All right, thank you. Good morning, everybody. I'm Sean McGowan, analyst at Roth. I have the distinct honor of covering both LiveOne and PodcastOne, two of the stocks in this group. And we have here to talk about various aspects of the businesses. CEO of LiveOne, Rob Ellin, and executive chairman of PodcastOne, and the president of PodcastOne, is Kit Gray. So, thank you for joining me.
Thanks.
Both of you. I think what I'd like to do is focus the conversation around kind of ways that 1 + 1 can equal 3 or 4 or 5, you know, as you put these businesses together and, and interact with the other elements of LiveOne. You know, how does it how does it add up to more than just the sum of the parts? I'll start with you, Rob. When you when you started the company, however many years ago? How many years ago was it?
Six.
Six years ago.It felt like .
600.
600, yeah.
Years of COVID, so.
Oh, man.
Six, 600.
City miles. The focus was pretty squarely on live music, and now it's not. That's not the sole focus. Tell us what aspects of the company are unchanged from the vision that you had back at the beginning, and to what degree does the new iteration, you know, kind of lean into different strengths?
Well, you and I have been doing this for over 30 years, Sean, and I think every company that I've ever started, right, has morphed itself. You know, COVID changed the world for a period of time. We lost all of our live partners. It's kind of amazing we survived, and I give so much credit to my team, guys like Aaron at the CFO level and so on. We had to pivot the whole business, right? We lost our partnerships with AEG, Live Nation, iHeartMedia. We had 2,500 of the biggest music events signed in the world. Now, we were always the combination of audio and video. We were gonna be that first platform that was really turning into that authentic voice of music that's missing since MTV. So we had to pivot. We had to step on the gas on our digital.
We had to grow that digital. We've grown it from 400,000 subscribers to 3.6 million subscribers. Then we acquired PodcastOne. When you get, you know, the mind of Norm Pattiz on your team, right, who's, you know, a mentor to, to Kit, and I got only a couple of years with him, unfortunately, before he passed away, but one of the most brilliant minds in audio, and he says, "Hey, podcasting is the next radio." We just stepped on the gas, and as you can see, we've signed 30 podcasts already this year and have just announced our pipeline is over 100 podcasts, the biggest by 10X in the history of the company. We fully expect to do the same thing this year. These are all podcasts that were $28 billion of acquisitions in the industry.
There's such a great opportunity to keep adding it, and the habitual behavior of consumers is just moving more and more towards podcasts.
Thank you. And Kit, if you could take us back to the beginning, you know, early in PodcastOne's life, you know, different name, different ownership, did you envision, you know, a world where there would be synergies with a company like LiveOne or some other entity, you know, as you were growing that company?
Yeah, well, what really COVID actually helped us as an industry, it helped us with the technology of people getting used to looking at Zooms all day and taking in interviews from different areas of the country, watching on YouTube. That really kind of fast-forwarded our industry. It was scary at first, obviously, but once we got everything kind of intact with advertisers, the consumption of podcasts really grew. And then Rob and I started working together a lot more, doing virtual shows, pay-per-view events, you know, streaming events with music groups, Adam Carolla doing live shows in Texas. As things started to open up, we were able to have those experiences. And what our vision when I started the company almost 12 years ago, 15 years ago, was just developing these communities and then offering them to brands.
Now we're able to do it in so many different ways beyond just audio. We have video. We use social media. We do streaming events, live shows, virtual shows, pay-per-view events, you know, merch. So we have all these different ways to be different and but a different opportunity for podcasters, as we like to call them, by having this partnership with LiveOne.
Okay. Thanks for that. And, you know, I look for another question for you, Kit. So PodcastOne is one of the top 10 podcast networks, but, you know, I don't think any individual podcast is necessarily in the top 10. So is that something that matters, you know, in terms of investors? Does it matter to the talent? You know, how important is it that the shows actually be top-rated, or is it a business strategy, you know, not necessarily to go out and, you know, have the number one show?
Yeah. You know, that, that's a good question. We, we like that middle ground, that 100-300,000+ downloads per episode. The reason we like it is we, we call them internally, we call them podcasters. This is their main job. This is their main focus. We, like I mentioned earlier, we sell beyond just spots and dots. We include the social media. We do exclusive episodes. We do host reads. We have CEOs on some of our shows to talk about their products. If you don't have that relationship with the talent and you don't have talent that wants to do that type of stuff, you can't get it. But it's helped us get, you know, beyond $10,000, $15,000 orders and get $50,000, $75,000 orders, which really makes more money on the content that we're actually producing, so.
