LiveOne, Inc. (LVO) Q1 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the LiveXLive Media Q1 2021 Earnings Conference Call. [Operator Instructions]. I'd now like to hand the conference over to your speaker today, Emily Greenstein, Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to LiveXLive Media's Business Update and Financial Results Conference Call for the company's first quarter ended June 30, 2020. Joining me on today's call are Rob Ellin, CEO and Chairman; Norm Pattiz, Founder and Executive Chairman of PodcastOne; Mike Zemetra, CFO; and Dermot McCormack, President. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future results and future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to the company's filings with the SEC for information about factors, which could cause the company's actual results to differ materially from these forward-looking statements, including those described in its Annual Report on Form 10-K for the year ended March 31, 2020, Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and subsequent SEC filings. You will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company's earnings release, which is posted on its Investor Relations website at ir.livexlive.com. And the company encourages you to periodically visit its IR website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, August 6, 2020, and except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I'd like to highlight to investors that the call is being recorded. The company is making it available to investors and the media via webcast, and a replay will be available on its website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, retransmission or rebroadcast of the call in any form without the company's expressed written consent is strictly prohibited. Now let me turn the call over to Rob. Rob?

Thank you, Emily. Good morning, and thanks for joining us today. We hope everyone continues to stay safe and healthy during these very challenging times. COVID has had a meaningful impact on the entire live music industry, effectively eliminating live user concerts and festivals. LiveXLive is uniquely positioned to benefit from the industry's need to migrate to streaming live digital festivals and performances. In Q1 alone, we livestreamed 455 music events with over 76 million live streams, featuring more than 1,000 of the biggest artists in the world. Over the past 4 years, we focused on building our brand and building our traffic. Today, we have grown and evolved to be the first talent-centric platform focused on super fans and building long-term, sustainable, valuable franchises in audio music, podcasting, over the top, pay--per-view and live streaming. We give the artists the ability to simulcast globally across all digital platforms, with technology, production, distribution, marketing and sponsorship. We have positioned ourselves at the forefront of the paradigm shift driving sponsorship and ticket sales for both digital and live, leading the way, helping artists innovate and monetize content with our full stack live streaming platform. I'm happy to report our Q1 results were above consensus analyst estimates. We are in the strongest position in the history of our company, and we are just getting started. Given the momentum we see in nearly all of our business verticals, we're excited to raise our guidance from last year's $38 million to this year guidance of $62.5 to $68.5 million. We are making tremendous progress by simultaneously driving revenue growth as well as a path to profitability. It's worth noting that in Q1, our adjusted operating income for the first time was positive $1.1 million, a substantial improvement compared to $3.1 million loss last year. We have also made enormous progress improving and strengthening our balance sheet. In July, we closed 2 common stock financings at $4.14 that resulted in $17.5 million improvement to our shareholder equity. As part of that financing, the largest music label in the world converted $10 million of accounts payable into common stock. At the same time, we extended our music licensing agreement through 2021. We've also just announced finalizing a $15 million convertible debt with one of our largest institutional shareholders, which will allow us to eliminate all of the short-term debt on the balance sheet and remove all the restrictions on our cash, giving the company flexibility to really start to mature and grow. Similar to traditional media networks, we have multiple divisions in our companies to drive unique revenue streams, including production, marketing, distribution and our own original programs. New monetization features for artists include pay per view, virtual ticketing, merchandise, subscription, digital tours and tipping, all of which create numerous revenue stream opportunities for LiveXLive. With our recent launch into live stream pay-per-view, we have sold tens of thousands of tickets in nearly 100 countries. We have the opportunity to bring in and connect with hundreds of thousands, even millions of new visitors on a weekly basis for LiveXLive, often gaining payment and card technology as well as information and interest and preferences. This information positions us to upsell or cross-sell other products and offerings, like subscription, merchandise, pay-per-view, podcast and targeted advertising. Our flywheel will continue to spin as we convert pay-per-view sales into subscribers. We have produced pay-per-view events in partnership with high-profile stars like Darius Rucker, Zac Brown, Shaquille O'Neal and Rob Gronkowski and we have up and coming pay-per-view events with international superstar Pitbull, rap star and successful entrepreneurs, Nelly, Jeremiah and the global K-Pop sensation, board man Monsta X. In fact, all of the Monsta X VIP packages sold out in 2 minutes and our pay-per-view livestream of Shaq's Fun House vs Gronk Beach had over 9 million views. We expect to continue to announce significant additions to our pay-per-view lineup in the near future. To enhance digital sales, marketing and promotions, we entered into separate cross-marketing and distribution deals with XUMO, FITE and Consumable TV, expanding LiveXLive's reach and content and extending beyond music into comedy, sports and other genres. Together with our growing list of over-the-top OTT, partners, our audience reach now extends to 100 million-plus U.S. households, building brand awareness and loyalty across multiple platforms, leading to digital advertising revenues. We are fortunate to have terrific music industry partners like Live Nation, iHeart, all the labels and publishers and, of course, hundreds of talented artists to make LiveXLive special. We have an exclusive partnership with Tesla. This is our eighth year where our LiveXLive subscription is pre-installed in every Tesla car sold in America. The LiveXLive app is pre-installed in 85 other automobiles as well across major carriers, Verizon, Sprint and T-Mobile. Through our distribution partnerships with BDDs around the globe, we have been able to grow our paid subscribers to 877,000. LiveXLive app is now on Roku, AppleTV, Amazon Fire and 40 million Samsung TVs. Our partnerships include TikTok, YouTube, Facebook, Twitch, Twitter, Tencent and Daily Motion. Across multiple platforms, including carriers, automobiles, over-the-top, and we have the ability to monetize our content multiple times in multiple different ways. On the fast-growing sponsor front, we have secured sponsor deals with Samsung, Kia, Chipotle, Mike's Hard Lemonade, White Claw and just announced a 2-year deal on sports with Corona. Sponsored revenue has more than tripled in the past 2 quarters, and we expect this to be a positive trend to continue. We continue to produce and live stream our own concert franchises. Music lives ON following the massive success of Music Lives' digital event, which we call our digital Coachella. The original festival broke all of our streaming records with an audience larger than any live Coachella or Lollapalooza event. An unbelievable 50 million views in 179 countries and 5 billion video views on TikTok. An average of 200,000 concurrent users. The Music Lives event truly validated the value of live streaming. In Music Lives ON, we have just hit our 14th episode, our weekly multi genre streaming series has received over 6 million live streams used with international artists, Anita, Marc Bassy, Jeremiah and Swae Lee. Weekly viewership continues to climb, showing a growth in brand awareness and interest in the growing franchise. Brand integrations have included artist partnerships, product placement, sponsored billboards verbal brand mentions and thematic integrations with the festivals' content. In early July, we proudly announced the acquisition of PodcastOne, which complements our music and video content stack and diversified our revenue model by adding a large advertising component alongside of our existing subscription business. PodcastOne added $27.5 million in revenues in calendar 2019. And by adding their experienced sales team and advertising team, we tripled the headcount of our sales team. With us today to give us an update on the integration and our move into podcasting and when we branded vodcasting, we have Norman Pattiz, PodcastOne's Chairman and Founder and icon in the radio business. Welcome Norm to the team, and I proudly hand it off to you.

