Podcasting has grown from a quirky, peer-to-peer medium, reminiscent of the early internet, into the future of digital audio. Here’s the TLDR to our field guide on the podcasting business.
1️⃣ Podcasting is evolving from its freewheeling, do-it-yourself roots.
2️⃣ The industry is seeing explosive growth amid the pandemic.
3️⃣ Spotify $SPOT is leading the biggest investment rush the industry has ever seen.
4️⃣ And Hollywood studios are using podcasts to decide which movies to make.
5️⃣ Podcasting veterans hope the sector’s characteristics will prevent it from becoming data-obsessed and dominated by tech-giants.
The podcast industry is currently a distributed market, because of its roots in the RSS feed, a type of file websites used to automatically transmit updates to their audience. “There’s no single platform that dominates things,” says Mike Kadin, CEO of Red Circle, a podcast ad marketplace. “There are big advantages to that. No algorithm is deciding what’s popular.”
This has shaped the kind of business it is. Because of the RSS feed, listening to a podcast is essentially an offline experience, which means podcasters get very little information about their listeners. That may be about to change. Players like Apple $AAPL and Spotify have chosen to offer more data to podcasters, like how long listeners stayed with an episode. Other companies are stitching together download information with third-party data to get a better sense of who’s listening and how. As tech giants throw big money around podcasting, many in the industry are betting another podcast quirk, the host-read ad, will keep them from getting crushed. This interlude, in which the host switches gears to recommend a product, is still the most common type of ad.
Even with fewer people commuting to work—a popular time for listening—Covid-19 couldn’t stop the rise of podcasting. Overall downloads of podcasts in the US have soared in 2020, according to data from podcast measurement company Chartable.
The pandemic does seem to have affected what people are actually listening to. Podtrac, another podcast data firm, tracks podcast downloads by genre. For the shows Podtrac measures, which is a subset of the ones measured by Chartable, overall downloads by US listeners grew by 42% from October 2019 to October 2020. Yet there was a huge disparity across genres. The popularity of news shows exploded. Shows like the New York Times “The Daily” and Vox’s “Today, Explained,” have seen huge jumps in downloads from people looking to understand the virus and its impacts. The hardest hit genre has been “true crime.” The category grew 25% from October 2019 to February 2020, but has seen no growth since March, around when the lockdowns happened.
In the past two years, Spotify has spent more than $600 million to acquire three podcast networks, including Bill Simmons’s The Ringer, and a podcast-making app. Here’s why: its main business, music, is a lousy cash cow. With podcasts, Spotify doesn’t have to hand over a big chunk of its revenue to record labels.
But Spotify is also straying away from podcasting’s open environment by offering exclusive content. It’s selling ads against it, and unlike others in the podcasting industry, it doesn’t have to make do with incomplete data from listeners. Spotify users gave their information to the company when they signed up and its app monitors their listening. In that sense, Spotify is more like Facebook $META, a walled garden, which can track the user experience, says Bryan Barletta, who writes Sounds Profitable, a podcast ad tech newsletter. To be sure, this content is a tiny piece of the podcasting market. But Spotify has been aggressively expanding it.
Hollywood has mined podcasts for story ideas since the early 2000s. But the relationship between the film and podcast industries has now advanced to the next level. Film and TV production companies increasingly use podcasts as their personal content incubators, testing out ideas in audio to decide if they should make the jump to screens.
Relative to films and TV shows, podcasts are cheap to produce, and thus a low-risk form of media with which to test out movie concepts. They are also often cinematic, utilizing voice actors, sound effects, music, and other narrative concepts borrowed from TV and film.
The tug-of-war between platforms, producers, and advertisers will shape the next phase of the podcasting industry. Any podcaster paying attention is also aware of what happened to content producers that relied too much on third parties like Facebook for traffic. Their audiences got used to finding them on social media, instead of on their websites. And the publishers themselves became subject to the whims of tech giants’ strategies and algorithms, swimming in page views one day only to find themselves shunned from the rankings and social media feeds the next. “Unless you have a direct relationship with your consumer, you lose,” Zohrob says. “People remember that. It’s so fresh.”
Some podcasters are rebelling against Spotify already. Joe Budden, the former rapper and cultural critic, pulled his exclusive podcast off Spotify in August, saying he wasn’t getting enough money from the company. It’s a sign that podcasting’s open ecosystem is still robust. At least for now, the Spotifys of the industry are having to adapt to it, instead of the other way around.
