth?  What can we expect moving forward for M&As with radio and audio platforms?

Transitions from Transistors

In short, we can expect podcasting popularity to grow while traditional radio will become more marginalized. What is the driving force towards podcasts? Podcasts are a multifaceted and unique way for listeners to receive information or entertainment at their disposal. One of the major draws to podcasts is the customizability for listeners. As previously mentioned, there are over 1,000,000 podcasts in a multitude of categories. The number of podcasts is up 45% from 2015, offering a wider range of topics to grasp a broad array of listeners. On top of the sheer numbers, listeners are drawn to the ease of podcasts. Time is valuable. Increasing technology and improving platforms have made podcasts easily accessible. 22% of podcast listening happens in transit, 11% at work, and 8% while exercising. With the current pandemic, all three of those categories have been affected. The US has seen a decline of 20% in podcast listeners, with expectations of turning things around once their routines begin to normalize. However, globally there has been a 42% increase in listeners. How are podcasts maintaining listeners during COVID?

The US has seen declines due to its reliance on listeners commuting. Once life begins to normalize, the numbers are expected to return to normal. Jobs and gyms are closed, but the overall stability in listeners is due to the 52% that listen to podcasts at home. Certain categories have seen an increase in listening, such as self-improvement, health and fitness, and medicine. Listeners are looking to better themselves during this time, and podcasts can adapt to the consumer’s needs.

Segue to Opportunity

With the significant growth in listenership comes advertising. Madison Avenue is waking up to this powerful audience. In 2019, US podcast ad revenue increased over 45% from the previous year to $708 million. Despite the pandemic, podcast ad revenue is expected to grow about another 15% in 2020. Audio companies are recognizing these trends and are beginning to develop podcasts or seek M&A activity.  

Last year Spotify shocked the podcast world by acquiring Gimlet, the digital media company that focuses on producing podcasts for a whopping $230 million. This was a huge leap for the legitimacy of the podcast craze. Prior to this acquisition, the most comparable deal was made in 2018 when iHeartMedia acquired Stuff Media for $55 million. Spotify’s acquisition marked the largest deal in the industry by a large margin. That is until recently when SiriusXM announced it would acquire Stitcher from E.W. Scripps for $325 million, setting another milestone. Stitcher had $72.5 million in revenue in 2019, yet Sirius XM was inclined to pay 4.5 times revenues for this money-losing company.

Take-Away

So what can we expect for future M&A deals in podcasting? The steady increase of listeners and the potential profitability of podcasts as advertising dollars are focused in the sector and are likely to fuel investments in podcasting.  Spotify and SiriusXM have set a standard, raising the valuation of podcast producing platforms. As one of the fastest-growing audio platforms, we can expect large players to have podcast business as a part of their audio offerings.

 

Suggested Reading:

Will Broadcast Mergers and Acquisitions Surge?

Will There be an Explosion of New Acquisitions?

Are Media Investors too Pessimistic?

Enjoy Premium Channelchek Content at No Cost

Each event in our popular Virtual Road Shows Series has maximum capacity of 100 investors online. To take part, listen to and perhaps get your questions answered, see which virtual investor meeting intrigues you HERE.