PodcastOne
Slacker, the music streaming service owned by LiveOne, called off its planned merger with Roth CH Acquisition V Co., a special purpose acquisition company, the companies announced Monday (Oct. 30).
LiveOne CEO Robert Ellin attributed the move to a poor market climate for small companies. “Market conditions for micro-cap stocks, for stocks under $1 billion, are just decimated this year as a whole,” he says. Companies that go public through SPAC mergers also face a difficult time, he adds. A SPAC is a blank-check company created and funded for taking a private company public. SPAC funding and mergers peaked in 2021, according to SPAC Research.
The SPAC market has softened considerably since 2021. Many SPACs failed to close a deal and returned their funds to shareholders. Music Acquisition Corp. returned funds to shareholders in Dec. 2022. Liberty Media closed down its SPAC in Nov. 2022 after a fruitless search for a takeover target. A record 123 SPACs liquidated in the first half of 2023, compared to just seven in the prior-year period, and the average redemption rate — SPAC shares redeemed for full value before merging with a target company — increased in the first half of 2023, according to Kroll. “It’s a tough market to come out in,” says Ellin.
Additionally, LiveOne believes Slacker has gained in value since it agreed to merge with Roth. LiveOne previously announced it had signed a letter of intent to merge Slacker with Roth and put a pre-money valuation of $160 million on the music streamer. But on Monday, LiveOne raised its revenue guidance for Slacker to the range of $63 million to $66 million for the fiscal year ended March 31, 2024. The company expects adjusted earnings before interest, taxes, depreciation and amortization of $17 million to $19 million.
“I think it’s worth $200 million at a minimum,” says Ellin, “and probably way higher than that when you’re looking at what Tidal sold for at $400 million and change, where Deezer trades at 300 million [euros, or $317 million]. We’re the only one that’s profitable. We make money every month, every quarter, every year.”
The market currently puts a far lower value on Slacker, however. LiveOne — including Slacker — has a $92 million market capitalization. That includes an 81% stake in PodcastOne, a podcast company LiveOne spun off in September that currently has a market capitalization of $70 million. LiveOne said that prior to the spin-off, PodcastOne was valued at between $230 million and $274 million by third-party valuation firm ValueScope.
Slacker was founded in 2007 and acquired by LiveOne — then called LiveXLive Media — in 2017 for $50 million. Many of its subscribers come from a white-label service that powers other brands’ digital radio. For example, nearly every new Tesla automobile sold in the United States comes with a subscription to Tesla Radio that’s provided by Slacker and paid for by the automaker. LiveOne says it added over 300,000 new paid Tesla subscribers in the first five months of its fiscal year, a 30% year-over-year increase. The company expects to add over 800,000 new subscribers this fiscal year.
With the SPAC merger off the table, Ellin sees numerous potential avenues for Slacker. “There’s an opportunity today to roll up multiple other companies in the space,” he said during an investor call on Wednesday (Nov. 1). “We have four to five potential acquisitions in the audio business alone that would fit in very nicely with the company and be extraordinarily accretive to revenues and bottom line. We also could explore a sale or a strategic investor, including some of our current customers or investors. We also will explore a direct IPO as the markets change and fair market value for the numbers that we’ve delivered are available.”
Roth “is currently exploring opportunities with other potential merger candidates in order to complete its business combination,” according to Monday’s press release.
Since LiveOne announced plans to acquire Kast Media in May, CEO Rob Ellin has not budged on his offer to compensate the podcasters to whom Kast owes millions of dollars. Ellin’s best offer: one-third of the money Kast Media owes them in cash, one-third of what they are owed in promissory notes to be paid over two years and one-third of what they are owed in stock from LiveOne subsidiary PodcastOne. In exchange, the podcasters must sign a multi-year agreement with PodcastOne and agree to reduce their cut of ad sales from 80% to as low as 60%.
“We’ve spoken to every podcaster. We’ve offered really fair deals — equity in our IPO to help them,” Ellin told Podcast Business Journal on Aug. 11. (Technically PodcastOne wasn’t actually going public via IPO, but making its shares available through a direct listing on the NASDAQ.) Podcasters had a tough choice ahead, Ellin explained — dig in their heels or take the settlement offer. “No other platform is going to pay them for the past,” he said. “They’re only going to work with them in the future.”
PodcastOne and its parent company LiveOne were, however, willing to pay at least one podcaster what Kast owes them in full — even if it meant taking out a high interest loan. Records obtained by Billboard show that in early August, LiveOne borrowed $1.7 million from CapChase, an online bank based in Madrid. That money, Billboard confirmed, was borrowed to pay UFC fighter-turned-podcaster Brendan Schaub what he was owed by Kast Media, the Los Angeles-based podcast company launched in 2016 by founder and CEO Colin Thomson. Kast Media, like PodcastOne, is a podcast network that provides a variety of services to podcast creators like production assistance, show distribution and, most commonly, advertising sales. Among its top shows are Logan Paul’s Impaulsive and Theo Von’s This Past Weekend.
