Hello podheads, this issue is all about the biggest changes sweeping the podcast industry. Here’s issue #15
Wokay, this week we saw a couple of developments and stories that speak to the undeniable fact of life: change is constant. Starting with Spotify
— my recent object of fascination.
Rolling Stone had a nice piece titled “Spotify Can’t Keep Losing More Than $1 Billion a Year. Can Podcasts Rescue Its Business Model?” by Tim Ingham, on the recent emphasis of podcasts by Spotify. The company with over 191 million monthly worldwide users is the biggest music streaming service on the planet.
But the music business is a tough place to survive and it is even tougher to make money. According to Financial Times, Spotify paid ¢79 cents on every dollar to music labels in 2017, an improvement from ¢88 cents it paid in 2015. Given the fact that top 4 labels and groups control about 90% of all music streamed on Spotify, it cannot afford to piss them off.
Spotify is largely responsible for pulling the music industry back from the brink. Since being founded in 2008, the Swedish streaming company has paid out more than $10 billion to music rights-holders (labels, artists, songwriters, etc.) in royalties. And it’s currently handing them $288 million every month.
But what it can do is to look towards supposedly greener pastures and that is what it is doing. Spotify is betting on other streams such as podcasts and videos to diversify its revenues. And it does seem that Spotify’s podcasting efforts are paying off. It is now the second largest podcast platform.
Ultimately, though, podcasts are attractive to Spotify’s investors for one key reason: You don’t have to pay record companies any royalties when people play them.
Spotify is surprisingly open about this fact. In August, the firm’s CFO, Barry McCarthy, told Music Business Worldwide that “the bigger the percentage of [podcast content in our] mix, the bigger the margin opportunity to be had.”
It also recently announced its Q3 results and here’s an excerpt from the
Separately, we continue to invest in podcasts and other forms of spoken word audio entertainment. We signed an exclusive deal with Joe Budden to bring his self-titled podcast to Spotify on September 12. Since that time, The Joe Budden Podcast has become the #1 podcast on the platform and engagement has been increasing. Our overall market share of podcasts globally continues to grow, and we intend to continue to invest in exclusive and original content on this front through Q4 and beyond.
Analysts also posed a couple of questions during the earnings call:
John Egbert — Stifel Nicolaus — Analyst
How should we think about podcasts and how significantly you’re investing in that format? What are some of the challenges you face in building out the content for podcasts and how do you approach negotiations with content owners? Is there an opportunity to strike fixed-cost deals or more advantageous variable licensing agreements for podcasts relative to music content?
Daniel Ek — Chief Executive Officer
I think we’re still in the very much early days of how the whole podcast marketplace will evolve. So, right now, we’re experimenting with different deal types, both fixed and variable, but I think over time, the way we are looking at this is that this is an integral component.
When you look at the landscape overall and you think about something like
radio, the truth is that the vast majority of the minutes that are being spent on radiotoday haven’t yet moved online.
So, our opportunity really is gigantic when you look at that, and there aren’t too many companies in the world that are focused on that opportunity of bringing audio online, and as part of that, obviously, we think non-music content has a very important place, and we’re really investing in both improving the user experience around that, but also improving monetization for creators in that space.
Answering a question about gross margin improvement, Barry McCarthy, the CFO, had this to say:
Over time, let’s say podcasts become a significant component of the business, that will have its own margin structure separate from music biz and a revenue stream different from the music biz. Today, we observe advertisements on subscription as well as ad-supported businesses, and we expect that to also be true on our platform as well. And, that business will grow gradually over time, and the effects of that margin structure will grow gradually over time.
On market share:
Rich Greenfield — BTIG Research — Managing Director
In the U.S., Spotify’s podcast market share appears to be high single digits. However, overseas, you are the dominant player in many markets. How do you close the U.S. gap?
Daniel Ek — Chief Executive Officer
Well, we’re continuing to invest in our user experience and are continuously shipping new updates to our products — among them, things that you should expect of a great podcast player like the ability to fast-forward, the ability to speed up the contents, and discovery, of course, being the prime among them. We believe that there’s still an enormous amount of potential in improving the user experience, and as we do that, we have a great opportunity of growing our share in podcast.
Spotify listed on the New York Stock Exchange on April 3rd in an unusual way. It directly listed on the exchange as opposed to the traditional way with the involvement of other intermediaries. It’s down by 8% of YTD.
It recently announced its Q3 results on Nov 1 and reported 40% YOY growth in premium subscribers.
Will Spotify go on to become a podcasting giant? I hope so given Apple’s seeming lack of interest in podcasts. Don’t read too much into the reduction of losses. That was due to a one-off tax gain from an investment through a share swap with Tencent Music Entertainment. The company will return to posting losses.
Vox Media, announced last week that it would be folding recode into vox.com. Vox Media had acquired Recode which was started by Kara Swisher and Walt Mossberg in 2015 after they left WSJ. Vox Media is the parent company of Vox, The Verge Eater, SB Nation,
Although the past couple of years have been nothing but bad news for digital media publications, this move does seem different. According to this Digiday article, the traffic to recode was down 51% YOY with the site attracting just over 1 million uniques.