Thank you, Rob. Good morning, everyone, from Los Angeles. And I'm waiting for the sun to come up, but it's a pleasure to be with you. The question I often get asked, especially since we announced our deal was, why did you do it? And let me just explain a couple of things. When -- after retiring from Westwood One, the company asked me if I would form a consultancy or a boutique or what have you to keep the talent that was closely attached to me at Westwood One to keep them at Westwood One. Of course. I agreed to do that and was largely successful. During that period, I was introduced to a mutual -- by a mutual friend to Kit Gray, young man, who is our President and Chief Revenue Officer, to this day, who is involved in the podcasting area. I didn't know a lot about podcasting at the time. But by the time we finished that meeting, I knew plenty about it. And I thought this is just Westwood One for the digital edge without having to push our programming through radio stations. This is direct-to-consumer, which was very, very appealing. Within days, we had formed PodcastOne. I didn't need anybody to finance it, I financed it myself. And when we started, the competitive marketplace was much different in that there really weren't any large-scale competitors. Following the game plan that we used at Westwood One quite successfully 35 years before and right up to that point, we wanted to create a 360-degree platform that provided everything that we needed to produce podcasting, everything that we needed to create a network that would be available to other podcasts to be a part of our network. We wanted to have a wide variety of programming. As a matter of fact, every category that was in the then iTunes, now Apple Podcasts, so that we went into advertising agencies that I've been going into for the previous 35 years. We weren't just pitching a medium, which in many ways, sold itself, but we were also in a position to be able to provide an advertiser with any type of program in every category that was available. So we set about doing that. And that was the nature of the business. There really wasn't a major competitor. There was a 360-degree solution that can provide all of the things that were needed to advertisers and all of the things that were needed to podcasters. Today, the situation is quite different. In the last 18 months or so, larger companies have gotten into the space, primarily audio companies. As a matter of fact, all the major players are audio companies. So in looking for ways to differentiate ourselves from the competition, which is something that we always do, the idea of hooking up with LiveXLive to provide a video component to everything that we do that could provide cross-marketing across multiple platforms and bring the video element much more into the on-demand side of the business, while allowing us to stream live events was very, very attractive. Doing the deal -- Rob and I had talked about doing something for some time, but the timing was right to do something like this. It was an all-stock transaction. We are all in. And primarily because I want to see the business -- our side of the business grow and simply selling the company to somebody else wasn't going to accomplish that. But getting back into being a public company offered us much more flexibility in terms of the kinds and types of deals that we could put together. I was the Chairman of a public company for over 30 years. So I know this space. In terms of being able to actually accomplish many of the things that we set out to do, we're well, well along that road. We are already in our -- well, let me point this out. The things that make us really look good to each other and the synergies that exist is we're all after the same consumer, the super consumer, the super listener. The one who is the fan of the artist or subject matter that we are presenting. And now we can present it in a variety of ways that make us significantly different than anybody else in our category. We can present streaming. We can present video-on-demand, audio on demand. We can do our traditional podcasts. We've now created a category called vodcasts, which is video-on-demand. We've helped each other immeasurably in putting can't pull talent from both of our companies into the assets that we already have into our digital distribution assets. We just did a deal with Pitbull for a podcast that's going to be very successful, and that came about because of the deal that had already been put together with Pitbull with LiveXLive. We took Adam Carolla, who is one of our stalwarts, and who was the most downloaded podcaster of all time, a well-known fact. As a matter of fact, he is in the Guinness Book of Records for it. But Adam does live podcasts in front of audiences on several occasions. On the last two that he did, one in Houston and one in well, and another one. We altered the podcast performance slightly by adding musical artists and streaming it on LiveXLive. Both of the programs, the other one was in Nashville, by the way, a little slow out here. It's mid-morning. But both of those podcasts as vodcasts and as live streams, in the case of the live streams, they both drew over 1 million live streams per episode without having any negative effect on Adam's regularly scheduled audio podcasts. We're going to be doing that with a whole lot of other artists. We're in the process of signing artists that will give us the full suite of distribution opportunities, and we will be the only company in our space that is able to do that, will be an audio and video company competing against nothing but audio companies. And that's a tremendous advantage going forward, which is something that we always look for moving forward. There are so many things that I could talk about right now, about why this deal made perfect sense and why we chose to do it as an all-stock deal. But my time is limited as is yours, and I'll be available for questions at the end of the presentation. But this was a deal that was screaming to be made, and that's why we made it. Rob, back to you.

