Latest / WTR Small-Cap Spotlight / LiveOne (LVO): The AT&T Deal, B2B Streaming Strategy, and Why Every Platform Needs an Audio Network

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LiveOne (LVO): The AT&T Deal, B2B Streaming Strategy, and Why Every Platform Needs an Audio Network · WTR Small-Cap Spotlight

• 0:00
  SPEAKER_01: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_01: In today's episode, I have the pleasure of being joined by Rob Ellen, Chairman and CEO of Live One Inc., NASDAQ Ticker Symbol LVO.
• 0:19
  SPEAKER_01: Also joining is my WTR Equity Research Colleague, Eric Goldstein.
• 0:24
  SPEAKER_01: Live One is a Los Angeles-based creator first music, entertainment, and technology platform delivering premium audio content, podcasts, live events, and original programming to consumers worldwide.
• 0:37
  SPEAKER_01: At the heart of the company is Slacker Radio, one of the longest-running digital music platforms in the U.S., which powers Live One's streaming service, which is available natively on iOS, Android, Roku, Apple TV, Amazon Fire TV, Samsung, Android TV, and embedded directly inside every Tesla vehicle on the road today.
• 0:59
  SPEAKER_01: Live One's subsidiary, Podcast One, which trades separately under NASDAQ ticker symbol PODC, is a top 10 podcast publisher and sales network with over 200 shows, now generating record revenue and profitability.
• 1:15
  SPEAKER_01: Rounding out the portfolio are PPV1 for live pay prevent events, day one music publishing, and custom personalization solutions, which is being refocused around celebrity brands following a restructuring.
• 1:29
  SPEAKER_01: The company is guiding for fiscal 2027 consolidated revenue of$82 to$90 million and positive adjusted EBITDA across all subsidiaries.
• 1:39
  SPEAKER_01: So with that having been said, welcome to today's podcast, Rob and Eric.
• 1:44
  SPEAKER_00: Thanks, Tim.
• 1:45
  SPEAKER_00: Thank you, gentlemen.
• 1:46
  SPEAKER_01: Rob, Live One has been called many things: a streaming platform, a podcast network, an entertainment company, and even a data business.
• 1:54
  SPEAKER_01: When you think about what Live One truly is today and what it is becoming, how would you define the company's core identity and its single most important uh competitive advantage?
• 2:04
  SPEAKER_01: And as a follow-on to that, please, also can you discuss the total addressable market for the digital service provider or DSP and podcasting markets and why is MA picking up in the industry again?
• 2:17
  SPEAKER_00: Yeah, it's a great, great question.
• 2:18
  SPEAKER_00: And uh, you know, I'll start with to start with we're DSP, which is you just hit at the end, which is a a music platform, subscription platform, right?
• 2:26
  SPEAKER_00: And there's only a few of us, there's only 10 of us left, right?
• 2:30
  SPEAKER_00: And when you think about who's left, you just watch iHeart stock go up 10x on two things.
• 2:35
  SPEAKER_00: One, they announced they're gonna put some podcasts and a licensing deal onto Netflix.
• 2:40
  SPEAKER_00: Okay, and I'll bring that back up shortly on some of the things we're doing.
• 2:44
  SPEAKER_00: And number two is Cirrus Radio made a bid for him, right?
• 2:47
  SPEAKER_00: So John Malone, who I consider most too, consider the smartest guy in media, is gonna put iHeart and Cirrus together, right?
• 2:54
  SPEAKER_00: After you go that, so if you put those two together, you got a$6 billion,$7 billion valuation and a$25 billion, right, is$30 billion.
• 3:01
  SPEAKER_00: The next stop is Spotify.
• 3:03
  SPEAKER_00: Spotify at$122 billion, right?
• 3:06
  SPEAKER_00: And after Spotify, it goes straight to trillion dollar companies.
• 3:10
  SPEAKER_00: All that's left is Apple, YouTube, and Amazon.
• 3:15
  SPEAKER_00: All right.
• 3:16
  SPEAKER_00: So we're in this very unique position that what we think is special, and the reason that Slacker has lasted this long, right, with those massive companies as competitors, is we're the Walmart in the space, we're the lowest price.
• 3:28
  SPEAKER_00: Number two is we're the most nimble.
• 3:30
  SPEAKER_00: And number three, we focus all of our energy on B2B deals, right?
• 3:34
  SPEAKER_00: Like that Tesla deal you were talking about.
• 3:36
  SPEAKER_00: But those B2B deals, right, are focused on how do we not spend any money marketing, right?
• 3:42
  SPEAKER_00: We can't spend$86 a sub to acquire subscribers and lose 30% of them, right?
• 3:47
  SPEAKER_00: That's a that's a very difficult model.
• 3:49
  SPEAKER_00: And I'm a huge fan of Daniel X.
• 3:51
  SPEAKER_00: And obviously he spent you know$35 billion getting there before he got profitable.
• 3:55
  SPEAKER_00: Now he's profitable, right?
• 3:57
  SPEAKER_00: Um, we have to do it a very different way.
• 3:59
  SPEAKER_00: And so what I've built all of my companies on, right, historically is on B2B partnerships.
• 4:06
  SPEAKER_01: Okay.
• 4:06
  SPEAKER_01: Fascinating overview, and uh very excited to hear more about the company.
• 4:09
  SPEAKER_01: So I'll turn it over to Eric to ask a few questions.
• 4:11
  SPEAKER_02: Okay, thanks, Tim.
• 4:12
  SPEAKER_02: Thanks, Rob, uh, for joining us today.
• 4:14
  SPEAKER_02: We really appreciate your time.
• 4:16
  SPEAKER_02: Uh, obviously, very timely.
• 4:18
  SPEAKER_02: This morning, um, first question you announced a collaboration with uh AT ⁇ T to expand uh next generation connected car entertainment.
• 4:28
  SPEAKER_02: Can uh you talk to us a little bit about that today?
• 4:31
  SPEAKER_00: Yeah, I mean, you're watching all of these monster businesses, right?
• 4:35
  SPEAKER_00: All these Fortune 250, Fortune 500 companies competing and crossing over each other's business.
• 4:41
  SPEAKER_00: And what's most important is data, right?
• 4:44
  SPEAKER_00: Everybody's re-working back up, and this happens in a cycle, right?
