Stitcher Up for Sale?
Who wants an integrated podcast network?
Stitcher has evolved quite a lot since it started in 2008 as a sort of internet radio service/app that collated together podcasts into a radio-esque feed. It was acquired by Deezer to be their speech play in October 2014 and then by Midroll (Scripps’ podcast ad network) in June 2016 for $4m. Midroll itself was a $50m purchase for Scripps earlier in 2015, where it repped a number of popular podcasts for ad sales and made some of its own shows through its Earwolf subsidiary. At that point it was the largest podcast ad network.
Back when it made these acquisitions, Scripps was in radio, as well as its core business, local television. However at the end of 2018 it had completed the sale of its final few radio stations.
Like all media companies, Scripps has seen its advertising revenues hit by COVID. With April/May seeing its local media division drop 40%. With regards to Stitcher, they said on their earnings call that:
Stitcher's business also faced challenges from the unfolding economic crisis and advertiser uncertainty about usage as stay-at-home orders reduced commute times. But listening has bounced back in recent weeks to near-normal levels with a new spike midday.
Scripps, particularly from its acquisitions, has a significant level of debt - $1.9bn - with a cost of servicing that’s likely to be $90m this year. It expects that it will be cash-flow positive this year, essential to keep those repayments going, and strategically it says it wants to try and pay down that debt.
Podcast companies are certainly in demand with big acquisitions from Spotify, iHeartMedia and Entercom. Large companies are definitely keen to get scale at speed, and buy is certainly easier than build.
Stitcher became the overall brand for some of Scripps’ previous podcast acquisitions - now encompassing Midroll and Earwolf - in late 2018. This makes it a relatively vertically integrated operation:
There’s Stitcher - the podcast app - which has around a 3% market share. Seems quite low, but it’s probably makes it around 4th in the market, after Apple, Spotify and Google.
There’s then podcast production - in Earwolf and Stitcher Premium - some content for premium users in its app, some as material that Midroll can sell ads in.
Then Midroll itself is a large advertising network that reps other shows and podcast companies, as well as selling space in the Stitcher family of shows.
Acquiring the lot makes any company a key player in the podcast space, which could be useful for media operators seen as podcast laggards, or could re-enforce any growing podcast business.
Whilst there’s some backend integration between the Stitcher side and the Triton side, the two businesses operate in different places in the market. Triton’s historically been a technology play - providing the digital plumbing for third parties. Whether that’s radio streaming, podcast delivery, ad network inter-op or audience measurement, Triton’s business works well when its seen as an honest broker for its clients. Omny is a CMS for podcasters and an easy-to-use front-end for shows to take advantage of ad networks (including those provided by Triton).
The Stitcher collection of companies hang together as a whole and they’re far more b2c, delivering products around reaching and monetising consumers. Triton/Omny is firmly in the b2b space, helping their clients so that they can deal with the consumers.
I imagine Triton will be kept separate from any deal, as its customers will worry if one of their competitors end up owning it. The fear that your plumber will one day make off with your plumbing, leaving you high and dry, tends to prey on the mind.
For Scripps, Stitcher isn’t a core part of its business - really that’s local TV channels and some digital-only TV networks like Court TV. Selling off Stitcher to pay down some debt makes corporate sense, especially at at time that podcast valuations have been, driven by Spotify, pretty high.
Also, in the podcast space there aren’t many companies that have the scale Stitcher does - across advertising, its own podcasts, its podcast network and its app. So based on other previous sales they’re perhaps looking for a bumper price point. The big question is whether there’s enough buyers out there willing to spend hundreds of millions dollars - or if Spotify’s big money acquisitions have just been outliers after all.
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