Excellent. Thank you, Norm. I've been working extremely closely with Norm for several months now, and I can only characterize him as an absolute perfect partner. We are fortunate to have him as part of the senior management team. Norm and I share the same passion, which is an Artist First, Talent First platform, right, that is focused on super fans and building franchises. And what Norman has already done with Adam Corolla and Shaquille O'Neil, and Mike Tyson and T.I., Steve Austin in wrestling, across all genres of pop culture, right? We can now expand upon and as Norman articulated, we can now expand to vodcast. So as I previously mentioned, we recently announced a content partnership with music icon Pitbull to produce and distribute a series of pay-per-view live stream concerts and original content. As well as to launch Pitbull's first podcast/vodcast show on PodcastOne. Pitbull has a social media reach of over 100 million followers and is an ideal candidate to partner with. Pitbull and I recently interviewed on CNBC to discuss our collaboration, and I encourage everyone to -- if you have an opportunity to watch the replay. In conclusion, I'll reiterate that LiveXLive is in the strongest position in the history of the company, and we are really just getting started. The future is now. Bands, brands and fans are coming together, right, in a revolution to build an entire new industry, very similar to what ESPN did 30 years ago. We're seeing telltale signs that all of the above modernization engines are all kicking in simultaneously. We have evolved as a major thought leader in music globally, and our success in music has opened up the floodgates for all genres of public culture. In addition, the strength of our balance sheet gives us the opportunity with respect to additional acquisitions, that could add new or complementary verticals or as a bolt-in to existing verticals. I'd now like to hand it over to my CFO, Mike Zemetra, who will review our Q1 financial results. Thank you.

