Sirius XM Holdings (NASDAQ:SIRI) is reportedly going shopping again. The satellite radio giant is making a play to acquire podcasting hub Stitcher from Scripps (NYSE:SSP), according to a Wall Street Journal report. The $300 million deal would arm Sirius XM with its third investment in a streaming platform since the beginning of last year.
Sirius XM closed on its $3.5 billion deal for Pandora in February 2019, a transaction that has helped pad its top-line results for the past five quarters. Earlier this year it invested $75 million for a minority stake in SoundCloud. Sirius XM has been the exclusive radio home of legendary morning show host Howard Stern since 2006, an icon who has crowned himself the "King of All Media" over the years. With Sirius XM reportedly buying into yet another digital asset, it's fair to to say that it's also making a run at the coronation process.
Amassing media royalty
All three of these streaming platforms are different. Pandora was one of the earliest streaming services, offering digital playlists based on a listener's tastes. SoundCloud is the world's largest open audio platform, essentially a hotbed of demo reels for aspiring singers, musicians, and other audio performers. Stitcher is a popular podcasting hub.
Stitcher would slide right in as yet another way for Sirius XM to expand its audience. Satellite radio is as popular as it's ever been, with 34.8 million total subscribers at the end of March. However, its organic growth has been decelerating in recent years. Revenue rose a mere 5% on a pro forma basis in its latest quarter, and the outlook is challenging when it comes to its flagship business.
Auto sales have been declining since last year, and that's been the historical lifeblood of the satellite radio business. The pandemic has also likely weighed on churn, with folks no longer driving as much as they used to during the shelter-in-place phase of the crisis. Advertisers are also reluctant to spend as freely as they once did.
Podcasting isn't necessarily immune to what's tripping up satellite radio these days. In its May earnings call, Scripps lamented how stay-at-home orders have reduced the commute times in which drivers often checked in on their favorite podcast streams. Scripps did note that Stitcher listening trends had started to improve to near-normal levels by early May. It also pointed out a midday spike in podcast streams, a phenomenon that makes sense since folks working from home now have a little more freedom to dictate their workday entertainment.
A Stitcher deal makes sense for both parties. Scripps could score a nine-figure payout for a nonessential asset. Sirius XM would keep up with the streaming music leader and its recent emphasis on podcasting. With Stern now in the final months of what could be his last contract with Sirius XM -- don't go, dude -- it's never too early to start thinking about succession plans for that "King of All Media" crown.