Is it part of the strategy to try to develop podcasts and to, not just bigger audiences, but to really have a breakout head? Is there a strategy in place for that?
Oh, yeah. I mean, we are able to use our powerful audience, any open inventory on our shows, we're able to use to promote special episodes, new programs. We just launched Varnamtown, which is one of the shows that we, we actually own IP to and are looking at second-window opportunities. We're almost able to create hits because of that.
I gotta say on a personal note, I binged on Varnamtown. It's hilarious. It's unbelievable that it's based on true events. It's almost like you couldn't make up a story as outrageous as it is and really high-quality audio production too. So it's, you know, that was an internally developed one, but even the ones that you picked up from Kast, I think are impressive in their audio quality.
We're gonna hire you to do our endorsements moving forward. That was really good. Thank you.
Yeah. Well, my wife thinks that's all I do anyway is listen to podcasts. So it's,
Yeah. Just to call that out for you a second, you know, Varnamtown is, Kit was just articulating, we were fortunate enough when you look at our board and our management team have created some of the biggest movies ever made in history and biggest television shows. And Patrick Wachsberger, who brought it to us, is the co-producer with us. And Patrick just came off of an Academy Award for CODA and previously did La La Land and Twilight. And, you know, I don't know. He did about $10 billion worth of movies or more, maybe insulted by that number. But it was great to put that together, and we fully believe that there's gonna be a bidding war for television. And that could be, you know, just one television show could make as much as the entire network across the board.
As I was listening to it, I said, "This is a Coen Brothers movie or, or something like that." It's.
Yeah. And.
This is so bizarre.
For everyone here, you gotta listen to it, and you gotta get to episode 8 because you'll be blown away by it. We did our own research, Kit and I and the team, right? No one, none of my friends who were in the CIA. No one had ever heard this story before 'cause it's such a small town. Then all of a sudden, after everyone did the research, they're like, "Holy cow. This is genius." And it's fun.
Yeah. It was fun. So following up with you, Rob, I look at LiveOne now, and I basically see three buckets. So I see PodcastOne, I see Slacker, and then what we can call, you know, all others. So let's start with this question. You know, almost all of the EBITDA on the company is in Slacker at the moment. You know, more than 100% of the reported profit right now comes from that division. I think I'm safe in saying that I don't believe that all of the value of Slacker is reflected in the stock price, certainly not, you know, the combined value of the whole thing. So what are the plans for the future to unlock that value further?
Yeah. So, so for any of you who know my background and know almost every one of my companies, you know, we joke we're a barbershop, right? We buy distressed companies that have really unique assets inside of it, right? Kit and I have only been together for a few years, right? We and I'm, I'm not even sure we would have been as close as we've become if, if the president of the company didn't tell me I had to double his salary and double his stock three days after meeting him, and I had to let him go. And it was the day before Thanksgiving. And then Kit and I became really close really quick. And, you know, COVID hit, and we went through this process.
We made a decision that we were gonna focus all the energy, right, on building out this model and adding podcasters and focusing on that bottom line. You're gonna start to see that now. Very much like Slacker, when I bought it, it was losing over $10 million a year. When we bought PodcastOne, it was losing over $5 million a year. We just said publicly, we expect this year $4-$5 million EBITDA. So it's a massive turn, just like Slacker, just like we did in Digital Turbine, just like I did with iWon.com. We see telltale signs that PodcastOne is gonna be right up neck and neck revenues and EBITDA with Slacker in the next 24 months.
What did you do at Slacker to make that turnaround happen?
Ooh. Begged, borrowed. We, we bought it, Slacker, with $55 million of payables. That was the biggest we gave a piece of equity, to some brilliant investors, Columbia and Mission and other smart guys, and invested $180 million into it. And they had made a lot of money in that fund and sold XM Radio for $2.5 billion, one of the sort of competitors in the space, more satellite-driven but very much a competitor. And so we had a we had to do a lot of things. We brought in a team, a SWAT team. We got rid of the CEO, the CFO, the president. We replaced everyone with our own team of experts that really understood not only how to fix it, right, and clean it up. We took massive costs out of it.
We settled all the payables, cleaned them up, and, you know, really focused the energy on the things that were working. And, you know, the first one, of course, was our partnership with Tesla. When we went into Tesla, we had to make sure we were gonna keep that partnership. Well, we just expanded that relationship and extended it for the 11th straight year. And, you know, with that extension of it, right, we went from $200,000-$300,000 of revenues to $ millions and millions a month, right? We woke up yesterday morning to 8,000 additional cars, right? So we had to focus our energies in the same way that we did in Digital Turbine. What was our best customers? Verizon, T-Mobile, so on. And what were the losing pieces that we had to clean up?