• 4:48
  SPEAKER_00: I started and built digital turbine, it was my last company, which went through these cycles and then went to a multi-billion dollar company with as high as 12 billion, still trades well over a billion from pennies, right?
• 4:59
  SPEAKER_00: When the cycle changes, and all of a sudden they realize they better own some of their own data.
• 5:04
  SPEAKER_00: So this is a is a partnership that has taken the better part of 19 months.
• 5:09
  SPEAKER_00: It took 27 meetings, right?
• 5:11
  SPEAKER_00: That's minimum.
• 5:12
  SPEAKER_00: I may be discounting if my team may tell me I'm off, but it took a lot of work to get there.
• 5:16
  SPEAKER_00: And what it is, is it gives us an opportunity of three things.
• 5:20
  SPEAKER_00: Number one is when you go into your car now, anywhere where there are the 70, 65 to 70 million cars that are powered by 18T's connectivity, right?
• 5:29
  SPEAKER_00: You will immediately see a live one logo and you'll immediately be able to go to our music app.
• 5:34
  SPEAKER_00: Number two is they're gonna help us market together with Cisco, right?
• 5:38
  SPEAKER_00: We are gonna package together to use music, very much like we did with Tesla, to drive subscribers.
• 5:44
  SPEAKER_00: Those subscribers will be freemium, they'll be free, they'll be our middle tier, and they'll be the high-end tier, right?
• 5:51
  SPEAKER_00: And hopefully out of 70 million people.
• 5:53
  SPEAKER_00: If we can drive, drive a small percentage.
• 5:55
  SPEAKER_00: I think one of the analysts said said if a half of 1% comes, right, the stock should be 14% or$14 or higher, right?
• 6:03
  SPEAKER_00: Um, and maybe this is better, right?
• 6:05
  SPEAKER_00: There's no one better to sign partnerships for a music subscription platform or for podcasts than it is on a uh carrier.
• 6:14
  SPEAKER_00: And the reason for that is most of the listening and most of the behavior is gonna is gonna be done on your phone.
• 6:20
  SPEAKER_00: Makes perfect sense.
• 6:22
  SPEAKER_02: So let's um let's um take a look at just the structure of your company.
• 6:26
  SPEAKER_02: Um, when we look at your business lines, uh, we see you have Slacker Radio, uh Podcast One, and you have a few other smaller businesses.
• 6:35
  SPEAKER_02: Um, you spun off a minority stake in podcast one a few years ago.
• 6:39
  SPEAKER_02: Um, can you maybe run us through the reasons for that?
• 6:43
  SPEAKER_02: Um, does that structure still make sense to you today?
• 6:46
  SPEAKER_02: And then can you give us an update on uh where your balance sheet stands, just your debt and cash positions?
• 6:53
  SPEAKER_00: Sure.
• 6:53
  SPEAKER_00: A lot of questions at once.
• 6:55
  SPEAKER_00: Uh, but I'll try to give you each one of them.
• 6:57
  SPEAKER_00: So let me start with why we spun out podcast one.
• 6:59
  SPEAKER_00: Number one is we took in an$8 billion piece of debt that was convertible into equity, right?
• 7:05
  SPEAKER_00: At$100 million market cap, right?
• 7:08
  SPEAKER_00: We bought the company in 2020, right in the beginning of COVID from one of the great geniuses of music, Norm Padditz, who built Westwood one.
• 7:17
  SPEAKER_00: And that's why all of our, since he passed away, our branding is everything is one in honor of him and out of his brilliance as well as his passing, right?
• 7:26
  SPEAKER_00: So we spun it out for that, but we also spun it out because it's the only independent podcasting network that trades on a major exchange in the world.
• 7:34
  SPEAKER_00: All right, puts us in a very strong position at the right time as the market starts to correct itself for media, we'll have a very good opportunity to roll up the space and continue to add multiple acquisitions in the podcast space.
• 7:47
  SPEAKER_00: Okay.
• 7:48
  SPEAKER_00: Uh regarding the balance sheet, all right, I think was the second one.
• 7:52
  SPEAKER_00: Uh, we have just taken in uh five months ago.
• 7:56
  SPEAKER_00: We took in$10 million from my partners at Lucid, uh, David Rosenberg and John Libman, exact same partners who did my deal at Digital Turbine.
• 8:04
  SPEAKER_00: They did the first at four, they did the second at two, and it hit a high of 106, and their warrants ended up being worth fortunes of money, right?
• 8:11
  SPEAKER_00: Um, so David called me and said, listen, we can do a firm commitment for$10 million and let's get done.
• 8:18
  SPEAKER_00: I said, okay, the market's really rough out there for media.
• 8:22
  SPEAKER_00: So we raised$10 million, but not only do we raise that, we've now also gotten our balance sheet where$15 million of our major partners, our music labels, our music publishers, for the first time since I bought the company, have become long-term partners.
• 8:36
  SPEAKER_00: Okay.
• 8:37
  SPEAKER_00: And with that, they converted$15 million of payables, royalties, past and going forward at$7.5 a share.
• 8:45
  SPEAKER_00: Okay.
• 8:46
  SPEAKER_00: And that's what that's when the stock was trading at five.
• 8:48
  SPEAKER_00: All right.
• 8:49
  SPEAKER_00: So it was great for the balance sheet.
• 8:51
  SPEAKER_00: We'll have positive equity for the first time ever.
• 8:53
  SPEAKER_00: And in the last call, we mentioned that the company is now positioned to really push the auditors to get rid of the going concern.
• 9:02
  SPEAKER_00: And with positive equity, positive equity, we're really excited about that.
• 9:06
  SPEAKER_00: When digital turbine got rid of their going concern, the stock went up by$600 million in value in seven days.
• 9:11
  SPEAKER_00: So I think it's going to be a major coup for us, right?
• 9:14
  SPEAKER_00: And with all that, we've been able to maintain our$250 million NOL, right, which doesn't get valued at all, which no one even writes about it.
• 9:22
  SPEAKER_00: But that NOL will give us the ability as we talk towards the end of the year and start moving into gap earnings.
• 9:28
  SPEAKER_00: That's great.
• 9:29
  SPEAKER_02: That's great.
• 9:29
  SPEAKER_02: Thanks, Rob.
• 9:30
  SPEAKER_02: So let's take a look at um uh your your deal with Tesla.