Great. Thank you, Rob. We ended fiscal Q1 2021 with our strongest quarter-to-date, posting record revenue, record adjusted operating income across the core operations of our business and record KPIs, including 45 live events, over 76 million live views and 20% net paid subscriber growth year-over-year. My commentary will include year-over-year comparisons unless otherwise specified. Turning to consolidated financials. Q1 2021 consolidated revenue was a record $10.5 million, up 11%, due in large part to the growth in our live event sponsorship, pay--per-view services and our paid subscribers, offset by declines in our programmatic advertising and live system services. Paid subscribers grew 20% to a record 877,000 or a net 144,000 additions. 84% of our revenue came from subscription in the period and 16% from sponsorship, advertising and licensing and pay-per-view ticket sales. Q1 2021 contribution margin grew over 450% to $2.8 million, a year-over-year improvement of $2.3 million, which was driven by the increase in revenue coupled with overall gross margin improvements to 27.1% in Q1 2021 as compared to 5.1%. Q1 2021 adjusted operating results were near breakeven at $0.1 million loss in Q1 2021, a massive 98% improvement. As Rob mentioned, this shift towards breakeven at the operating level was driven by our music operations, which generated positive $1.1 million adjusted operating income, a substantial improvement compared to a negative $3.1 million in the prior year. In addition, management enacted certain onetime cost reduction initiatives in the period, including pay reductions, saving approximately $1.1 million in Q1 2021. Now I would like to discuss the Q1 financial performance across our Music Operations and Corporate divisions. Turning to Music Operations. As a reminder, our Music Operations consist of our audio and Internet radio services along with our livestream operations, including sales, marketing and product development and to a lesser extent, certain general and administrative costs. During Q1 2021, Music Operations generated $1.4 million in sponsorship advertising and license revenue, up from $0.9 million. The increase was driven by paid sponsorship and licensing which increased over 350%, offset by a 63% decline in programmatic advertising resulting from an overall decline in advertising demand from the current COVID-19 environment. Subscription revenue was $8.9 million as compared to $8.6 million, driven by the net increase in ending paid subscribers. With the onset of the COVID-19, our subscriber growth and corresponding revenue began to slow across both our direct-to-consumer B2B partners. We expect this trend to continue at least through the remainder of the first half of fiscal 2021, which is reflected in our fiscal 2021 guidance. Finally, we generated $0.2 million in ticket sales from the launch of our pay-per-view platform in May 2020. We expect the number of events and average revenue per pay-per-view event will continue to grow. Q1 2021 contribution margin of $2.8 million increased over 450% from 1 year ago, largely driven by the revenue growth from our Live Events business coupled with substantial reduction in the average cost to produce live events. In Q1 2021, we spent approximately $1.4 million to produce 45 live events at an average cost of less than $30,000 per live event, after excluding certain nonrecurring production expenses. This was a significant improvement compared to $251,000 per event in Q1 last year. The improvement was largely driven by cost of efficiencies realized from the scale of our business, coupled with our transition to more profitable, digital-only and pay-per-view live events in the current period. Q1 Music Operations' adjusted operating income was $1.1 million as compared to an adjusted operating loss of $3.1 million. The improvement of $4.2 million was largely driven by the increased contribution margin, coupled with lower marketing, product and personnel-related costs, driven partly by onetime COVID-19 cost reduction initiatives enacted in the period, coupled with slightly higher capitalized internally developed software costs. Turning to Corporate. After including Corporate and public company overhead, Q1 overhead adjusted operating loss was $1.2 million as compared to negative $1.5 million in Q1 2020. The increase -- the decrease was largely due to lower personnel costs, driven by onetime COVID-19 cost reduction initiatives. Excluding noncash based compensation, amortization expense, depreciation and certain nonrecurring operating expenses. Our consolidated operating expenses decreased $2 million or 40% to $3 million in Q1 2021, largely due to the $1.1 million onetime COVID-19 cost reduction initiatives. Turning to our balance sheet. Our balance sheet is in the strongest position in our history. We ended Q1 2022 with cash and restricted cash of $17.1 million, up $4.7 million. The increase was largely driven by net cash proceeds from operations of $4.5 million and financing of $1 million, offset by net cash outflows from investing activities of $0.8 million. The quarter-to-date net cash savings from operations was largely driven by working capital savings from active management of our payables during the period. Now I would like to update you on a few additional items. In July 2020, we executed on several key financing events, which substantially improved our net equity position by over 300% and $40 million versus June 30, 2020 through positive changes in our liquidity from unrestricted cash plus our AR, incurred payables plus our current debt. More specifically, we provided notice to repay our senior secured debenture holders by August 31, 2020. As of today, we owe approximately $8.9 million in principal and $6.5 million of restricted cash will be fully released upon the payment. We entered into a $15 million, 8.5% senior secured convertible financing arrangement with a significant existing institutional shareholder. The agreement is for 2-year debt and is convertible at $4.50 per share. Upon closing, we would also issue the holder approximately 800,000 shares of registered common stock. We completed a $17.5 million common stock financing at $4.14 per share including the conversion of $10 million of liabilities into equity by a major music partner, improving our balance sheet and bringing our ending cash to over $20 million as of today. Turning to financial guidance. We are raising our full year fiscal revenue 2021 guidance and updating our fiscal 2021 guidance as follows: revenue of $62.5 to $68.5 million, an increase of $1.5 million from prior 2021 guidance; annualized contribution margin of 30% to 35% of revenue, an improvement of over 100% year-over-year versus fiscal 2020; adjusted operating loss of $2.5 million to $5 million, representing a 70% improvement year-over-year at the midpoint. Consistent with Q1 2021, we are forecasting our combined Music Operations service segment to be profitable in fiscal 2021 with only corporate overhead adjusted loss between $4 million to $5 million. Capital expenditures, which principally consist of internally capitalized labor costs in the range of $3.5 million to $5 million and we're expected to live stream over 100 music events, an increase of 140% year-over-year. That concludes our prepared remarks. At this point, I would like to hand it back to Rob.

