Podcast industry is at 'the beginning of the beginning': LiveOne CEO

LiveOne subsidiary Courtside Group, better known as PodcastOne, (PODC) saw its shares tumble 45% in its market debut. LiveOne Chairman and CEO Rob Ellin (LVO) says there was a "perfect storm in podcasting" where big name companies like Spotify (SPOT) and Apple (AAPL) were investing big bucks on assets, but now "there's a window" where a company like his can go in and buy podcast networks, pointing to his company's purchase of distressed asset Kast Media. On the podcast industry as a whole, Ellin says it's at "the beginning of the beginning," given the global growth potential. On concerns about saturation, Ellin explains that "you went through that first cycle... real enthusiasm and excitement. Now, you've got a pullback because people... had acquired all these assets. They have to figure out how to run them.

Video Transcript

[AUDIO LOGO]

SEANA SMITH: Podcast network PodcastOne going public today on the NASDAQ, a spin out from its parent company LiveOne. But the stock under pressure on its debut, off nearly 50%. We want to bring in Rob Ellin, chairman and CEO of LiveOne PodcastOne.

Rob, it's good to see you here. Congratulations on the public debut today. Obviously, you're going public in a very difficult time here for the market. We were talking earlier in the show just about whether or not we're going to see a little bit more activity when it comes to public listings. But when you make the decision to go public now and you did this via SPAC, why did this make sense for your company?

ROB ELLIN: Sure great question. This wasn't a SPAC. This is actually the first time ever done in history where it was a spin off of a minority stake.

SEANA SMITH: My apology.

ROB ELLIN: So we uplisted our stock. And the reason that we did it is as-- and we started this process almost eight months ago. It got delayed a little bit by NASDAQ. When it finally got-- by the time it finally got done, we had already achieved a lot of our goals. And one of those goals was to acquire additional podcast networks. So this is that kind of perfect storm in podcasting.

You had this wild cycle-- Spotify, Apple, iHeart spending billions and billions and billions of dollars and big multiples, right, to acquire both individual podcasts, whether it was Joe Rogan or was buying networks or buying technology.

Now is that opportunity where there's a window where a sophisticated management team like ours who has the history of doing this and the history of doing it in radio and now in podcasting could acquire and roll up multiple podcast networks.

So we've bought a distressed asset called Cast Media, very distressed, troubled asset was-- owed a lot of money to its podcasters and couldn't really afford to pay them. And the banks pulled out. And that host pulled out. So we acquired those and have added some very serious revenues to it.

So this morning, we announced as part of the uplisting, we increased our guidance from 34 million last year to this year being 47 to 53 million. And for the first time have a very serious EBITDA for $4 to $5 million EBITDA. So dramatic, dramatic turn for the company. And I fully expect to use that currency going forward for additional acquisitions.

AKIKO FUJITA: Rob, on that point that you made about where the podcast industry is, I mean, it feels like there's a bit of a shakedown that's happening. There were some big names that were acquired, especially for Spotify. We were talking about Meghan Markle's podcast, for example, earlier today that haven't necessarily performed well. Are we at a saturation point? How would you characterize the state of the industry right now?

ROB ELLIN: The beginning of the beginning. We're really in the first, maybe second inning of podcasting. It's grown since COVID from 400 million to 1.3 billion. But from all the numbers they're indicating globally, it'll be a $7 to $10 billion industry by 2030.

So you're going to go through another cycle. You went through that first cycle, real enthusiasm and excitement. Now, you've got to pull back, because people had to-- they had acquired all these assets. They have to figure out how to run them. It's really complicated just to acquire them, not know how to deal with creators.

What I think we're best at is we're a creator-first platform, building really serious relationships with those creators, and giving them a full 360 play, everything from marketing to production to sales across the board. And then we have this massive distribution network that crosses over Apple and Spotify and iHeart and Samsung TVs and OTT channels.

And I think we're just going to continue to expand that network. And I think the agnostic-- the ability to be agnostic and be across all the platforms is going to be critical.