• 9:35
  SPEAKER_02: So you have uh 1.1 million free ad-supported subscribers uh inside Tesla Vehicles today uh with a daily engagement exceeding 59 minutes per user, which is pretty amazing.
• 9:48
  SPEAKER_02: So you've just launched an expanded AI-driven marketing campaign.
• 9:53
  SPEAKER_02: Can you walk us through the conversion playbook?
• 9:56
  SPEAKER_02: Um, investors would want to understand uh the math here.
• 10:00
  SPEAKER_02: If you can achieve a 10 to 15% paid conversion rate on those 1.1 million uh users today, uh what does the annualized revenue uh impact look like on your blended RPO?
• 10:13
  SPEAKER_02: Also, can you give investments and upgrade?
• 10:16
  SPEAKER_00: I think it's a yeah, I think there's a couple of things.
• 10:18
  SPEAKER_00: Sorry about that.
• 10:19
  SPEAKER_00: I think there's a couple of things you get out of that Tesla right opportunity now, right?
• 10:23
  SPEAKER_00: Now, as we revisit it and step on the gas, shockingly, we were able to convert over 50% of every, actually about 63% of every Tesla car, right?
• 10:34
  SPEAKER_00: We able to convert into either free or paid subscribers, right?
• 10:38
  SPEAKER_00: There's only two million of them.
• 10:39
  SPEAKER_00: It's a pretty staggering number.
• 10:40
  SPEAKER_00: And if we could do that at AT ⁇ T or or any of our other partnerships, we just announced Samsung, LG Visio, which is owned by Walmart.
• 10:48
  SPEAKER_00: If God willing, we signed, you know, you know, 10%, let alone 60%, you can only imagine what the revenue is going to be.
• 10:54
  SPEAKER_00: But now's the time for us, now that we've secured these people and they're using it 59 minutes, it means they always love the service.
• 11:00
  SPEAKER_00: The fact that they love the service is a telltale sign that we just got to speak to them and get to them directly and get to them in a unique way.
• 11:08
  SPEAKER_00: Previously, in our old deal with Tesla, we only had a VIN number.
• 11:11
  SPEAKER_00: We knew your habitual behavior and what musicalists do.
• 11:14
  SPEAKER_00: We could change your music.
• 11:15
  SPEAKER_00: We couldn't really talk to you directly or know who you are, and we didn't have your credit cards, we didn't have your information.
• 11:19
  SPEAKER_00: Now we have all the information who you are.
• 11:21
  SPEAKER_00: Now's the opportunity for us to start converting.
• 11:23
  SPEAKER_00: So we are using some brilliant AI technologies that are finding Tesla users.
• 11:29
  SPEAKER_00: They're finding where the thought leaders are in Tesla.
• 11:32
  SPEAKER_00: They're finding the thought leaders who talk about music inside of Tesla cars, right?
• 11:37
  SPEAKER_00: As well as we are using our 216 or 18 podcasters, everyone from Adam Corolla to Lady Gang to Baby Mama to Dr.
• 11:46
  SPEAKER_00: Phil.
• 11:46
  SPEAKER_00: We're using them to also drive those subscribers when we're when they're listening to our podcast to convert to paid subscription, right?
• 11:54
  SPEAKER_00: And we have the ability to be nimble and offer them unique deals for them to do it.
• 11:58
  SPEAKER_00: Okay.
• 11:59
  SPEAKER_00: If 10 or 15% convert, we're going to pick up 150 or 200,000 subscribers, an average of like$6 a month, right?
• 12:07
  SPEAKER_00: And some will be some will be the mid-tier, some will be the high tier, like every other music subscription, right?
• 12:12
  SPEAKER_00: But we are the lowest price by far.
• 12:15
  SPEAKER_00: If we pick up an average of$6, we pick up, you know, a million two a month.
• 12:18
  SPEAKER_00: We pick up$12 million.
• 12:20
  SPEAKER_00: If we do that for three years, we picked up$40 million in revenues and we're we're right back at you know$120,$130 million in revenues without any of the new partnerships.
• 12:29
  SPEAKER_00: So we're really excited about it.
• 12:31
  SPEAKER_00: Uh these are but we've now had two straight months of growth, right?
• 12:35
  SPEAKER_00: That's the first time in a year, right, off those subscriptions.
• 12:38
  SPEAKER_00: And now we're gonna really step on the gas and really spend the time to convert these people and convert as many as we can.
• 12:44
  SPEAKER_02: Okay, fantastic.
• 12:45
  SPEAKER_02: So let's take a look at uh podcast one.
• 12:47
  SPEAKER_02: So um the uh you have executed a pretty remarkable turnaround here.
• 12:53
  SPEAKER_02: So just uh a couple weeks ago, I believe podcast one raised their fiscal 27 guidance to uh 68 to 75 million in revenue and seven to ten million in EPITA.
• 13:04
  SPEAKER_02: Uh and separately you completed a$7 million warrant exercise, repaid all your debt, your junior debt, and now you hold the largest cash position in the company's history.
• 13:15
  SPEAKER_02: So, what's driving the guidance uh raise?
• 13:18
  SPEAKER_02: Is it advertising momentum, B2B platforms, uh AI licensing, or all three?
• 13:24
  SPEAKER_02: And then one angle that caught our attention from a recent presentation you made, you noted that video now represents about 30% of podcast revenue, and that you're targeting 50% with TV adaptation deals already underway.
• 13:41
  SPEAKER_02: So, can you walk us through the video monetization model uh as well?
• 13:47
  SPEAKER_00: Okay, a lot of questions.
• 13:48
  SPEAKER_00: So let me let me start with so you understand.
• 13:50
  SPEAKER_00: We bought podcast one, doing 17 million in revenues, losing five.
• 13:54
  SPEAKER_00: We finished this year at between 60 and 62 million, right?
• 13:59
  SPEAKER_00: We're a March 31st year end, 60 and 62 and 6 million plus in EBITDA.
• 14:05
  SPEAKER_00: So that's an 11 million dollar swing in the five-year period since we owned it, right?
• 14:09
  SPEAKER_00: And a you know, 4x on the revenues, three and a half X on the revenues, right?
• 14:14
  SPEAKER_00: So going into this year, we said we're gonna do uh we're gonna do uh 68 to 75 million.