Thanks, Mike. Before we open up for questions, I'd like to congratulate our President, Dermot McCormack, who you're going to hear a lot more from on our next conference call. He recently was named Pollstar's "Impact 50" Annual Power List for 2020 in the Maestro's category of executives. We take a concept revision and turn it into a brilliant show or event. Dermot was recognized for producing Live's history-making live streaming festival, Music Lives. Congratulations, Dermot, on the award. Well deserved, and we look forward to hearing a lot more from you on upcoming calls. With that, I'm going to open this up now. If the operator can open it up now for questions, it will be terrific.

[Operator Instructions]. Our first question comes from the line of David Bain with Roth Capital.

Great. Maybe, Mike, maybe I can start with understanding the balance sheet. Just so I'm clear, the $15 million convert proceeds, they no longer have to go towards an acquisition, it looks like. So that debt will swap out the current. And with the other transactions, can we assume that the payable bucket will be close to cut in half by the time you report the September quarter before including any other additional relief from major music partners, similar to the $10 million transaction? Is that the way to look at it?

Yes. I mean, you're absolutely right on the financing. As far as the payables, yes, you can assume, I think half is probably a good proxy.

Okay. Fantastic. And then now that PodcastOne is folded in, have the front-end loaded cost synergies begun? And can those get us to EBITDA breakeven in the relative near term? Maybe put differently, does the higher end of your operating loss range contemplate a December or March breakeven? And then if you could discuss maybe the mix of subscription versus advertising you expect as you near that level?

Sure. So yes, we are starting to realize day 1 synergies. As far as profitability, I mean, we've always indicated that PodcastOne is incredibly accretive to our business. And just to note, in Q1, that was all organic in terms of even showing our core music operations sort of getting to profitability. So we expect that trend to continue. As far as the mix, we said anywhere from 50% to 65% of our revenue will come from subscription. And the remainder will come from the other, including the advertising.

Our next question comes from the line of Jon Hickman with Ladenburg.

Could you talk a little bit more about how the -- like how you're generating sponsorship revenues, in particular, as -- is that a -- I mean, you have 3 or 4 dedicated sales guys, but could you like elaborate on that process?

So Jon, I'm going to hand this to Dermot. I'll just give you -- we're no longer 3 or 4 sales guys, right? Part of the beauty of the acquisition, right, and bringing Norman and his team in is we're now close to -- I think we're over 15 people in sales. And with that, Dermot, why don't you take this and talk about some of the opportunities you see and the Corona announcement we just made?

Sure. Thank you for the question. So there's really a bunch of levers that would be put on. What you're starting to see now is really the fruit of a bunch of strategies that we've put in place in previous quarters, and we're starting to see the fruit. But the first pick is really just adding to -- we hired Jason Miller as their head of sales. And we've added more staff into the mix in different regions. So we're seeing fruit from that. In the COVID period, you're going to remember that live music has shut down. There's a ton of money that goes into live music in physical environments. We're starting to benefit from that as we start to produce original programming, like Music Lives ON, Livezone. We're benefiting from our partnerships with companies like iHeart where we cosell. We, as you guys are aware, we own Spring Awakening, which is a physical festival. We want to lead in combining physical and digital festivals, which is huge opportunity when physical returns. We signed a multiyear deal with Corona Beer to support digital Spring Awakening this year as well as physical next year. And then we continue to push on our distribution. As we previously announced, a deal with XUMO. We have many more coming. Our audience has continued to grow. So audience grows, market opportunity, adding to headcount and great original programming is really driving our ad sales. And pay-per-view is also an opportunity for advertising sales. As we push more of these great names like Pitbull into the market, we have redefined our relationships with these artists because of these deals. So we can bring that proximity to the artist and their fans to an advertiser in a very different kind of way. So just to recap, we're seeing that push and we hope to -- we'll definitely continue to see it. Also, there's tons of synergies with the podcast sales team as we combine podcasts to create, again, new original type of advertising opportunities and for great names like Adam Corolla and video products. So a ton of great things happening and advertisers are starting to see the fruit of that.

