Howard’s End? How SiriusXM Will Survive After Stern

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As a seasoned media industry observer with decades of experience under my belt, I find this story intriguing and insightful. The strategic moves by SiriusXM to acquire talent-rich podcast networks like SmartLess Media and Wondery reflect a shrewd understanding of the evolving audio landscape.

In recent times, major audio platforms and media corporations have invested massive sums into content creators to expand their podcast libraries. For instance, Spotify, having spent over $1 billion on its initiative, signed deals with figures such as the Obamas, the Sussexes, Joe Rogan, and others. However, following a period of reduced investment in content, the landscape has changed significantly. As described by Scott Greenstein, President and Chief Content Officer at SiriusXM, this new environment makes it apparent which prominent players in the audio industry are still financially capable. These include SiriusXM, Spotify, Amazon’s Wondery, and iHeartMedia.

This year, SiriusXM has been quite assertive in securing high-value talent contracts, acquiring both the hit podcasts SmartLess and Call Her Daddy. These acquisitions have garnered attention not just due to their hefty price tags, over $100 million each, but also for their implications on SiriusXM’s broader business strategy and its reputation as a welcoming environment for talent.

Ted Danson shares that no one is subtly correcting them or saying ‘I’m not sure, you should do it this way,’ while they are in the podcasting world with Where Everybody Knows Your Name With Ted Danson and Woody Harrelson (Sometimes), which falls under Conan O’Brien’s Team Coco banner and was acquired by SiriusXM in 2022. Instead, they have a lot of freedom: ‘Feel free to enjoy yourself and chat with fascinating people,'” says Ted Danson.

The organization aims to continuously attract fresh talent and advertising revenue, especially considering recent speculation about Howard Stern’s retirement. As a renowned broadcaster, Stern has contributed significantly to the rumors while also subtly reminding listeners of his role in building SiriusXM’s brand during contract negotiations. Additionally, they are exploring strategies to convert free podcast listeners into paying customers, such as implementing a paywall. However, this move hasn’t been implemented for shows like ‘SmartLess’ and ‘Call Her Daddy’ – not just yet.

Greenstein states, “Regarding larger podcasts, we’re consistently experimenting with exclusive content and content hidden behind a paywall. If we discover the ideal podcaster and their agreement, we might risk moving completely behind a paywall, understanding that we could potentially lose some free listeners, as is common in such situations.

He suggests replicating the podcast model similar to satellite radio, which requires payment from listeners. If the funds are sufficient, this can be achieved. However, it’s difficult to execute this plan without control over some of the larger players in the field,” he notes.

SiriusXM needs to add new shows to keep feeding its large podcasting ad sales unit, which accelerated with the acquisition of podcasting company Stitcher in 2020. Greenstein says he looks for shows — he keeps an eye on the top 10 or 20 podcasts in the industry and when their contracts are ending — that have big, monetizable audiences with the potential to grow. He adds that the company evaluates metrics such as downloads, ad revenue and social media buzz. Those contracts also come with download floors and metrics that the podcasts must meet. “We just won’t make stupid deals,” he says. “And we won’t make deals that don’t make sense. It doesn’t mean some aren’t a gamble, even in a smart business setting. But that’s the nature of the media business.” 

Prior to this year’s significant fluctuations, SiriusXM boasted a substantial collection of podcasts even before they gained notoriety. Among these was Ashley Flower’s Crime Junkie, which ranked as the second most popular U.S. podcast in Q2 according to Edison Research, and Dateline NBC, which placed fifth. Alex Cooper’s Call Her Daddy, an interview-style podcast with a large female audience base, was the fourth most listened-to U.S. podcast during the same period, while SmartLess, hosted by Jason Bateman, Sean Hayes and Will Arnett, ranked sixth. SiriusXM holds distribution rights for these podcast episodes, which are already widely distributed, and possesses exclusive advertising privileges.

The specifics about which television series or series, as well as how many episodes would be available only for paid users, are yet undecided. This decision is also contingent on the actors’ readiness to participate. However, considering that Spotify has abandoned its exclusive distribution approach for top podcasts like Cooper’s, it could potentially present a challenging situation. Factors such as the financial burden on the company and the talent’s discontent over limiting potential audience reach are likely contributors to this challenge.

Greenstein explains that the conversation with Stern resembles one he had earlier, where SiriusXM guarantees to maintain the podcast’s creative integrity while freeing talent from the “ratings race.” Additionally, they provide a financially attractive offer. Greenstein further states, “You allow them to express their creativity as they see fit. You establish a financial structure that excites them. And in doing so, we now have the ability to ensure that the large fan base can only access this content on SiriusXM if they want it to continue.

Apart from acting as trials for potential paywalls and generating advertising revenue, prominent podcasts are also integrated into the broader SiriusXM network. Many of these podcasts already feature streaming radio channels that provide early and exclusive content on the SiriusXM streaming app. This app is a relatively affordable ($9.99 per month) subscription service designed to deliver Sirius content to listeners both inside and outside their vehicles, and also attract younger subscribers.