Here’s where the script differs for Recode when compared to the ailments of other digital media companies:
The website’s traffic has declined, but the audience for Recode’s podcasts, newsletters and conferences has increased over the last year, the Vox Media spokeswoman said.WSJ, Ben Mullin
Kara Swisher, responding to a tweet said the same but it is hard to make out anything given the absence of numbers.
Kara Swisher also took umbrage to a tweet by Jessica Lessin, another escapee from WSJ and the founder of tech focussed digital media company, The Information.
Recode will relaunch as a part of vox.com sometime next year. Recode has two popular podcasts – Recode Decode hosted by Kara Swisher and Recode Media hosted by Peter Kafka. Vox Media also redoubled its podcasting efforts recently by launching new shows including Pivot, hosted by Kara Swisher and Scott Galloway.
All things considered, this seems like a logical step for Recode.
Also read: Turn and face the change: Recode and Vox.com are partnering
Muckrakers and rabble-rousers
Bello Collective published a really interesting article titled “Podcasts Could Spark a New Golden Age of Investigative Journalism” written by Liam O’Donoghue, host of the East Bay Yesterday podcast. In the post, he writes about the emergence of investigative podcasts.
The best of these podcasts have managed to create an investigative hybrid that combines the most important elements of longform print reporting with the entertainment qualities that make podcasts so addictive.
In the post, he writes about Serial, In the Dark, and The City as examples of how these podcasts are akin to deep investigative pieces by muckraking news organizations. This post is rather prescient given the political climate around the world and the mounting body count of media outlets.
Let’s unpack this.
While each season of Serial and In the Dark could easily become a longform print or digital article, the audio format facilitates the kind of emotional impact that’s difficult even for the best journalists to achieve with words on a page (or a screen).
This is a rather important aspect of the medium. Good podcasts have the power to captivate audiences like no other. The True Crime genre is a really good example of how podcasts can draw attention to incidents and events that have transpired.
Podcasts like Serial,
Podcast network Canadaland crowdfunded the podcast “Thunder Bay” a deep dive into crime, corruption, and racism in Thunder Bay, Ontario.
Are podcasts a cure-all for these media companies? No! But there is a place for them and if done properly they can add a lot of value. Just look the The Daily by the New York Times.
The post makes for a really good read.
Although the pernicious effects of these platforms have long been visible, the debate only really started since the US elections. Hey, it only took the world’s oldest democracy being trolled by Russian bots and 14-year-old kids in Macedonia.
Once evidence surfaced that the Russian government has used these social media platforms to spread disinformation to influence the outcome of the US elections, the role of these platforms in our democracy has been questioned like never before.
And over the past couple years, the evidence has continued to mount.
- Earlier this year, it was found that the Military in Myanmar had systematically used Facebook to incite violence against Rohingya Muslims which led to a genocide.
- Rodrigo Duterte, the president of Philippines weaponized Facebook to intimidate journalists, opposing politicians and anyone who opposed him.
- Rumors circulated on WhatsApp led the mob lynchings in India.
- YouTube has become the home for the alt-right and they are peddling everything from conspiracy theories about Hilary Clinton, Robert Muller and George Soros to spreading anti-Semitism and instigating violence against African Americans.
What do these developments have to do with podcasts? Much like these platforms, podcasting is an open medium. Anybody with a smartphone can today record and publish a podcast. One of the biggest advantages of podcasts is that anybody can create a podcast. The disadvantage is also that anybody can today create a podcast. And as with any open medium, sooner or later, the bad elements will start using it for all the wrong purposes and we’ll have the same debate down the line
CNN recently published a piece titled “Podcasts help extremists get their message out“. The article quoted the following excerpt from a report by the Anti-Defamation League’s Center on Extremism (ADL):
Podcasting plays a particularly outsizedrole in spreading alt right messages to the world.
I wouldn’t mind if you thought this whole premise seems tenuous at best. But podcasting shares many similarities with these platforms and given the times we live in, I’d disagree. Again quoting from the ADL’s report:
Also important is the fact that the de-platforming strategies that have forced prominent white supremacists off many social media, crowdfunding and other platforms have not yet caught up to podcasting, and podcast hosting companies are not necessarily doing their own policing.
This means alt right podcasts can be found, sometimes in abundance, on sites such as YouTube, Libsyn, PlayerFM,
Spreaker, PodBean, and others. This makes it easier for alt right white supremacists to reach audiences with podcasting than through many other platforms.
It’s not for everyone
Dan Misener by
Amazon finally launched Audible in India. The subscription starts at ₹199 ($2.75) which is a really great price point. Why does this matter? Well, podcasts aren’t really that popular in India. Check out the Google trends for the search term “Podcasts” in India and the US. The hope here is that Audible can be a gateway to podcasts for Indian users.
Apple is investigating an issue with podcast data which shows a sharp decline in consumption numbers.
Google Podcasts added (finally) an option to share episodes. Why is the big deal? Well, even the small things matter when it comes to Google Podcasts.
Why are podcasts popular in the UK? – Radiodays Europe
Adam Molina asks “Why doesn’t anyone use Google Podcasts?“
Things are getting interesting at Pandora. The company announced Lindsay Bowen as the VP of podcasts and entertainment content partnerships.
The Washington Post announced new hires for its upcoming flagship daily podcast “Post Reports.”
Burning question: Will Julia Roberts return to season 2 of Homecoming?