We've cleaned it up, and I couldn't be more proud of my team. You know, it'll, it'll be a Harvard Business School story in the near future of what we did with that, that business as well as combining it with PodcastOne and audio.
So let's talk a little bit about some of these other businesses, not just the kind of second-window stuff that Kit was referring to, but, you know, the things that maybe aren't as synergistic. What, how do you see that emerging for LiveOne, these, you know, things that are not Slacker and not PodcastOne but kind of tangential?
Yeah. So one, you know, Kit, Kit talked about, and if you know, in my background, I owned Atmosphere Entertainment and was fortunate enough to produce the movie 300 and Spiderwick Chronicles and did over $1 billion in revenues. I saw when I bought PodcastOne, all of these scripted shows could turn into television. So we created sort of our own television division. You're gonna be hearing more and more about it. I think we announced our fifth show recently. We'll probably announce our sixth any minute now. You know, we'll do 8-12 shows a year that are scripted that make money podcasting but then have these windows to sell to television and film. So you have it on that side. Our merchandise business, which is just getting more and more exciting, you're watching all these celebrity brands, right? You know, my brother did an Avión, right?
Tequila Avión. He put into the television show Entourage and literally, you know, sold for $hundreds of millions afterwards, right? It was really just a concept for a tequila business. You're watching Kim Kardashian, and you're watching so many of these, you know, celebrities with 10 million-100 million followers just literally taking on industries and destroying them, right? Revlon filed for bankruptcy. I see this opportunity that we have these unique relationships that Kit has built, right, on the podcasting side. We already have our rev shares in place that if we can figure out the right product, we can launch them for almost no cost, and it could be massive, massive wins for us. So we launched our first one with Jeremih, one of the great artists in R&B, billions of downloads.
Together with Russell Bevan in conjunction, we announced that the two of them, we launched the wine with them, and we sold out of every single solitary bottle that we had right off the bat. We see telltale signs that we're gonna be able to do many of those. I expect to do somewhere between 8 and 12 products a year. With current celebrities on our platform, we already have our rev shares built in where if they weren't already built in, you didn't have those partnerships, you'd be giving them 90% of it. That's a waste, right? We don't control them.
How about back to the music roots? You know, I know you're doing other things in audio and music, and, you know, you haven't completely left that. You got your colleague here.
Yeah. So, so one of my favorite people sitting over there, Josh, he's really become part of my family, right, to my children, to myself. All three of my older kids are in music. My daughter has a, a song that it's a hit song right now that she wrote, number 50 in radio. Josh has been an instrumental help in it. He ran publishing for Roc Nation, did a great job, had number one hits. He saw this opportunity to compete with Splice by buying a marketplace for beats and sounds and bringing in producers around it. And he'll do a better job articulating it. But we grew we grew 300% plus, right, in revenues this year. And it's small but growing. And as you think about those relationships, we're a creative-first platform. The more creators that we become close with, the closer the relationship, the more we grow.
They're all coming through our studio, and they're all coming through our publishing. We're just expanding that business dramatically. I see that as a unicorn in the next five years.
Is there a logical connection between that business and Podcast and, you know, the other parts of LiveOne?
Yeah. There's, you know, there's so much. We've had so many musicians, right, you know, who are also podcasters on our network. And, you know, you just watch so many of these crossovers that's happening. And it, it's so exciting. And there's all of this, you know, our audio business, right, and let's just use Tesla as an example, right, 1 million-plus cars. What did we do? We snuck in and put in 100-plus podcasts now into the Tesla cars. We're the only exclusive podcast network inside of Teslas now. And we're gonna grow that. Every day they grow. We're gonna grow with them. What did we do? We put our podcasts into our app. So every time you come to our app now, you have all our podcasts.
We have as much original programming and unique programming as you're gonna find in the industry.
So, Kit, if we're sitting here, maybe not a year but two years from now, and we're looking back, what are the metrics that will tell us that PodcastOne has been as successful as you wanted it to be? Are we looking just at revenue, number of shows, EBITDA? You know, what, what should we be looking at?
Yeah. Both on that front, number of shows, is not as important as, really the number of downloads, right? And growing that, it'll also be views as YouTube has gotten into podcasting over the last year. That is, really the second biggest search engine in the world behind Google. So discovery of podcasts and people consuming video, is a big deal. We just actually took one of our main competitors' shows from Dear Media, Bitch Bible, which is Jackie Schimmel. She was just doing a weekly podcast. We now have her doing that weekly podcast but using video. She has it all set up in her home now. And, so we have a whole new audience. And then you just basically add the audio and video numbers together, and then sell those to advertisers, which is really exciting. So, we're seeing that.
