Loop Media Tries Out New (Interim) CEO

Loop Media Tries Out New (Interim) CEO
Justis Kao

Burbank-based short-form video distributor Loop Media Inc. is implementing strategies to “streamline operations” and demonstrate its value to advertisers after seeing its stock price fall over the last year. In addition to layoffs and voluntary salary reductions for senior management, the company recently named a new chief executive. After a decade at the helm, founder Jon Niermann has stepped down and has been replaced by Justis Kao, who is now its interim chief executive.

Loop announced the changes to its executive board about a month after releasing fiscal first-quarter results for the period ending Dec. 3. The report posted $10.2 million of revenue, up more than 78% quarter over quarter but down 31% year over year. 

Niermann will stay on Loop’s board and plans to focus on revenue and distribution. Kao said Niermann has been a mentor to him for nearly a decade, and that the two begun discussing a possible leadership transition over “the last couple of months.” Kao said that he has no changes planned to Loop’s “greater movement” in the immediate future other than continuing Niermann’s efforts to drive the company’s growth forward and reduce expenses.

“We’re going to just really drill down and focus on how we can be the most productively efficient and accurate, while being even more collaborative,” he said.

Out-of-home advertising

Loop offers music video content from labels including Universal Music Group N.V., Sony Music Entertainment and Warner Music Group Corp., in addition to licensed or acquired content including sports clips, drone and nature footage, and trivia and lifestyle content. Content is distributed at locations such as gyms, bars, hair salons, casinos, bowling alleys and arcades through either the partner’s own screens or through Loop’s “small box” media players, called Loop Players. In the fiscal first quarter, the company recorded 77,000 active partner screens and Loop Players.

Niermann stressed that Loop Media works in two different spaces: connected television – meaning internet-connected TVs that can stream videos – and digital out-of-home – or DOOH – video, including “place-based media” displayed to consumers at retail or hospitality locations. He added that the company is focused on creating branded content that can be played at bars or restaurants and has “far-reaching” impacts for advertisers. 

“We really believe in, and we can’t say enough about, the nature of a captive audience out of home,” said Jon Phillips, Loops’ director of public relations. “You’re not going to get up and leave when you’re at the bar (when) an ad comes.”

However, Niermann said that advertisers usually purchase either C-TV content for at-home consumers or DOOH content to reach the public – not both.

“Justis and the team delivered this great content,” Niermann said. “Now it’s a question of whether advertisers are aware that, with Loop, we’re in this very cool hybrid of both spaces that is showing growth on all sides.”

Paul Newman, director of forecasting at eMarketer Inc., said that the DOOH market is set to grow 11.2% this year, compared to 2.2% growth for traditional out of home, the latter of which include billboards, posters or pamphlets.

“Advertisers will continue to increase their spending on DOOH ads due to the flexibility and improved measurability compared to traditional out of home,” Newman said.

Concurrently with the announcement of Kao’s promotion, Loop announced the immediate departures of chief revenue officer Bob Gruters and chief operating and marketing officer Randy Greenberg.

Firm looks to correct course

Niermann did not disclose how many employees had been affected by recent layoffs, but stated that no single division was specifically targeted and that many Loop employees work remotely. The California Employment Development Division reported it had not received any work adjustment or layoff notices from Loop. 

In its first-quarter filing to the Securities and Exchange Commission, Loop stated that the company eliminated “some non-revenue-generating headcount” last year while continuing to invest in the expansion of its revenue and ad-sales team. This move was made as part of a plan to reduce its sales, general and administrative costs by about 20%. Loop reported that such expenses totaled $6.2 million in the fiscal first quarter, compared to $8 million in the same period last year.

Niermann said that the company got “a bit ahead of itself” on its cost structure, thinking that revenue would catch up to its spending. Now, the company is shifting resources to invest in its growth and top line.

“We didn’t quite have the timing right on that, so, unfortunately, you’ve got to course-correct,” Niermann said. “The key thing that we have to deliver for our shareholders and for our employees is to get this company cash-flow positive as soon as we possibly can and, unfortunately, costs are part of that equation … there’s a scrappiness that you lose as you grow, and you can get a more siloed and corporate feeling, especially after you become public. We need to get back to that scrappy attitude.”

Loop’s senior management agreed to take salary reductions in the fall to aid cost-cutting. In an employment letter agreement filed with the SEC, the company reported that Niermann agreed to reduce his current annual base salary to $368,000, compared to his previous salary of $575,000. Kao agreed to salary reductions that place his annual salary at $272,000, compared to his previous salary of $425,000. 

“We wanted to do our part,” Niermann said. “Senior management has taken 40% reductions across the board … everybody wants the company to get on good footing, because we know we can be rewarded in the end (if we) let the business catch up with us a little bit.”

Other executive officers that agreed to salary reductions include co-founder and chief product officer Liam McCallum and chief financial officer Neil Watanabe. According to Kao’s employment letter, his position as interim chief executive does not have a fixed term, and Kao said the company has not determined if or when he might assume the role permanently. 

“I put 150% into every day that I’ve been here; I’ll continue to do that,” Kao said. “My plan is just to do this job to the best of my abilities and see where it goes from there.”

Importance of political ad spending

Advertising revenue consistently accounts for the vast majority of Loop’s revenue, accounting for 92% of the company’s revenue in the fiscal first quarter. While revenue declined quarter over quarter in the most recent reporting period, Niermann said that Loop’s “core organic growth” was higher. The reason for the revenue decline, he said, was the lack of political ad placements compared to the same period in 2022, when U.S. congressional and local elections pumped money into advertising campaigns. 

According to eMarketer, total U.S. political ad spending is expected to hit $12.32 billion this year, up nearly 29% from the prior presidential election in 2020. In its fiscal first-quarter report last year, Loop reported “unusually strong seasonal advertising related to the political election cycle,” which it said had a significant, positive impact on its advertising average revenue per unit player.

“We’re starting to see it trickle in, (and) I think it will start to steadily go up between the conventions and November,” Niermann said. “We know that our platform is attractive for political (ads), we’ve seen it at work, and our footprint is bigger now.”

The company also attributed its revenue decline to reduced digital ad spending across sectors. Newman said that digital ad spending is expected to grow 12.6% this year, up from growth of 10.6% last year when the market slumped slightly amid uncertainty and some pullbacks.

“One of the main growth areas within the wider DOOH market is in-store retail media, which use place-based ads in stores to deliver ads right where money is changing hands and at the point of decision,” Newman said.

Share-price slump

Loop’s stock price has not been above $1 since Dec. 29, and this year’s peak was 89 cents per share at the beginning of January. However, Niermann said he is not concerned about the possibility of a delisting notice. He said that the NYSE told him that Loop is “far from the only one in this boat.”

“Companies have these ups and downs, they’re not fun and nobody wants to be where we are right now, but (the NYSE) understands that it’s just a rough tide right now,” Niermann said.

This year, Phillips said that Loop wants to increase advertisers’ awareness of its platform’s consumer reach capabilities and promote the reality that DOOH ads aren’t limited to being “just a billboard on a highway.” 

Kao has been leading a charge to expand Loop’s services into Canada, Niermann said, and the company is currently testing in other English-speaking markets such as Australia and New Zealand.

“We don’t want to get ahead of ourselves because we believe that there’s still so much growth (in the U.S.), Niermann said. “But at the same time, you need to take advantage of those opportunities. I think that the global perspective and focus that Justis is giving us is great for the future as well.”

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