Eric Boyko, Stingray Digital’s co-founder and chief executive officer, in the company's Montreal office.Christinne Muschi/The Globe and Mail
Stingray Group Inc. said it will buy a U.S. in-store advertising network in a $59-million deal that the Montreal media company hopes will deepen its presence in the audio market in retail outlets and deliver more revenue from many of the stores in which it already provides music services.
New Jersey-based InStore Audio Network bills itself as the largest audio advertising provider of its kind in the United States, piping ads over retailers’ speaker systems to millions of shoppers every week at chains such as CVS and Rite Aid drugstores. After Stingray’s $506-million purchase of a major Canadian radio conglomerate in 2018, the deal marks the second-biggest acquisition in the company’s history, chief executive officer Eric Boyko said in an interview.
Stingray has built itself into an audio and media conglomerate since going public in 2015, with a growing roster of radio stations, streaming services, TV audio channels and advertising lines. It sells music services to more than 120,000 retail locations worldwide, and recently began its own retail audio advertising service, pumping ads over speaker systems in about 2,000 stores, owing to recent deals with Dollarama Inc. and Metro Inc .
The InStore acquisition will add more than 16,000 stores to Stingray’s audio ad portfolio, the two companies said Wednesday, bringing Stingray’s total to about 18,000 outlets.
“We’ve indirectly become the radio of every retailer,” Mr. Boyko said. Stingray now hopes to cross-pollinate its advertisers across the combined network to reach more consumers at points where they’re already primed to make purchases.
“The guys that do tacos, they want to do Taco Tuesday – so you go to the store on Tuesday, and you hear, ‘Hey, have tacos,’” he said.
Stingray is one of the country’s biggest multiplatform music providers. It was built through acquisitions in traditional and new media. Mr. Boyko likened the company’s push for in-store audio to a consumer having radio follow them from their car to the store. The InStore acquisition, he said, will help Stingray monetize the experience.
Many of the thousands of stores that subscribe to Stingray’s in-store music services pay $40 to $50 a month, Mr. Boyko said. Adding advertising revenue to that mix, he said, can push revenue up to several thousands of dollars a store each month. That revenue is split between Stingray and the retailer.
In Stingray’s most recent fiscal year, which ended in March, 2021, profit nearly tripled to $45.1-million, or 61 cents a share, from $14-million, or 18 cents a share, in fiscal 2020. The company brought in $249.5-million in revenue, down 19 per cent from $306.7-million in fiscal 2020.
Stingray’s shares closed at $6.86 on the Toronto Stock Exchange Wednesday. That’s close to the price the company listed at in 2015, although it’s about double the low in March, 2020, when the COVID-19 pandemic’s first wave rattled global markets.
Mr. Boyko said his company’s organic sales growth – from existing operations, rather than new acquisitions – has been about 2 per cent in the past several years. But with growth in its retail media division, which would include InStore revenue, the company hopes to bring that rate as high as 10 per cent or more.
He acknowledged retail ads don’t make sense in brand-specific stores – “it doesn’t work with Gucci and Prada.” But supermarkets, pharmacies and hardware stores all have products competing for consumer attention. They’re places, he said, with “different brands that want you to buy their brand.”
Stingray hopes to deploy its audio ad system in as many as 6,000 stores by midsummer, he said.
Mr. Boyko also said Stingray would pay for the acquisition in cash: about two-thirds up front and the rest on an earn-out basis – tentative amounts to be paid out later based on certain goals being achieved.
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