We're doing more content with these people. But really, it's all about building the communities and building these shows and making sure, when we acquire a show like Bitch Bible that we're able to grow it 15%-20% on an annualized basis in terms of audience and community. We bring in all these other revenue channels that we've been talking about today. And it's not just a podcast play. It's really building into these communities. And if you can have 10, 15, 20 of these where you're working hand in hand with these shows, continually grow and add another 10, 15 every year, it's great. You know, there are some shows that we just come on and just do regular sales for too, which is great as well. But we love those ones that we're talking about.
Let's talk a little bit about the economics of some of these, you know, ancillary or additional revenue streams. So it's, you know, we can understand the podcast business, ad-driven, you know, number of shows, downloads, audience size, you know, the Slacker business. We can understand it that way. What are the economics that are different with some of these second-window opportunities? How does it work timing-wise? What kind of money are we talking about?
Yeah. I mean, to start with the television and film side of it, right? One show turns into a hit show, and you can make $100 million off it, right? And there's no cost to us, right? Once a podcast is done, just think about walking to a studio, right? When I owned Atmosphere Entertainment, I had to walk into the studios, and you walk in, and you're selling them a book. You're selling them a script. There's no proof that it's gonna work. It may be a great story. Now we'll walk in, and Kit gives me the ammunition, right, and goes, "How many downloads do we have now on Varnamtown?
Over 1 million.
Okay. So we have over 1 million downloads. So I walk into the studio, and I go, "Hey, I've got this amazing show, amazing story, true story, right? It fits in right into, you know, Fargo and True Detective and all the hottest shows on television. Imagine I'm walking in. I'm walking in with a machine gun. Now I'm walking in with 1 million downloads, proof of concept. I'm gonna get a way better deal from the studio. I'm gonna get a way better backend, right? I'm gonna get a big, fat check to start it off." So we just sold the show Vigilante, and we got a $70,000 check right off the bat. It's pure profit, right? The next thing that happens after the end of that check is they've now greenlit the show.
As they greenlit it, we now get paid every single episode, 26 episodes a year, I don't know, $50,000 apiece, right? If you do that for three years, you're starting up adding up $ millions of pure bottom line with no additional cost. Then if it works and the show's a hit, the backends could be tens to hundreds of $ millions. You know, so that's gonna be one fantastic revenue stream that's coming in over the next year to three years.
How about that music technology that you were talking about? How does that work, and how big could that be, and what's the timing on that?
Yeah. So, you know, and Josh would do a better job of this than me 'cause he's brilliant at articulating it. But think about Splice. Splice exploded during COVID, right? Beats and sounds. We have music inside of Post Malone's song, Drake's songs, right? We own a piece of every single one of them. And what happens is it becomes so viral because we're sharing royalties. So Splice is royalty-free, right? We're sharing the royalties with those with that talent. We're a creative-first platform. When they share it, what are they doing? They're hitting their social media, and they're telling all the biggest producers, all the biggest artists that LiveOne shares in those revenue streams. And we're a participant in it, right? There's no reason that can't be $100 million in revenues in 3-5 years and massive profits.
That's not a deal that these guys could have gotten somewhere else, right?
It's really very difficult to do that because you have to find the right producers. You can buy Beats and Sounds. You can pay $100. You can pay $1,000 for a package. But actually having those curators that are choosing, right, we're like the Tiffany's, right, at the Cartier for Beats and Sounds. When you come to that platform, you got the best curators. We have an 18-year-old kid that just won 2 Grammys. We have a 22-year-old kid just won a Grammy, and we're only 7 months into this. So Josh brilliantly did this at Roc Nation. We're doing it again except for this time. It's all built on the backs of AI. You're gonna read a lot about that coming out right now, right, using AI to find those beats and sounds that tie in what we're looking for.
We're gonna add 10,000 beats and sounds any minute now. So just keep watching for that and watching. The 300% growth, it's small, right? But you get you grow 300% a year for the next three years, and all of a sudden, you get a very serious business. And I, I see Aaron. He doesn't smile that often with a big frown, but he, he's frowning 'cause he's watching EBITDA kick in. It's small, but it-it's growing fast, and this is very, very profitable.
I'll wrap up with a couple of other questions, but I did wanna open it up to see if there are any questions in the audience for you guys while you're here. Okay. Let's talk then about other, you know, is there a pathway to returning to live music? Is that something that's in the future?
