With podcasting, big advertisers are all ears
A projected increase of 28% in ad dollars will create a ‘frenzy’
Some are calling it the second golden age of audio.
Podcasting, once viewed as a niche industry that catered to public radio fans, got a major boost this month when Swedish streaming giant Spotify agreed to pay around $230 million (U.S.) for Gimlet Media, the New York producer of such audio dramas as Homecoming and the documentary series Crimetown.
The deal — the largest to date — comes during a period of rapid growth in podcasting and could transform the industry in much the same way that Netflix changed television, analysts and executives said. Spotify’s venture into the business is expected to bolster the value of podcast firms, generate higher licensing fees for producers, and potentially create a more consumerfriendly model built around subscriptions rather than advertising revenue.
“It sends a signal that podcasting’s time has come in a big way,” said Kelli Richards, chief executive of All Access Group, a digital music and entertainment consultancy. “You are going to see a frenzy of more podcasters entering the system.”
The surge will probably prompt a wave of consolidations in a crowded market that already boasts more than 550,000 podcasts worldwide on Apple’s Podcasts app, one of the most popular ways to discover programs. Newer podcasts will need to work harder to get discovered, said Oren Rosenbaum,
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head of emerging platforms at United Talent Agency. The agency represents more than 50 podcast creators or companies. “It is getting tougher and more challenging,” Rosenbaum said.
BuzzFeed laid off members of its podcast team, while other companies, such as San Antonio, Texas-based IHeartMedia Inc. have expanded, purchasing Atlanta-based Stuff Media for $55 million last year.
Podcasts are expected to take in $514.5 million in ad dollars this year, up 28 per cent from 2018, according to Interactive Advertising Bureau and PwC. That boost has helped fuel Southern California podcast firms such as Beverly Hills-based PodcastOne, which will take in about $40 million in revenue this year, up 25 per cent from 2018, said executive chairman Norm Pattiz.
“People listen to podcasts from start to finish,” Pattiz said. “If they can’t do it in one sitting, they hit the pause button. They can consume it whenever and wherever they want.”
Last year, about 73 million Americans tuned in to podcasts each month, with many concentrated in metropolitan areas such as New York and Los Angeles, according to Edison Research and podcast analytics firm Podtrac.
Part of the growth has been fuelled by celebrities such as Remi Cruz and Alisha Marie, who last year launched an L.A.based podcast about their lives called Pretty Basic, in which they discuss such topics as dating and fitness.
The podcast has helped them gain new fans beyond YouTube, generating more than five million downloads. It’s produced by Ramble, a joint venture of New York-based podcast company Cadence13 and United Talent Agency.
Podcasting took off in 2005, when Apple made more than 3,000 podcasts available for free on iTunes. Digital audio files became even more widespread seven years later when Apple launched its Podcasts app.
Hollywood took notice in 2014 after the success of Serial, a popular podcast that investigates whether convicted murderer Adnan Syed really killed his high school ex-girlfriend. Venture capital firms poured money into startups, including Gimlet Media and West Hollywood-based Wondery, that created narrative programs similar to Serial that could be licensed for TV shows.
Increasingly, podcasts have been an inexpensive way to test stories for possible TV shows or movies.
“There is a lot more hunger for stuff that has been proven than for stuff that’s just pitched,” said producer Marc Smerling.
He and Zac Stuart-Pontier launched the documentary series Crimetown as a podcast through Gimlet. It cost $500,000 for 18 episodes, a fraction of a TV budget, and had 16 million downloads in its first season. FX is now turning the podcast into a cable TV series.
“There is a large appetite from television producers for underlying (intellectual property) that comes with a built-in audience,” said Wondery CEO Hernan Lopez. “Books and comic books have been the main sources of IP to be optioned, but podcasts are becoming an increasingly popular form of IP.”
Making money in podcasting has been a challenge, in part because of a heavy reliance on advertising. Often podcasts must have at least 10,000 downloads per episode to even quality for ads — a tall order for small firms.
But Spotify — with its 96 million subscribers — could help matters by making a subscription model for podcasting more popular, as the company attempts to build a robust audio platform that goes beyond streaming music.
“The subscription model is a better consumer experience than having an advertising business,” said Michael Montgomery, a lecturer at UCLA An- derson School of Management. “Netflix has shown that in spades.”
Spotify plans to spend as much as $500 million this year buying podcast companies (including about $340 million to buy Gimlet Media and New York podcast company Anchor FM Inc.) Already, Spotify has more than 185,000 podcast titles.
“We have the opportunity to make original content the way Netflix does and to utilize the catalogue of content we have in the platform to help bring people to the podcast space,” said Dawn Ostroff, Spotify’s chief content officer.
Some podcasters are trying to leverage their popularity by selling tickets for live events. Crooked Media’s political commentary program Pod Save America held more than 70 shows across the U.S. and Europe last year, with tens of thousands of people attending its shows since 2017.
For now, entrepreneurs like Jason Smith, CEO of Starburns Audio, welcome Spotify’s entry into the business. His 10-person company produces such shows as Dumb People Town, about people doing asinine things.
“It opens it up,” Smith said. “It shows that there is real value in these networks.”