• 14:20
  SPEAKER_00: So another great growth year, right?
• 14:22
  SPEAKER_00: And I just raised the guidance again to seven to ten million dollars of EBITDA.
• 14:27
  SPEAKER_00: It's becoming a very serious business.
• 14:29
  SPEAKER_00: Why is it becoming serious?
• 14:31
  SPEAKER_00: Number one is our podcast is making more money because it's not just audio, there is now a movement into video that is so big and so unique, right?
• 14:39
  SPEAKER_00: You watched it with YouTube.
• 14:41
  SPEAKER_00: YouTube came out and said, um, I believe it said the industry is now 9 billion, going to 25 billion.
• 14:47
  SPEAKER_00: So massive growth between now and 2030.
• 14:50
  SPEAKER_00: And YouTube says they have record video growth for the fourth straight year in a row.
• 14:54
  SPEAKER_00: Okay, say number two is you watch iHeart stock go up 10x on an announcement.
• 14:58
  SPEAKER_00: They put a couple of their podcasts and licensing deals onto uh Netflix.
• 15:04
  SPEAKER_00: Okay.
• 15:05
  SPEAKER_00: I'm gonna be talking about this a lot, and I've only brought it up in the last conference call for the first time, but I've been bringing it up internally because I've expecting this to happen for a long time, which is why would every streaming platform not buy a music platform?
• 15:19
  SPEAKER_00: First of all, they got to compete with Amazon, YouTube, and Apple, right?
• 15:23
  SPEAKER_00: All three of those have both audio and video, right?
• 15:26
  SPEAKER_00: So if you're gonna have it, you better be competing at right in the center of the ring with them because they're now a streaming platform as well, right?
• 15:32
  SPEAKER_00: Amazon Prime eats into your grid and comes right after, you know, Paramount and Peacock and HBO and so on.
• 15:39
  SPEAKER_00: So why would they not buy an audio?
• 15:41
  SPEAKER_00: They have such difficulties raising their ARPUs a dollar every two years, right?
• 15:46
  SPEAKER_00: So that so now what everyone's waking up and realizing is all these streaming platforms are either television networks, cable networks, or they're cable and satellite themselves, right?
• 15:57
  SPEAKER_00: They're putting everything on, they're putting every kind of channel, every kind of content on.
• 16:01
  SPEAKER_00: So it's becoming very important to have talking heads, right?
• 16:04
  SPEAKER_00: I humbly believe that every one of these streaming platforms should buy an audio network because the beauty of an audio network, when you add a dollar price onto Netflix every two years, right, you've got to make another$2 billion worth of movies and television that may or may not work.
• 16:21
  SPEAKER_00: Music always works.
• 16:23
  SPEAKER_00: And they're not paying for it.
• 16:24
  SPEAKER_00: Now you pay a you pay a big percentage to record labels and the publishers, but you don't have to create, curate, and create that content.
• 16:32
  SPEAKER_00: It's a syndication business, right?
• 16:33
  SPEAKER_00: So imagine if they bought a music streaming platform, which is what I thought was gonna happen to iHeart, right?
• 16:39
  SPEAKER_00: I think the only reason I'm long the stock is they're gonna get bought by Netflix, right?
• 16:42
  SPEAKER_00: It makes so much sense.
• 16:43
  SPEAKER_00: Netflix could raise the prices five dollars tomorrow morning.
• 16:47
  SPEAKER_00: Okay.
• 16:48
  SPEAKER_00: If they buy us, they could raise them tomorrow morning.
• 16:50
  SPEAKER_00: They already have 350 or 400,000 subscribers.
• 16:53
  SPEAKER_00: Imagine they just had music and they changed the price by$5.
• 16:56
  SPEAKER_00: What would happen to Netflix stock?
• 16:59
  unknown: Okay?
• 17:00
  SPEAKER_00: Skyrocket.
• 17:01
  SPEAKER_00: Okay.
• 17:02
  SPEAKER_00: So our pros are critical to any subscription business.
• 17:05
  SPEAKER_00: So for us, we're right in the sweet spot.
• 17:07
  SPEAKER_00: We're one of 10 that's left.
• 17:09
  SPEAKER_00: There's really not another one in the US.
• 17:11
  SPEAKER_00: Everyone's getting bought.
• 17:12
  SPEAKER_00: TuneIn just got bought for$170 million.
• 17:15
  SPEAKER_00: They don't even have music licenses, right?
• 17:17
  SPEAKER_00: Cirrus is getting bought by iHeart, right?
• 17:20
  SPEAKER_00: Title got bought by Square a couple of years ago for$400 million.
• 17:24
  SPEAKER_00: I do, I do more revenues than any one of those, right?
• 17:27
  SPEAKER_00: Than any one of these small ones, right?
• 17:29
  SPEAKER_00: Same thing Napsa got bought for$230 million.
• 17:31
  SPEAKER_00: There won't be any audio platforms left except for us.
• 17:34
  SPEAKER_00: That's it, right?
• 17:35
  SPEAKER_00: And we're the only ones that can white label, and the only ones that are willing to, if Tesla or any one of the retailers or any one of the streaming partners wants to brand it as their own, we'd love to have it powered by Live One, just like Intel inside.
• 17:51
  SPEAKER_00: But we're totally good if you want to want to white label it.
• 17:53
  SPEAKER_00: I don't think anybody else is willing or able to change their brands or give up that or have the nibleness that we're gonna have.
• 18:01
  SPEAKER_02: That makes sense.
• 18:02
  SPEAKER_02: So let's um let's take a look at um your use of AI uh here for a second.
• 18:08
  SPEAKER_02: So Podcast One has launched uh podcast one AI.
• 18:12
  SPEAKER_02: So you're targeting the AI training data market with over 250,000 hours of premium video and audio content uh now being prepared for licensing to hyperscalers, and the company expects to begin generating licensing revenue this quarter.
• 18:29
  SPEAKER_02: So at a recent recent investor uh conference uh last month, you put in uh explicit dollar value on that content library of between 500 million and 750 million, which is obviously a big number relative to the size of your company today, the market cap of your company.
• 18:48
  SPEAKER_02: So can you walk us through um how you arrive at that valuation?
• 18:53
  SPEAKER_00: Yeah, I I didn't give the market cap what the value what they're gonna be.