Rob, can I add something?

Yes, absolutely, Norm.

Sure. One of the things that I think it's important to understand is the PodcastOne network in the last 12 months was downloaded about 2 billion times, that's tens of millions of listeners. Just as advertisers use that to reach consumers, we also use that to reach podcast listeners. The ability to be able to promote what's going on both at LiveXLive and PodcastOne is enormous. Our ability to be able to drive consumers to the events that are taking place is second to none. That can translate, and we expect that it will translate into more subscription revenue, more pay-per-view revenue as well as more consumption across both platforms that can then be redirected towards advertisers. So it's just getting that rolling. And we've started that rolling. It is going to have a tremendous effect on the ability to reach those super consumers, the ones who will subscribe and the ones who will listen to the benefit of our advertisers.

Okay. And Mike, if you could just elaborate on the pay-per-view side, when you sell a ticket, do you have to wait for the event to recognize that revenue?

Yes, yes. So in terms of fulfilling our obligation, any presale events will show up on our balance sheet as deferred revenue, to the extent we've collected cash.

[Operator Instructions]. Our next question comes from the line of Ron Josey with JMP.

Just two, please. Norman, you mentioned timing was right to do the acquisition and appreciate the commentary on the downloads and the reach on listeners. But can you just talk about the gen -- the podcast market in general? And frankly, how you view, why you chose to work with LiveX going forward? And then a question we get often on podcasts is just, how do you keep talent on the platform? So any insight there would be helpful. And then Rob and Mike, we just talked a little bit about advertising. But with the revenue shift -- the revenue mix shifting pretty dramatically in the quarter towards advertising, can you just talk here the increase in sponsorship and demand? And then, Mike, you cut out a little bit when I was listening just on expectations for advertising going forward.

Since the original question was directed to me, I'll start out with what's going on in podcasting. I mean podcasting is a very hot space right now, and it hasn't even hit its inflection point. What I mean by inflection point is as an advertising medium, once podcasting becomes a separate line on an advertiser's annual budget, that's when it will hit its inflection point. Now it has become with some advertisers, but not with all advertisers and not with most advertisers. We're still going in and trying to take money away from other audio mediums. But once that hit, and I've seen it before, I saw it in network radio. Once network and syndicated radio became a line item on advertisers' budgets, which it did and remains today, the size of the business tripled. It's predicted that next year, podcasting revenue will crack $1 billion. So if you think that before hitting that inflection point, we're looking at a business that could hit $1 billion in gross revenue, then I think what you -- the future remains extremely bright in terms of the growth potential, which is the reason why you see companies like Spotify and the Satellite Networks and some of the major radio companies moving into the space with a lot of energy, primarily because a lot of their core businesses have flattened. And in some cases, have shown some decreases. So moving into the digital area makes all the sense in the world because it's a great story. And with the potential for increased revenue in podcasting and in digital audio on demand, that's a story that needs to be told by those companies. We recognized that from the very, very beginning that this was going to be a space that was going to be rapidly growing. I know rapidly growing space from 35 years as the Chairman and CEO of Westwood One. And when -- the reason that this deal made so much sense to me was the growth that's going to come in the business is also going to be driven by innovation and the innovation that we're talking about is taking what is obviously significant steam on the -- on the audio side and packaging it with the ability to be able to live stream our content, create video-on-demand vodcasts or podcasts, if you will, which can create longer life for the product that may be streamed as a live event. And doing this now puts us in a unique position and creates a competitive advantage because we can now go into advertisers and talk to them about 360 multi-platform offerings, live video, video-on-demand, live events, podcasts, both audio and video, using social media as well and a way to expand our offerings to podcasters and talent. I think your last question was how do we retain talent? Well, our talent -- our deals are mostly partnerships. So our interest and the interest of our partners is very much the same. We have a track record of bringing in some really good talent in a lot of key areas. Now in some cases, they may be people you've never heard of, okay, because especially in our female area. We have a influencers from places like Bachelor Nation, Real Housewives, places like that, where they have huge social followings and can attract super listeners to a great degree and are influencers in their own rights. We find them. We find them early. We're less interested in going out and finding the personality with huge TV Q that will demand, in some cases, millions of dollars worth of guarantees. We can play in that game if we desire to do so. But we've had much more success, finding them early, building them out and making them partners in our operation so that our interests are all the same.