I kinda teased, right? So we were just on this massive trajectory, right, with 300 million live streams. We had 5 billion engagements. We blew up the TikTok platform, largest live show they've ever done in history. We streamed everything from Roc Nation to EDC, I'm sorry, Rock in Rio to EDC to Outside Lands. You can name the biggest shows in the world to the biggest artists. We had 3,000 artists. I would say 97% of them hit their social media and told their fans, "Listen and watch," okay? We've been patiently watching the market and patiently watching for the right time. The phone is ringing you off the hook that there's no choice anymore, right, for these big music events, just like sports, right? You know, the opening of that door is happening. It's never turning back.
The consumer thirsts for it, right, 'cause not everyone can attend these events, right? It's expensive. It's difficult to get to. There's all kinds of hurdles to attending them. They wanna see them. 100 million people watched Coachella this year. These are fall of your chair numbers. We're starting to get those phone calls coming in left and right. What we wanna do is just like we did with Social Gloves, we wanna get paid to produce it 'cause we're the best in the world at it. We wanna make 30% margins on that. And then we wanna be able to grow and partner with those music events where they share in the revenue streams, the ancillary revenue streams with us. But we won't do it where there's a cost to us, right? Right now, we're laser-focused on these bottom-line numbers.
I'm sure virtual reality headsets can only help, you know, in that regard, right?
Yep. For anyone that's put on those Apple headsets, it's, it's magical, right? It's a long way off, right, and it's a really hard trail. You know, I've talked about publicly, I'm not a huge believer in long-form content, right, on any of these VR elements. But three minutes of content, a minute to three minutes, music's beautiful for. If anyone ever saw the Coldplay one, it's so fantastic. And you could literally see, you know, the microphone, the wires, the people working behind the scenes. It's pretty amazing how a production goes on. We're really excited about where that's going. We were the first-ever company in history to do a full music festival. We did two of them. We got paid $1 million by Facebook. We got paid $1 million by Samsung. That next round is coming.
I would stay tuned. I fully expect our next big announcement in the very near future will be the first-ever pay-per-view festival ever done in history.
so.
Is Coachella pay-per-view or?
Coachella is done for, I think it's 13 years now on YouTube. They got this amazing partnership, that they just do it across YouTube. And YouTube does like 2 or 3 of them, right? And that's really it. No one's focused their energy on actually curating, like ESPN or like the old-school MTV, curating a newsroom and anchors and hosts and correspondents that actually makes it more interesting than watching just somebody perform on stage.
So, to wrap up then, I'll ask the question that I asked Kit before. If we're looking out a year, two years, what are the metrics that you're gonna, you know, measure yourself on the success of the? Is it stock price? Is it EBITDA? Is it, you know, revenue?
Yeah. I think I've never changed these metrics, right? We're a creative-first platform. The more creators we have on our platform, the more superfans they have, which is where our focus is, right? We're not focused. We'd love to have billions, right? We'd love. Spotify just said they're gonna have 1 billion subscribers, right? 1 billion. Goldman Sachs just came out and said there's gonna be 1.7 billion paying subscribers to music by 2030. These are staggering TAMs, the biggest of any industry I've ever been in, right? What I've said is we're gonna get to 10 million subscribers. We're after those superfans. We're the lowest-cost provider, right? We're one-third of our competitors. We're the best service because we're the most nimble and small and we're the only ones that can white-label it. So we're looking for 10 million subscribers, right?
We're looking to increase the number of talent on our platform, so 30 new podcasts. I'm so excited to watch this. Like, every 2 weeks, I get another message from Kit, "Oh, we signed another one," right? And I expect next week, we add another one. I'll be mad at him if we don't because we haven't signed one this week, right? So it's really exciting to watch. We've been patient. I like to describe what PodcastOne and Kit and his team does is Moneyball, right? Hedge fund managers in this room. He literally runs this like a hedge fund. He's the only one in the industry that his entire team studies the numbers so carefully. They didn't make this mistake or fall into the trap of doing 80/20 deals 'cause you just lose your shirt, right?
We've stuck to our guns, kept those margins right, and we still see telltale signs now. It's about to turn usually EBITDA positive and then usually profitable. We just converted all the debt, right, to equity. All of our debt in the parent company converted to $2.10. All the debt at Podcast One converted to $3, well above the markets, right? We just cleaned up the last remaining big payable left in the company. As of yesterday, we announced $3 million payables were extinguished, right? That's not happening with magic, right? It's happening by the success of the business.
All right.