• 18:57
  SPEAKER_00: Uh I'm just giving you what's out there clearly, which is is that these practice models are going to get more and more desperate, right?
• 19:04
  SPEAKER_00: They are so hungry for data, right?
• 19:06
  SPEAKER_00: If you're gonna train a car to drive, or you're gonna train a robot, they're gonna learn human behavior, crying, laughing, smiling, you know, all the different things, right?
• 19:16
  SPEAKER_00: And what you're seeing is, and you know, I've been saying this for about six months now, you're gonna see all the AAA content ripped down.
• 19:22
  SPEAKER_00: If you go into AI today, and I wanted to change your face or my face to James Bond or to you know to Mickey Mouse, 10 weeks ago you could have done that.
• 19:33
  SPEAKER_00: That's over.
• 19:34
  SPEAKER_00: In fact, you won't even find anything that looks even close to them anymore because the lawsuits are starting, just like Napster, just like movies years ago.
• 19:42
  SPEAKER_00: It took years for this to unwinding to negotiate the deals.
• 19:46
  SPEAKER_00: So literally CNN just sued sued um uh um I forget which one of the AI companies, one of the big AI companies.
• 19:54
  SPEAKER_00: They just sued them last week, came on CNBC and sued them.
• 19:57
  SPEAKER_00: This is going to come fast and furious.
• 20:00
  SPEAKER_00: And when that content is ripped down and they don't have that, right, they're gonna lose a tremendous amount of data.
• 20:05
  SPEAKER_00: There's very few companies on earth that have 250,000 hours of data.
• 20:10
  SPEAKER_00: They don't need one hour, they don't need two hours, they don't need one person crying at two.
• 20:14
  SPEAKER_00: They need thousands of hours, tens of thousands of hours to fill those pipes, and they're all a non-exclusive deal.
• 20:21
  SPEAKER_00: So I think you're gonna see the modernization happen imminently.
• 20:24
  SPEAKER_00: Okay.
• 20:25
  SPEAKER_00: I think you're gonna see monetization of codes.
• 20:27
  SPEAKER_00: I have 24 years of building apps and so on.
• 20:31
  SPEAKER_00: Those codes are now called tokens, right?
• 20:33
  SPEAKER_00: Okay.
• 20:34
  SPEAKER_00: You're gonna you're gonna see I've only said video content of 250,000 hours.
• 20:39
  SPEAKER_00: Imagine how much audio content I have.
• 20:42
  SPEAKER_00: We have a ticker, like literally in the office adding this all up, because it's literally takes it's gonna take a month to gather all of it.
• 20:49
  SPEAKER_00: And this is all just hitting high cylinder.
• 20:52
  SPEAKER_00: We have to figure out is, but you can be sure we have hundreds and hundreds of thousands more of audio content than video content because most of the podcasters did not generate all video content of them until the last five years.
• 21:04
  SPEAKER_00: Okay.
• 21:04
  SPEAKER_00: Very few that did.
• 21:06
  SPEAKER_00: And we have you know amazing talent like Dr.
• 21:08
  SPEAKER_00: Phil and Adam Carolla, who own their own content.
• 21:11
  SPEAKER_00: And owning your own content, we already have our Rev shares, we already have our partnerships.
• 21:15
  SPEAKER_00: It's gonna be very hard for anyone else to find licensed content at this mass.
• 21:21
  SPEAKER_02: Okay, really amazing.
• 21:22
  SPEAKER_02: Thank you.
• 21:23
  SPEAKER_02: Um, so let's talk about your B2B partnerships.
• 21:25
  SPEAKER_02: Um, so Live One has disclosed uh three-year Amazon partnership, um, a multi-year agreement with uh Fortune 250 streaming network valued at over 26 million, and a growing ecosystem now that now includes Amazon, Apple, Spotify, YouTube, uh Paramount Global, Pluto TV, Tele, LG, Samsung, and Visio.
• 21:49
  SPEAKER_02: And the Slacker uh B2B pipeline stands at 70 plus potential partners across five verticals.
• 21:57
  SPEAKER_02: So give us a framework for how these deals are structured.
• 22:00
  SPEAKER_02: And what do you offer a distribution partner that Spotify or Apple Music doesn't today?
• 22:08
  SPEAKER_00: Well, they can't, right?
• 22:10
  SPEAKER_00: So they can't white label.
• 22:12
  SPEAKER_00: They can't drop their prices and be nimble.
• 22:15
  SPEAKER_00: And they don't have they don't have the ability for their tech team to sit and stand up and handle the amount that is being asked for from these B2B partners, right?
• 22:24
  SPEAKER_00: So they're just too big, right?
• 22:26
  SPEAKER_00: And they don't need it the way we do, right?
• 22:28
  SPEAKER_00: So we have to we do it, we do it nonstop.
• 22:31
  SPEAKER_00: This is what we do.
• 22:32
  SPEAKER_00: And if you remember in Digital Turbine, I signed 58 carriers and probably 10 hardware companies.
• 22:37
  SPEAKER_00: This time, not only do I have mobile companies, because all my business is a mobile-centric.
• 22:42
  SPEAKER_00: So the reason they go to a billion is because I focus on mobiles where there's 8 billion people and there's 8 billion phones, right?
• 22:49
  SPEAKER_00: So what's happening now is that the B2B partnerships are all of a sudden the cycle is changing.
• 22:56
  SPEAKER_00: Everybody is focused on data.
• 22:58
  SPEAKER_00: The word AI is a big word for a lot of things, but the reality is it's data, right?
• 23:05
  SPEAKER_00: And how do they get their hands on the data?
• 23:07
  SPEAKER_00: It's starting with their own customer base.
• 23:09
  SPEAKER_00: If they're talking to their own customers on a regular basis, it's game changing.
• 23:12
  SPEAKER_00: So we have now partnered with just in the last four weeks, Samsung TV, LG, uh Visio, which is a beautiful partnership because Visio, the CEO just talked about Visio and Sam's Club coming together, right, without saying the word Amazon Prime to compete with Amazon, right?
• 23:27
  SPEAKER_00: There's going to be a unique opportunity right now that all these companies, Fortune 250s and 500 companies, are literally infringing on each other's businesses.
• 23:38
  SPEAKER_00: And the number one spot they're going to be looking at is owning their own data, right?