And I think Norm, if you don't mind, I'll just jump in for a minute. One of the exciting things about adding Pitbull to the lineup is, is he crosses over all 5 of the different subsidiaries of our company, right? From audio to live streaming to over-the-top to podcasting to pay-per-view. And that's really a unique model that each one of those has a moonshot of their own, right? And the TAM on them is the biggest of anything I've ever been involved in. We've combined them together to give you the opportunity across both and with the skill sets of these 2 teams, we can cross-promote and sell and keep making more money off of the same content. So a really unique opportunity. And I think that Pitbull is just the beginning of music artists, fans who will join our platform, right, because we're the only artist-centric platform that is fully focused on the artist first and focused on their super fans and giving them an opportunity to participate in everything from a piece of the subscription, to a piece of the sponsorship, to a piece of the ownership of the -- of their business. And in doing that, you get a long-term relationship versus a short-term, just like we did with Pitbull, and we did with Nas and we did with Nelly and we did with Jeremiah. And you're going to see more and more of those Artist First deals. And if you look at the social media numbers globally, artists are the biggest social media stars in the world. Seventy-five of the top 100 are artists and bands, 750 of the top 1,000 are artists and bands. And so we want to have a few of those that really share the same passion around unification as well as building franchises. And with Norman joining and the franchises he has, we have multiple different franchises now within our business from LiveZone or SportsCenter of Music or our authentic news, that news programming that's been missing for 25 years in music, the Music Lives, right, which Dermot helped to build a platform that is literally -- it's the biggest festival probably ever done in history, right, all done digitally to Shaquille O'Neil and T.I. and Adam Carolla. So we're going to keep building franchises, and we're going to keep treating the artists right. This is going to be a word that we're going to be hearing every time you hear from this company, is Artist First, Talent First.

That's great. And then, Mike, anything on advertising? Super helpful, Norman and Rob.

Yes. I think I can take the next 2. So listen, I mean, we aren't seeing anything but huge demand for everything that we're doing as far as sponsorship. So going forward, we don't expect there to be anything but positive things in relation to that. As far as expectation of sort of consolidated advertising, I mentioned that probably 40%, upwards of 40% of our revenue by the end of the year will be some form of advertising, sponsorship, licensing and our pay-per-view ticketing.

And our next question comes from the line of Barry Sine with Spartan Capital.

I want to follow-up and also ask a question around advertising. So the PodcastOne transaction closed July 1, and I know that's a huge increase in the size of the sales force. What's the process and what's the timeline for us to start to see results from a unified sales force? I'm assuming March quarter, and Mike just talked about the implications in terms of ad revenue for guidance. And then on an ancillary note, the impact of political advertising in this presidential election year. Do you expect that to be significant? I know there's going to be a lot of ad spend and a lot on digital and a lot targeting a younger audience. Do you expect that to be a material driver of your advertising results this fiscal year?

Should I take a swing at that?

Go ahead, Norm.

Yes. I'll go ahead. Yes. I'll handle it. In terms of politicals, we are seeing some political advertising, but it's also having -- this is a very strange year, okay, with divisions that we're seeing and the passions of the general political situation. There are more advertisers who don't want to be around political programs than there are advertisers who are taking -- who are going to be adding to the revenue of programs that will reach audiences that politicals are interested in. We will certainly see some advertising revenue coming our way from politicals. We've already seen it. But with COVID and with the number of advertisers who want to stay away from controversial programming, especially in the talk side of the business, it's hard to predict if we're going to see a huge bump from political advertising. I keep hearing about all the money that's going to be spent. And I think it will, but it hasn't really, to any great degree, happened yet. The revamping of certain political campaigns and the directions that they're taking is certainly evident. The overall demand, we're all looking for this COVID thing to become a thing of the past, and it looks like it's going to be something that we're going to have to live with, with some time -- for some time. We're still getting plenty of requests for proposals, but we're also seeing advertisers whose supply chains are being interrupted or aren't able to market their products in the same way. So initially, the projection for this year, for calendar year 2020 was to break the $1 billion barrier. We're going to miss it as an industry. The projection is to break the $1 billion barrier next year. We think that we're seeing a lot of requests for proposals for fourth quarter. And there's, of course, in fourth quarter calendar year, we're going to be selling the 2021 calendar year upfronts. So we'll see a surge at that time and get a much better handle on what it's going to look like overall. But the growth of the medium seems to be powering through the negative side of what is a result of COVID and what is a result of politicals that are unlike any politicals I've ever seen in my career.