In February, Schaub and other podcasters noticed that Kast’s payments on advertising money were becoming irregular, before falling off all together by the end of the month. By August, Kast Media owed Schaub, an accomplished podcaster with three successful shows – the Golden Hour, The Fighter and the Kid and the Brendan Schaub show – a whopping $1.6 million in unpaid revenue. A month later, Schaub and his co-host Bryan Callen announced on the Fighter and the Kid podcast that they were leaving Kast Media and joining PodcastOne.
“Brendan spoke to a number of agencies, and the company that gave us the best deal when we were out this money was a company called PodcastOne,” Callen said at the time. “PodcastOne has been the agents of a lot of people we know, and they have been very happy with them.”
A rep for Schaub declined to comment for this story. LiveOne did not respond to requests for comment.
After announcing LiveOne’s plans to acquire Kast Media in May, Ellin revealed that the deal would only close if 70% of Kast’s podcasters would join LiveOne under the proposed settlement terms. To date, PodcastOne has not announced the closing of the Kast Media acquisition. On Sept. 8, the day PodcastOne was listed on the NASDAQ, LiveOne released a statement increasing its revenue and earnings guidance for the year that included Kast Media’s revenue and adjusted earnings and assumed “the previously announced Kast Media” acquisition “would have taken place at the start of the fiscal year,” which is April 1, 2024. On Wednesday (Sept. 27), LiveOne issued a press release saying that it “reiterates” its previous revenue guidance.
That reiteration has not helped the company’s share price. In July, ValueScope, a third-party valuation firm hired by parent company LiveOne, valued PodcastOne between $230 million and $275 million, which came out to $8 to $12 per share, a valuation Ellin had hyped to podcasters considering joining PodcastOne.
That estimate ended up being overly optimistic — PodcastOne’s share price immediately dropped 46% after being listed on the NASDAQ and has since tumbled even further. Three weeks after being listed on the NASDAQ, the stock closed Tuesday at $1.91 per share with a $45 million market capitalization, a drop of more than 80% after less than three weeks of trading.
“I hope this serves as a wakeup call for creators, because long-term, they’re much better off doing everything themselves – they don’t need these big podcast networks,” says Bryan Last, president of Arcadian Vanguard and the on-air co-host of The Jim Cornette Experience and Jim Cornette’s Drive-Thru. While Arcadian Vanguard produces each episode, it started contracting its advertising sales to Kast Media in 2018, in 2023 it brought sales back inhouse.
“Any service a network offers, most podcasters can do themselves,” he tells Billboard. “When their model puts an entire community of creators at risk, there’s obviously something wrong with the model.”
PodcastOne debuted its long-awaited listing Friday (Sept. 8), with officials from parent company LiveOne ringing the opening bell on the trading floor of the NASDAQ to celebrate what CEO Rob Ellin says is first ever spinoff of a minority stake in a publicly traded company. Shares of the new LiveOne subsidiary Courtside Group, better known as PodcastOne, fell 45% shortly after trading opened, dropping from $8 per share to close at $4.39.
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The tumble came amid growing criticism of one of PodcastOne’s acquisition targets — California-based Kast Media — by major podcasters like comedian Theo Von who accused Kast of failing to pay out $4 million in advertising fees collected by Kast on behalf of its podcaster clients.
In a video viewed more than 1 million times, titled “This Man Defrauded Our Podcast,” Von alleges that Kast Media founder and CEO Colin Thomson did not pay his show This Past Weekend with Theo Von for the advertisements it sold and booked for Von’s show. Von claimed This Past Weekend eventually cut ties with Kast Media, only to later be approached by Thomson and Ellin and was told on a phone call, “If you come over to our new network PodcastOne, we’ll pay some of what you’re owed in stock,” Von said, adding “it felt like to me they’re trying to leverage our podcast and other podcasts to then make their stock do well and if that happens, then we’ll get a share of our money.”
Von told viewers he declined the offer.
Ellin addressed the Kast Media scandal on Friday during a post-market opening interview with Yahoo News. He noted that PodcastOne is no longer hiring Thomson to join his the publicly traded company, but noted he hoped to help creators hurt by the Kast Media controversy.
“We’ve bought a distressed asset called Kast Media, a very distressed, troubled asset (that) 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,” he said.
Von isn’t the only podcaster to go public about the Kast Media scandal. Pro Wrestling podcaster Jim Cornette and cohost Brian Last have detailed their own experience with Kast Media and PodcastOne in a series of at least seven podcast episodes over the last two months. Former Sirius XM host Jason Ellis has also spoken out against Kast Media in a recent viral video.
Von said he will continue pursuing Thomson for the money he is owed by Kast Media.
“You f—ed with the wrong rat, homie” Von said while a picture of Thompson aired on the screen. “You can’t get me to shut up.”
Thomson did not respond to multiple requests for comment.
LiveOne will capitalize on the booming podcast industry by spinning off its PodcastOne business as a standalone entity through a dividend to shareholders as of August 28, the company announced Thursday. PodcastOne shares were approved for listing on the Nasdaq exchange on Monday (Aug. 14) and will begin trading under the “PODC” symbol on Sept. 8.
