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The Players Technology Newsletter 14.0 — 03/03/19

TURN THE MUSIC DOWN 


Hey <<First Name>>,
 
Last month Spotify bought Gimlet Media and Anchor, two of the world’s biggest podcast production and distribution companies, for $340M combined, in an industry that totaled just $314M in 2017 alone! 

About 73M Americans listen to podcasts monthly, up from 42M in 2014. Industry revenue, small compared with that of radio, TV, movies, or books, almost doubled from 2016 to 2017, to $313M. That figure is expected to double again by 2020. 

For the longest time, the industry has been represented by anybody with a microphone and a dream, with the idea that if they could find an audience they could make money. The reality is that only several top podcasts make more than $1M a year. Its something that a steadily growing number of people really love, but nobody’s mastered how to make real money.

Measuring podcast audiences is still a work in progress, and there’s no good way for advertisers to automate their ad buys across numerous podcasts. That means lots of the things advertisers like to do on TV and the internet — like create a single ad and blast it over and over in front of millions of people, or create creepy targeted ads based on your personal media consumption patterns — aren’t available to podcast advertisers. Instead, most ads (67%) are read by hosts, and most ads (64%) are direct-response ads for things like mattresses and socks because those advertisers can use promo codes to track the results of their ad campaigns. 

So why are Spotify and its competitors investing more in podcasts? Because the engagement metrics of podcasts are higher than music and growing exponentially! A remarkable attentiveness measure is that 85% of people who listen to podcasts, listen to the end. Also, Spotify’s bottom line demands it. By investing in the medium, Spotify becomes less reliant on music, which has required it to pay out as much as 80% of its revenue to music labels. With podcasts, the company doesn’t have to distribute revenue for royalty payments whenever someone presses “play” on a podcast episode. 

The company plans to spend as much as $500M on podcast deals this year, a big bet that profits will eventually match enthusiasm. As a result, we could see an arms race of some sort, as Spotify’s rivals consider making similar moves and as podcast publishers work to raise their profile in whatever way possible. This also means even more folks with a microphone and a get rich dream will start their own podcasts. 

But what’s ultimately taken place is Spotify putting an end to podcasting’s Wild West era. What comes next is modernity, and without the best producers, distribution, and financiers, new podcasters will essentially be talking to themselves.

Sincerely,

Rudy

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