• 23:42
  SPEAKER_00: The carriers, today's announcement of ATT, the carriers used to control their own home screen.
• 23:47
  SPEAKER_00: Now it's controlled by Android and Apple.
• 23:49
  SPEAKER_00: All right.
• 23:50
  SPEAKER_00: That's a scary proposition.
• 23:52
  SPEAKER_00: All right.
• 23:52
  SPEAKER_00: So this is a great opportunity for us to either distribute, right, through all of these sizable companies with 10 million to 3 billion eyeballs to have them as an investor, strategic investor, and come in or to buy the company.
• 24:09
  SPEAKER_02: Okay.
• 24:10
  SPEAKER_02: Fascinating.
• 24:12
  SPEAKER_02: So let's take a look at um some of the the uh cost reductions the company's been going through.
• 24:17
  SPEAKER_02: So you have reduced your headcount from approximately 350 employees to under 90 while maintaining your revenue, actually growing your revenue, uh, and cutting your uh quarterly operating expenses by more than 50% year over year, which is uh pretty dramatic to say the least.
• 24:37
  SPEAKER_02: So all your subsidiaries are now expected to achieve uh positive adjusted EVAD on fiscal 27.
• 24:45
  SPEAKER_02: Can you uh be specific about where you're using AI uh to replace human labor?
• 24:51
  SPEAKER_02: Is it uh content curation, ad trafficking, customer service, um, et cetera?
• 24:57
  SPEAKER_02: And is there a floor below which uh your headcount reduction becomes a risk to trying to grow the business?
• 25:05
  SPEAKER_00: Yeah, actually, it's not a risk, it's it's a reward.
• 25:08
  SPEAKER_00: I mean, it's always hard to do.
• 25:09
  SPEAKER_00: And and some of this was gonna happen, attrition was gonna happen anyway.
• 25:12
  SPEAKER_00: We did five acquisitions, we got hit with COVID, right?
• 25:16
  SPEAKER_00: So it was very difficult to run a business, right, where people are no longer coming into offices, right?
• 25:22
  SPEAKER_00: Very different animal, right?
• 25:24
  SPEAKER_00: So what we did is we studied it hard, and we have utilized AI in a very unique way.
• 25:29
  SPEAKER_00: Starting with, we used to have a hundred DJs and VJs and hosts hosting these channels, right?
• 25:34
  SPEAKER_00: I could stand them a music channel if you wanted for your wife and yourself.
• 25:38
  SPEAKER_00: You want your anniversary night, and you and I had your habitual behavior of your music, right?
• 25:43
  SPEAKER_00: I'd be able to stand up channels for you and name American in, you know, in the Goldstein name, right?
• 25:49
  SPEAKER_00: And here's your happy anniversary, and I can put 10 channels together in 30 seconds.
• 25:53
  SPEAKER_00: And I literally could have one person instead of one person per channel doing that.
• 25:57
  SPEAKER_00: So that was a big cost savings.
• 25:58
  SPEAKER_00: Okay.
• 25:59
  SPEAKER_00: Number two is is it just amazing what you can build now, apps that you can build, software you can build, the things that AI can do for you are dramatically, dramatic cost savings for us across the board.
• 26:12
  SPEAKER_00: And then our marketing side, right?
• 26:13
  SPEAKER_00: Um in our PR, our IR, right?
• 26:16
  SPEAKER_00: You don't need the staffs anymore, right?
• 26:19
  SPEAKER_00: It's you can you can write these, you can write these PRs so intelligently with one person overseeing them and making sure that you touch them up and make sure they're right.
• 26:28
  SPEAKER_00: Okay.
• 26:29
  SPEAKER_00: We had to do this ATT announcement.
• 26:31
  SPEAKER_00: We got the call at one o'clock in the morning last night.
• 26:33
  SPEAKER_00: Said ATT is coming out with theirs.
• 26:35
  SPEAKER_00: They're putting it out out at 9.58, and we gotta have it out at 10, right?
• 26:40
  SPEAKER_00: Normally that would be a fire drill beyond anyone's belief, right?
• 26:44
  SPEAKER_00: We put that together in less than 10 minutes, got it over to them, got their approval, right?
• 26:48
  SPEAKER_00: Cisco took a little bit longer.
• 26:50
  SPEAKER_00: Once we had everyone's approved, we're able to move forward.
• 26:52
  SPEAKER_00: So this there's just great cost savings.
• 26:54
  SPEAKER_00: I would say we're probably at the tail end of that now, and that you're gonna start to see us hire again, all right?
• 27:00
  SPEAKER_00: And it's not gonna be a lot of people.
• 27:02
  SPEAKER_00: So we're gonna, we're gonna we're gonna build, you know, game changers.
• 27:05
  SPEAKER_00: So where are the game changers gonna be?
• 27:07
  SPEAKER_00: I publicly said we're gonna announce a new president of the company, which I do with all my companies, who has built and sold a public company for a billion dollars or better, right?
• 27:15
  SPEAKER_00: Built and exited, right?
• 27:16
  SPEAKER_00: Whether in the market or sold it, right?
• 27:18
  SPEAKER_00: So that's happening very shortly.
• 27:20
  SPEAKER_00: Number two is you're gonna see us hire heads of each of those verticals.
• 27:24
  SPEAKER_00: If we're gonna do these massive B2B deals, right?
• 27:27
  SPEAKER_00: We're not exclusive to them, they're exclusive to us.
• 27:30
  SPEAKER_00: We have a huge opportunity to expand upon those.
• 27:33
  SPEAKER_00: And we can go as deep and as wide as social media, cable, satellite, streaming networks, um, uh audio, right?
• 27:43
  SPEAKER_00: Auto and uh, all the car companies like Tesla, right, and expand from there, hotels, airlines, membership programs.
• 27:51
  SPEAKER_00: So we see a telltale sign.
• 27:53
  SPEAKER_00: And if you guys didn't know, I owned Kazai years ago and had one of the greatest runs in the stock, like literally, literally went from 40 million to 600 million in no time.
• 28:01
  SPEAKER_00: And we were able to use that to buy a lot of companies, but I also got a great learning curve, which is it's an unaffordable model to buy subscribers.
• 28:10
  SPEAKER_00: You just can't win.
• 28:11
  SPEAKER_00: So we're gonna stick to those B2B deals and stick to those partnerships and really position ourselves that we're going to leverage our great content in return for this great distribution.