SEANA SMITH: Yeah, Rob, I wanted to ask you, and we're showing some of the competitors up there on the screen or other names that are in this space. How do you get that edge when it is more and more crowded when you talk about the fact that the industry is certainly seems like it's going under a bit of a transformation process, when we talk about moving away from the massive spending that we've seen over the last several years? How do you find that niche?

ROB ELLIN: Well, I think it's two-fold, right? We're very, very selective. You probably-- for any who have listened to my interviews previously, I talk about my team runs the company like "Moneyball." So if you ever saw the movie "Moneyball," we really run it almost like a hedge fund, right? We are very careful and very selective.

And we try to find that niche between 50,000 and a half a million downloads, right? And we'll grow that now. Now will be the first time we'll have an opportunity to get podcasts. And you're starting to see that come over on a regular basis. We're doing a million. But we fill that niche where the creator really needs the full support.

And I think what's happened is the larger places, for them to manage those smaller creators is really difficult. And that's why one of the great, great parts of this is that our competitors are also our partners. And so we're going to continue to do that and continue to work with them. And who knows down the line? They could be a strategic investor or a buyer.

And I fully believe that this cycle will come back in 12 to 24 months. And those same buyers are going to be even bigger buyers next time, because the TAM on this is so big. And one of my biggest investors said-- he was at an event of ours Tuesday night.

He said to me, he goes, you know what the biggest problem in podcasting is? There's so much great content. There's not enough hours in the day to cover it. So I have to cut back the number of podcasts I choose. And I think it's going to be-- I think it's a medium that's going to grow dramatically.

AKIKO FUJITA: Yeah, Rob, I'm going to attest to that. I have so many favorites in podcasting. I feel like I don't have enough hours in the day. But you mentioned, we're still in the early innings. There's another wave coming. What do you think's going to drive that? Is it about the Joe Rogan-style podcast? Is it about storytelling? Is it the fictional scripted content? What do you think is going to be the big catalyst to move this even further?

ROB ELLIN: Yeah, so it's such a great question. I mean, yeah, we're a very powerful community and network in driving our podcasts across each other's podcasts using that community to grow. I think it's going to be a little bit of everything, right? You know, Laura Martin over at Needham always described our company from all the great things we did in music. And we're just starting to hit this in podcasting, right?

I've only owned the company for three years. In that three years, we took it from about $20 million in revenues, losing a lot of money, to where now it's going to do over $50 million and be very, very EBITDA positive, right? And the reason for that is we've got the team in place, we've got the management, we're starting to hit that critical mass. And you really don't need any additional infrastructure. You really have no additional cost.

And what I see happening is multiple revenue streams. YouTube has changed the dynamics completely. You now have video. So you don't have just audio, you have video coming in. Next, you're going to have-- and you probably know my background in owning Atmosphere Films and having the movie "300" and did billions in revenues in "Spiderwick Chronicles" and Patrick Wachsberger who sits on my board and just winning an Academy Award.

We have a passion around turning these podcasts into television and film. And if you can hit that second window, you could have one or two-- one of two pieces of IP that you control and own could turn out bigger than the entire network and revenues and bottom line.

And then products. Just look at what Logan Paul is doing with Prime. It's truly amazing. He uses his podcast very much like my brother did in "Entourage" when he used Avion, right? There really wasn't-- you weren't marketing or presenting it. You were just-- it was integrated into to the content.

And if we can keep doing that, you're going to see more and more products launched from our company. I love the live side of the business. Watching Adam Carolla a couple of weeks ago do his live show. And the first live show we did with him, he asked us to put three of his favorite country artists on. Shockingly, we pulled off all three and a million people watched and it didn't affect one piece of traffic on the audio.

So I think there's very unique dynamics of new revenue streams that can come from podcasting and, again, is those habitual behavior of the consumer. My kids are 29, 27, 21, my oldest kids. I have a younger one. My three older kids, so much of their time has been used to podcast. And I think it's going to continue to grow.