What does a 30-year-old podcast star have in common with a 94-year-old investing legend? On the surface, not much.
Alex Cooper rose to fame through the creation of the Call Her Daddy podcast, which interviews high-profile celebrities and focuses on a range of topics including sex, relationships, and mental health.
Warren Buffett, on the other hand, made his name through the conglomerate he has run for decades, Berkshire Hathaway, and its now $300 billion-plus equities portfolio. Buffett is known as one of the best stock-pickers of all time.
Yet those two individuals are now loosely intertwined. Satellite media company Sirius XM Holdings(NASDAQ: SIRI) just signed Cooper and her podcast, as well as her growing podcast network, to a deal reportedly worth up to $125 million over the next three years. Sirius XM also happens to be the 16th largest position in Berkshire's equities portfolio. Berkshire first began purchasing shares in 2016 and now holds a roughly 31% stake.
The stock has not performed well. It's down by nearly 50% from where it went public in 1994, and down roughly 62% over the last five years. Can Cooper and her devout fans, known as the "Daddy Gang," help save this Buffett stock?
Reigniting subscriber growth
Sirius XM is a large audio company that boasts a combined monthly audience of 150 million listeners. You may know it best from its classic satellite radio services, but the company also owns the digital music streaming service Pandora and has a growing podcast network as well.
As one might expect, the company makes most of its money from subscriptions. In the second quarter, it generated roughly 76% of total revenue from subscribers. The problem is that quarterly subscriber revenue has been shrinking. And according to Visible Alpha, the consensus estimates for where revenue is heading (in red on the chart below) don't exactly point to massive growth over the next few years.
Data Source: Visible Alpha. Chart by Author.
Cooper and the Call Her Daddy podcast may be able to help. The deal will give Sirius exclusive advertising and distribution rights to Cooper, as well as other content creators on her network such as Alix Earle and Madeline Argy, both of whom have millions of followers on various social media platforms. While it's hard to confirm exact numbers, Cooper reportedly gets 5 million listeners a week. Call Her Daddy was Spotify's second-largest podcast in 2023 only behind Joe Rogan.
Sirius XM CEO Jennifer Witz said at an industry conference that bringing on talent like Cooper will help attract younger audiences and provide more opportunities for advertisers across the company's platform including live events, video, and social. Cooper came to Sirius after finishing a three-year, $60 million contract with Spotify. Interestingly, at Spotify's 2022 Investor Day, management pointed out that by video-streaming her episodes, Call Her Daddy had doubled its audience from its audio-only episodes.
Call Her Daddy is not the only big podcast Sirius is bringing on. The company also signed Smartless with Jason Bateman, Sean Hayes, and Will Arnett in a deal reportedly worth $100 million, and will broadcast a weekly show with former South Carolina governor and U.N. ambassador Nikki Haley. Analysts seem to like the new strategy, with one recent upgrade citing improving subscriber trends.
Can one podcast save the day?
At Spotify's 2022 Investor Day, Tony Jebara, VP of engineering and head of machine learning, said that the company can look at the lifetime value of individual podcasts, specifically related to their impact on the bottom line, and divide that number by the cost to acquire and promote the show. "And we will focus only on renewing shows that have a great return for the business," he said.
Given that statement, one could conclude that Call Her Daddy didn't make the cut at the price Cooper was seeking to renew her contract. That said, Spotify has been shifting its strategy. And the company has done well since Cooper signed on in 2020, not that the success can be completely attributed to her. Between 2020 and 2023 Spotify achieved a 15% compound annual growth rate in premium subscribers, with a total of 236 million at the end of 2023. Spotify's stock is up nearly 200% in the last five years.
While Sirius XM has its issues to grapple with, including a heavy debt load, I ultimately think its current strategy makes sense. Making its services more broadly appealing to listeners will go a long way, and podcast deals like the one with Call Her Daddy could help rejuvenate the company's reputation and introduce its services to a new subscriber base.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Spotify Technology. The Motley Fool has a disclosure policy.