• 28:21
  SPEAKER_00: And we're gonna rev share it and partner with them as deep and as hard as we can with all those industries.
• 28:27
  SPEAKER_00: And you're gonna see heads of each of those verticals being hired pretty eminently.
• 28:31
  SPEAKER_02: Okay, makes sense.
• 28:33
  SPEAKER_02: Makes sense.
• 28:33
  SPEAKER_02: It's it's really it's very impressive.
• 28:36
  SPEAKER_02: So let's just take a look at this the structure of the company again, which we had touched on a little bit earlier.
• 28:41
  SPEAKER_02: So live one owns approximately 70% of podcast one.
• 28:46
  SPEAKER_02: Uh, podcast one is 27 million shares outstanding.
• 28:50
  SPEAKER_02: So at a recent price of$5, uh, that stake was worth between somewhere in the neighborhood of 90 to 100 million dollars, which is just shy of live one's market capitalization, which is around 120 million dollars.
• 29:05
  SPEAKER_00: Uh at current.
• 29:07
  SPEAKER_00: No, live one's way less than that.
• 29:09
  SPEAKER_00: It's kind of crazy.
• 29:10
  SPEAKER_00: Our ownership is about 20 million shares.
• 29:13
  SPEAKER_00: That 20 million shares worth 100 million.
• 29:15
  SPEAKER_00: Live one's today is trading, trading in the six range on 14 million shares.
• 29:20
  SPEAKER_00: It's trading at 84 million.
• 29:21
  SPEAKER_00: So we're trading below the ownership in our subsidiary, right?
• 29:25
  SPEAKER_00: Doesn't happen often, but as you know, it's a very inefficient market.
• 29:29
  SPEAKER_00: And you know, we're just coming out of death and destruction of media.
• 29:33
  SPEAKER_00: And you're watching media stocks that have literally just slowly dropped for seven straight years.
• 29:38
  SPEAKER_00: You know, my friends at Starz, Jeff Hirsch, his stock, so proud of him.
• 29:42
  SPEAKER_00: His stock is up from six to twenty-seven, right?
• 29:45
  SPEAKER_00: Lionsgate has gone from literally from seven dollars to fifteen dollars.
• 29:48
  SPEAKER_00: iHeart's gone from 60 cents to six dollars to as high as eight dollars.
• 29:52
  SPEAKER_00: Now it's I think about four and a half, five, right?
• 29:55
  SPEAKER_00: So media is finally getting some attention, and people are waking up reeling what is media?
• 30:00
  SPEAKER_00: Media is data.
• 30:02
  SPEAKER_00: Data is critical to AI, right?
• 30:05
  SPEAKER_00: Media is gonna have a huge, huge footprint and a huge amount of new revenue streams that drives out of it.
• 30:12
  SPEAKER_00: And I think everybody's just waking up to that.
• 30:14
  SPEAKER_00: And you know, there's always a there's a there's a line in the media business that is content is king and distribution is king cong.
• 30:20
  SPEAKER_00: There's so much distribution right now that content is king and king Kong.
• 30:25
  SPEAKER_00: If you have AAA content, you have an invaluable asset that is going to get paid in a real way.
• 30:30
  SPEAKER_00: And I humbly believe talking heads is the one missing ingredient from every streaming platform.
• 30:36
  SPEAKER_00: They're paying, they're paying the Jerry Seinfelds and Dave Chappelle's$20 million to do one show.
• 30:41
  SPEAKER_00: Why would you not want to have a true show on your platform with the great thought leaders, right?
• 30:47
  SPEAKER_00: And those great thought leaders have massive audiences, and you could take the audiences with you.
• 30:53
  SPEAKER_02: Okay, so so clearly, just you know, as you articulate it, the the market is not ascribing much value at all to the live one-up assets outside of podcast one.
• 31:06
  SPEAKER_02: Um, and then you you mentioned earlier there's uh recent been some speculation about a Sirius XM iHeart combination.
• 31:15
  SPEAKER_02: Um, how would that change uh the competitive landscape?
• 31:18
  SPEAKER_02: And does it create any strategic opportunities uh for you uh in advertising or licensing and so on?
• 31:29
  SPEAKER_00: I mean, I think you know, listen, less competitors are out there is always better, right?
• 31:33
  SPEAKER_00: I'm a huge fan of iHearts.
• 31:34
  SPEAKER_00: I'm a huge fan of Bob Pittman and John Sykes and what they've done.
• 31:37
  SPEAKER_00: They've built in just an amazing asset, right?
• 31:40
  SPEAKER_00: With great content.
• 31:41
  SPEAKER_00: I'm a huge fan that, you know, uh of what Sirius built.
• 31:44
  SPEAKER_00: I was a large shareholder and a partner with with uh with uh Mel Carmizen when he originally took over control of it.
• 31:51
  SPEAKER_00: Um so I'm a big fan of it.
• 31:53
  SPEAKER_00: But we're it just opens the floodgates again for us as the small, nimble player to be able to do these B2B deals as opposed to go try to spend, you know,$100 million marketing, right?
• 32:04
  SPEAKER_00: We got 1 million Tesla subscribers, right?
• 32:07
  SPEAKER_00: It costs to get those free subscribers about$86.
• 32:10
  SPEAKER_00: Okay.
• 32:11
  SPEAKER_00: Well,$86 times a million is$86 million.
• 32:14
  SPEAKER_00: We don't have to spend a dime.
• 32:15
  SPEAKER_00: And we're in Tesla cars in perpetuity.
• 32:18
  SPEAKER_00: Every single car will have live one one butt button on it.
• 32:21
  SPEAKER_00: We have to convert more.
• 32:23
  SPEAKER_00: We got to press to convert them.
• 32:24
  SPEAKER_00: But if we keep doing what we're doing, we're gonna have uh we're gonna have a nice footprint in this industry and we're either gonna get bought, right?
• 32:31
  SPEAKER_00: I just hired Craig Christensen um at the CFO role, right?
• 32:35
  SPEAKER_00: Big you know, jump for us.
• 32:37
  SPEAKER_00: He's he did 24 acquisitions in his last company and trades at a$600 million market cap, right?
• 32:42
  SPEAKER_00: You know, we're we're sitting here trading at 80, right?