These actions are being taken in anticipation of when 70-year-old Stern, a longstanding talk radio head at SiriusXM whose contract runs through the end of 2025, decides to step down. By then, the company aims to have a pool of talented audio personalities ready, including James Corden, Andy Cohen, and O’Brien. This is partly due to Stern’s impact. As Cooper said to THR, “I chose Sirius because there’s ample room to explore various avenues and expand Call Her Daddy into something more significant.” Witnessing the growth SiriusXM has facilitated for Howard Stern is truly remarkable.

However, Greenstein mentions that Stern hasn’t expressed any desire to depart. “He’s been with me and the company for almost two decades now, and he seems content, but he also has the freedom, like many talented artists do, to step away whenever he chooses. No one can ever fill his shoes. We wouldn’t even attempt to replicate him. It’s not about being appropriate or practical,” Greenstein explains. “In any endeavor, whether it’s a sports team or a media company, you want to have a strong roster of talented individuals who each bring their unique identity.” If Stern were to retire, SiriusXM would still own his collection of content for several years, Greenstein notes, ensuring that Howard’s voice remains on the air.

Most of the company’s income is still derived from its satellite business, whereas ad income faced challenges during the first half of 2024 due to broader consumer unease. Last quarter, SiriusXM, which operates music streaming service Pandora as well, reported revenue of $2.2 billion, a 3% decrease compared to the previous year. Out of this total, advertising revenue amounted to $443 million, remaining stable year-over-year. Advertising income struggled during the first half of 2024 due to consumer uncertainty; however, podcasting advertising revenue has remained a significant strength.

The subscriber count for satellites at the company has seen ups and downs, as SiriusXM has experienced a decrease of 100,000 subscribers in the last quarter and approximately 450,000 in the first half of the year, bringing the total to about 31.5 million. This represents an increase compared to 2023, and the company maintains a relatively low monthly churn rate, but there are worries about a potential long-term decline due to satellite radio’s aging user base.

In addition to that location, our streaming app (a competitor to Spotify’s 246 million subscribers) and podcasts are available, along with more affordable packages. Our main customer base is older than 45, but we aim to expand by not only offering diverse content, but also exploring various pricing strategies and packaging options to attract a younger audience. This was stated by SiriusXM CFO Thomas Barry at a March investor conference.

Barry noted, “Therefore, we’re modifying our material, just like we did with ‘SmartLess’. Also, as I mentioned earlier, we’re exploring content that resonates with a younger audience, similar to what we did with John Mayer and James Cordon.

The Cooper podcast network also offers an opportunity to attract a significant number of young female listeners, but Greenstein clarifies that this was not the primary reason for the acquisition. Instead, he expresses enthusiasm about it, adding, “We’re thrilled about this development. However, our approach is not about specifically targeting this demographic. We signed a talented individual who happens to resonate with this audience, rather than waking up and deciding that our goal is to cater to 18-to-34 year old women and then seeking others who fit that description.

Moving from Wondery to SiriusXM, Richard Korson, head of SmartLess Media, highlights the company’s wide audio presence and the opportunity to host more live programs and create additional podcasts within their three-year agreement. In the near future, he anticipates launching two more shows this quarter and possibly another pair in early 2025.

Korson expressed that we were thrilled about the prospect of broadening our audience and for all our programs at SmartLess Media. I strongly believe that exceptional audio content is universally appealing, and people absorb it as part of their media diet. Sirius provides us with the opportunity to reach consumers in their preferred listening environment, whether it’s satellite radio or podcasting networks.

As a devoted admirer, I’d like to highlight one key aspect Greenstein emphasizes when discussing SiriusXM: their exceptional booking team. This team, he points out, has the knack for inviting most guests onto their shows. To illustrate, Kamala Harris graced not just one but two of their popular programs, Call Her Daddy and The Howard Stern Show. That’s a testament to their influence and reach!

Beyond nurturing fresh talent like Dylan Douglas, who hosts a political podcast geared towards Gen Z on SiriusXM Progress Channel, the company is keen to foster their growth into the next big names like ‘SmartLess’ or ‘Call Her Daddy’. Additionally, these strategic acquisitions involve taking over a range of podcasts under the SiriusXM banner, such as Cooper’s Unwell Network with shows like ‘Hot Mess With Alix Earle’, and potentially creating new content. Greenstein explains that these deals make the six-figure investments more cost-effective in the long run.

Investors are optimistic about the company’s shares due to its anticipated free cash flow of $1.2 billion in 2024, which is largely unspent on capital investments, as evidenced by Warren Buffett’s Berkshire Hathaway’s recent acquisition of a majority stake following a merger that streamlined the company’s share ownership.

Wall Street values cost efficiency as well. Analyst Jeffrey Wlodarczak of Pivotal Research expresses a concern among investors that the company might excessively invest in younger audiences with large sums of money and specialized talent for shows like SmartLess and Call Her Daddy, which could negatively impact their cash-flow narrative. At present, Greenstein mentions the company is reassessing and considering the current market situation. He points out that finding exceptional talent is challenging, but he believes they already have the top-notch talent available. However, if another opportunity arises, he doesn’t dismiss the possibility either.

Originally, this tale was published in the October 23rd edition of The Hollywood Reporter’s magazine. If you’d like to get the magazine, you can subscribe by clicking [here](http://www.hollywoodreporter.com/subscribe).

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2024-10-24 16:25