LiveOne, which also owns the music streaming platform Slacker Radio, will issue a dividend of about 19% of PodcastOne shares to its shareholders and retain the remaining roughly 81% of the outstanding shares. LiveOne CEO Robert Ellin said he expects PodcastOne stock will be priced between $8 — the minimum price for Nasdaq-listed stocks — and $12 per share. A third-party valuation of PodcastOne in February put the company at between $230 million and $274 million.
“We will be very aggressive to continue to grow that and it’s a big part of the reason we’re taking the company public,” Ellin said during a conference call for investors on Thursday (Aug. 17). The company currently has a pipeline “of over 10 additional acquisitions that we’re carefully taking a look at,” he added.
PodcastOne has a number of popular podcasters including Adam Carolla, Dr. Drew Pinsky and Jordan Harbinger. It ranked 10th in Podtrac’s publisher ranking for July 2023. Last week, LiveOne obtained the exclusive network distribution and advertising rights to comedian Brendan Schaub’s portfolio of podcasts including The Schaub Show and The Fighter.
PodcastOne already has two important acquisitions in 2023. LiveOne entered into a letter of intent to acquire Kast Media, a podcast network expected to add up to $10 million in annual revenue and boost earnings for PodcastOne. The company also has a binding letter of intent to acquire Guru Fantasy Reports, owner of fantasy football website Fantasy Guru, that Ellie said he expects will close “in the next few weeks.” The all-stock deal is expected to add annual revenue of $2.5 million and over $600,000 in earnings before interest, taxes, depreciation and amortization.
PodcastOne had revenue of $10.6 million in the quarter ended June 30, accounting for roughly 38% of LiveOne’s total revenue. Last week, LiveOne raised its guidance for PodcastOne’s full fiscal year revenue from $34 million to a range of $42 million to $47 million.
Separately, LiveOne also plans to make Slacker Radio a standalone, publicly traded entity through a merger with Roth CH Acquisition V Co., a special purpose acquisition company. LiveOne and Roth have signed a letter of intent but no merger date has been announced. LiveOne said it expects Slacker to have a pre-money valuation of $160 million.
The president and co-founder of PodcastOne, Chris “Kit” Gray, is facing a lawsuit filed by his former executive assistant, who says she was fired after refusing to ship cannabis products legally purchased in California to his home in Florida where cannabis is illegal. PodcastOne is also named as a defendant in the complaint.
Cherri Bell, an executive assistant with more than 20 years of experience including seven years at PodcastOne — which was purchased by media company LiveOne in 2020 — alleges that she was terminated on Feb. 10 in retaliation for refusing two requests by Gray to ship cannabis vape pens, gummies and other THC products across state lines through FedEx.
The suit, filed by Bell’s attorney Timothy McCaffrey Jr. in Los Angeles Superior Court on Friday (Feb. 24), claims that after relocating his residence from California to Florida “in or around November 2021,” Gray “began planning trips to the Los Angeles area beginning in January 2022” and, following each of those visits, asked Bell “to ship various items to his home in Florida in random boxes that she was instructed to collect from around the office” using the company’s FedEx account.
“On or around” Oct. 18, 2022, the suit continues, Gray sent Bell a text message requesting that she ship some clothing to his family in Florida along with another package he left at the office. “In this text he also thanked her and mentioned again that he did not want to take the contents [of the package] on the plane and that he was nervous keeping it at the office,” the complaint reads. Inside the package, Bell claims she found “smoking paraphernalia from a marijuana dispensary including vape pens and vials” and subsequently decided not to ship the items after determining it was illegal to send drugs and drug paraphernalia across state lines.
Bell was right: While marijuana possession is legal in a number of states, possession and transportation are barred at the federal level under the Controlled Substances Act. Using FedEx as a drug courier to ship more than 50 grams of cannabis can land a person in federal prison for five years.
When Gray allegedly asked about the package weeks later, Bell says she responded via text that she did not feel comfortable sending the envelope. Gray then allegedly responded, “‘Oh I wouldn’t sweat that,’ completely dismissive of Plaintiff’s concern even though he had admitted to Plaintiff that he was nervous about carrying the package and leaving it at the office,” the complaint reads. Gray also allegedly told Bell he wished she would have told him earlier, “since apparently his supply was running low,” and that he had shipped “similar items approximately ten times in the past.”
Two days later, Gray allegedly asked Bell to drop off the package, along with a few bags of “gummy bears,” with another female employee, who would take care of the shipment. Following this incident, Bell claims she “noticed a definite change in her working relationship with Gray and the way he treated her,” according to the complaint.
The lawsuit alleges that Gray began to retaliate against Bell in the days and weeks that followed, including by delaying repayment of her expense report, giving her negative performance reviews and attempting to isolate her from the rest of the staff. While Bell was on medical leave for work-induced stress, it continues, Gray terminated her.
Bell is suing Gray and PodcastOne for illegal retaliation, wrongful termination and failure to pay wages upon termination.
Billboard made multiple attempts to reach Gray and PodcastOne/LiveOne officials but did not receive a response.
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