• 32:45
  SPEAKER_00: We'll be thrilled to get the 600 and be working back towards where we were.
• 32:49
  SPEAKER_00: And we traded, you know, between 400 and 800 million for almost six years before COVID.
• 32:54
  SPEAKER_00: So we're we're really excited about where the business is going.
• 32:57
  SPEAKER_00: We're gonna keep upgrading.
• 32:58
  SPEAKER_00: As you know, we have one of the most prolific boards in media in the world, right?
• 33:02
  SPEAKER_00: It's like the who's who in media.
• 33:03
  SPEAKER_00: Everyone from Steve Bornstein who built ESPN and the NFL networks, Kenny Salma built the tennis channel, very similar models to we did Patrick Waxberg, who was co-chairman of Lionsgate when the stock went from six to 48.
• 33:15
  SPEAKER_00: So we have some really special people here.
• 33:17
  SPEAKER_00: We have a beautiful flywheel, right?
• 33:19
  SPEAKER_00: It's all about talent first, driving traffic.
• 33:22
  SPEAKER_00: The more traffic they drive, the more the flywheel goes around and the more revenues we drive.
• 33:27
  SPEAKER_00: So we've talked about audio.
• 33:29
  SPEAKER_00: We've talked about Slackers audio, we've talked about podcasting.
• 33:34
  SPEAKER_00: Uh, we have a pay-per-view technology that we built in-house.
• 33:37
  SPEAKER_00: We have live streaming we built in-house.
• 33:39
  SPEAKER_00: We did over 4,000 artists from Justin Bieber to Bruce Springsteen to Metallic, all performed on our platform live.
• 33:48
  SPEAKER_00: We've had over 5 billion engagements.
• 33:50
  SPEAKER_00: So we have world-class technology, world-class board, right, and world-class content.
• 33:56
  SPEAKER_00: I've never had all those pieces in the same time.
• 33:58
  SPEAKER_00: I've always had most of the pieces, but I've never had all of them at the same time.
• 34:02
  SPEAKER_00: And yeah, I've been pretty fortunate, you know, with a lot of hard work and go through a lot of trials and tribulations, including almost going out of business in digital turbine in 2008.
• 34:11
  SPEAKER_00: We were we were an hour away from going broke, right?
• 34:14
  SPEAKER_00: The stock dropped$500 million in valuation as I was skiing down the mountain in Aspen.
• 34:18
  SPEAKER_00: And I apologize if you already heard this story.
• 34:20
  SPEAKER_00: I'm not a good, I'm not that good a skier, but I'm good enough to get down the mountain without losing$500 million, right?
• 34:26
  SPEAKER_00: It's it was disastrous.
• 34:28
  SPEAKER_00: We fought through, we had debt holders, we battled through it, we turned around.
• 34:31
  SPEAKER_00: And what I tell you is, you know, and I and I steal this from you know from Michael Jordan, really.
• 34:36
  SPEAKER_00: You know, I've always said, and this really comes back to me from my staff, they said, how do you do it?
• 34:41
  SPEAKER_00: And I said, What how do I do what?
• 34:43
  SPEAKER_00: They said, you don't stop working.
• 34:45
  SPEAKER_00: I love what we do.
• 34:47
  SPEAKER_00: I absolutely love what we do.
• 34:48
  SPEAKER_00: So we win because we outwork everybody else, right?
• 34:52
  SPEAKER_00: The the carrier deal took a year and a half.
• 34:55
  SPEAKER_00: The retailer took two years, two years and six months, and still going, right?
• 35:00
  SPEAKER_00: Contracts are signed, right?
• 35:01
  SPEAKER_00: But the real launch is happening.
• 35:03
  SPEAKER_00: It's really, I'm really proud of my team, and they're really a special group of people.
• 35:07
  SPEAKER_00: And we're just we're we're just gonna fight through it until we get this thing to a unicorn.
• 35:12
  SPEAKER_02: So, Rob, I just want to say thank you very much for for joining us today.
• 35:17
  SPEAKER_02: Uh, you've laid out a pretty compelling story.
• 35:20
  SPEAKER_02: You seem to have businesses that are incredibly well positioned uh for things that are going on in the marketplace today.
• 35:28
  SPEAKER_02: Um, and it seems like as as you continue to execute, I'm sure that the market will uh start to pay more attention and and start to value your stock more appropriately.
• 35:38
  SPEAKER_02: Um, Tim, I just want to turn it back to you.
• 35:41
  SPEAKER_01: Thanks, Eric and Rob.
• 35:43
  SPEAKER_01: Uh, thanks for joining us today.
• 35:44
  SPEAKER_01: A really fascinating conversation.
• 35:45
  SPEAKER_01: It's not lost on me that you're the primary owner of Podcast One and you're on our podcast.
• 35:49
  SPEAKER_01: So uh a bit of an irony there.
• 35:51
  SPEAKER_01: But uh it does feel like you have uh wind in your sales.
• 35:54
  SPEAKER_01: So uh congratulations and hope the trajectory continues.
• 35:58
  SPEAKER_00: Great.
• 35:58
  SPEAKER_00: Let me just give you one more one more little tidbit that I think is important, uh, which is that we bought back six million dollars worth of stock in Live One.
• 36:07
  SPEAKER_00: We bought back 2.3 million shares of podcast one, and I probably just announced we're imminently going to start buying back more live one stock, okay, and are continue to buy live podcast one stock every day.
• 36:19
  SPEAKER_00: So we consider all options in this, but the one thing we know is we're so undervalued right now.
• 36:24
  SPEAKER_00: The industry is trading at 3.7 times revenues, we're trading at 80% of revenues, right?
• 36:30
  SPEAKER_00: It doesn't make any sense, right?
• 36:31
  SPEAKER_00: It's time for us to go back into the market and buyback stock.
• 36:36
  SPEAKER_00: And buyback is a very substantial piece right now.
• 36:40
  SPEAKER_01: Great.
• 36:41
  SPEAKER_01: Well, thank you for sharing that data point with us as well.
• 36:42
  SPEAKER_01: And have a great afternoon.
• 36:44
  SPEAKER_00: Thank you guys.
• 36:45
  SPEAKER_00: Appreciate the time.
• 36:47
  SPEAKER_01: Thank you for listening, and don't forget to subscribe, as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 37:03
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 37:08
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.