And then Norm, if you could talk about the process of integrating the sales team and you bring over a much larger sales team than LiveXLive had and your salespeople's impression on the -- not the podcast inventory, but the legacy LiveXLive product inventory and your ability to increase monetization of that inventory.

Yes. Well, we're already moving on that. I mean we got started on that even before the deal officially closed because it was if we hadn't closed the deal, we'd still be doing these deals because it made so much sense. Our team is very pumped up about the opportunity to sell things that our competitors don't have. And the integration has already started with programming that has been added to each lineup. For instance, there's a number of podcasts that were -- that are available through LiveXLive that are now on the PodcastOne platform. And vice versa, we're migrating the PodcastOne podcasts over to the LiveXLive platform. That's going to result in increased audience. And every time I tell my sales department about something that we're going to do, and I ask them about their opinion of it, the first thing they say is if it's got audience, we can sell it, okay? And that's what it boils down to, the ability to generate significant audience to be able to go out and generate premium rates because there are so many advantages to podcasting. So many advantages to taking advantage of audiences that are totally committed to the kind of programming that you see at LiveXLive and that you see at PodcastOne. For instance, the average time spent listening to a podcast according to Apple is 48.3 minutes, which is interesting since -- since a lot of podcasts don't even run that long. What it does mean is, regardless of the length of the podcast, our consumers are listening to it from start to finish. Over 90% of our consumers listen to it from start to finish, and that's because they may not do it in one sitting, but there's a pause button there. So consequently, host-read commercials to an audience that's committed to listening to the program in its entirety is very, very valuable to advertisers. When somebody like, especially on the women's side of programming, when somebody like a Kaitlyn Bristowe reads the commercial and reads it with enthusiasm, or it's a product that they actually use, that's hugely valuable to the advertiser. In the same way that we are artist first, if artists are #1, then advertisers are #1A. Okay? So we have to supply the kinds of things that will allow us to take good care of both of our programming constituencies and our support constituencies. And podcasting has proven in its growth to be of great value, not only to major brands who have really only discovered podcasting in the last maybe 3 or 4 years, but also to direct response advertisers. The ones who say, to get this product go to this website and use the promo code ADAM or call this 800 number. It works. Advertisers know it works. So the more personalities that we can get committed to doing what we're doing, and we're having very, very good success doing that, the more intriguing and more salable this becomes the advertisers. It's a growth curve that is not going to go down. It's going to continue to go up in spite of the kinds of things that we're seeing right now, which nobody has ever seen before in the environment.

And lastly, just the timing on how long will it take you to fully impact reported advertising results. I know there's a long lead time RFPs and so on. I'm assuming that we won't really see the full impact of the integrated sales team until perhaps the March quarter, is that fair?

I'm hesitant to talk about forward-looking. When I was a private company, I could talk about a whole lot of things. Now as a public company, I don't like to look at forward-looking things with that kind of specificity. But I will say this. It's already having an effect. We're already cross-marketing across multiple platforms. Once we can get a few things like the ability to start taking -- using more and more music programming in pure podcasting right now, which is mostly spoken word, then you're going to see the thing skyrocket. It's hard to make a firm projection in the environment that we're in right now because even if we do take off, there are other things that could potentially have an effect.

No, I'm not -- not to cut you off but Barry, let's do this on the call afterwards. Just to wrap up, guys, again, this is an inflection point in the company. We see telltale signs that the integration of the 2 businesses, our offices are around the corner from each other. Norman and I speak 6, 7 times a day. Between Dermot, Norman and I, we all see on every level of this, right? When you think about pay-per-view, and I'm going to get cut off in a minute. When you think about pay-per-view and signing tens of thousands of tickets, think about who's coming into the ecosystem and who's coming into the funnel. We're now bringing paying credit card buyers to music into the ecosystem, who cross between all the businesses. And when you think about Pitbull, you're going to hit on every aspect of it. He's going to come with some of his own advertisers that come with him. As you guys probably know, he's got many brands that back him. So all these giving the capabilities to talent, to be able to cross across this. Norman and I have already had Shaquille O'Neil move from podcasting to do a live event that drew 9 million people. So we're very confident that the integration of the sales team, the finance team, the acquisition team has really all kicked into high gear here. And we fully expect that you'll be seeing more and more of these substantial announcements coming over the next couple of weeks. With that, guys, I think I'm being told to wrap up. So I don't think we have any time for more questions, but I think I'm going to be speaking to most of you shortly. We have -- do we have time for one more question? Hello?

I'm not showing any further questions in queue at this time.

So thank you, everyone. Thank you, everyone, for spending the time this morning, and we look forward to the follow-ups.

And with that, ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.