Podcasting

Sound investments

The expensive battle to be the Netix of audio

 





Jan 2nd 2021 | words 576

 

 

 

ABOVE THE din of chat-shows, dramas and documentaries streamed to blaring voice-activated speakers, a louder sound can be heard: ker-ching. On December 29th Spotify, an audio-streaming service, aired the first in a series of exclusive podcasts by Prince Harry and Meghan Markle. The next day Amazon bought Wondery, a producer of popular podcasts including Dirty John and Dr Death, for a sum reportedly in excess of $300m. The tech giant, which got into podcasting only in September, has also signed up expensive stars such as Will Smith and DJ Khaled.

 

The deals are the latest in an industry-wide spree. Last year Daniel Ek, Spotifys boss, declared that audionot just musicwould be the future of his firm. Since then Spotify has been on a billion-dollar podcasting binge, acquiring production and ad-tech firms such as Gimlet, Anchor and Megaphone, as well as shows; in May it paid $100m for The Joe Rogan Experience. Apple, the biggest podcast distributor, has bought Scout FM, a podcasting app, and signed up stars like Oprah Winfrey.

 

Podcasting makes most of its money through ads, which last year generated revenue of just $1.3bn, according to Omdia, a data firmequal to 6% or so of the recorded-music industrys sales, or the box-office takings of one Hollywood blockbuster. Why the big noise about a small business?

 

One reason is growth. Global podcast listeners will exceed 2bn by 2025, Omdia reckons, from 800m in 2019. Ad sales may nearly treble, to $3.5bn. As giants hoover up shows, advertisers put off by fragmentation can buy many spots in one place.

 

Second, podcasts give audio-streamers a chance to own content, which they cannot do with music. Most of the worlds tunes are owned by three record labels, which skim off about 70% of the streamers revenues. No matter how much they grow, firms like Spotify find their costs grow with them. The fixed cost of acquiring a podcast means that growth can boost margins.

 

Last, the ability to own podcasts gives streaming services a way to differentiate themselves. In contrast to video-streamers, which compete on content, Spotify, Amazon and Apple offer roughly the same library of 40m songs. Artists, who see streaming mainly as a way to promote their more profitable live shows, have little incentive to be exclusive to one service. Original podcasts are a way to lure fans.

 

If their valuation model for podcasts is based on music catalogues, the streamers may be overpaying for some of them. Will Page, a former Spotify chief economist, notes that whereas back catalogues like Bob Dylans, recently sold to Universal Music Group, are valuable because the songs are replayed for years, podcasts are perishable. A podcast about Dylan is of its time; a Dylan song is timeless, he says.

 

Spotifys move into podcasting has helped its share price double this year. But rivals like Apple and Amazon, which offer bundles of audio, video, gaming and more, can attract stars with promises of a spin-off TV show or game. Tech giants can also lean on hardware: iPhones come with Apples podcast app and Amazons speakers default to Amazon Music. The battle for consumers ears is only likely to get noisier.







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Economist | The podcasting battle to be the Netflix of audio

 

  


 

 

Podcasting

Sound investments

The expensive battle to be the Netix of audio

 





Jan 2nd 2021 | words 576

 

 

 

ABOVE THE din of chat-shows, dramas and documentaries streamed to blaring voice-activated speakers, a louder sound can be heard: ker-ching. On December 29th Spotify, an audio-streaming service, aired the first in a series of exclusive podcasts by Prince Harry and Meghan Markle. The next day Amazon bought Wondery, a producer of popular podcasts including Dirty John and Dr Death, for a sum reportedly in excess of $300m. The tech giant, which got into podcasting only in September, has also signed up expensive stars such as Will Smith and DJ Khaled.

 

The deals are the latest in an industry-wide spree. Last year Daniel Ek, Spotifys boss, declared that audionot just musicwould be the future of his firm. Since then Spotify has been on a billion-dollar podcasting binge, acquiring production and ad-tech firms such as Gimlet, Anchor and Megaphone, as well as shows; in May it paid $100m for The Joe Rogan Experience. Apple, the biggest podcast distributor, has bought Scout FM, a podcasting app, and signed up stars like Oprah Winfrey.

 

Podcasting makes most of its money through ads, which last year generated revenue of just $1.3bn, according to Omdia, a data firmequal to 6% or so of the recorded-music industrys sales, or the box-office takings of one Hollywood blockbuster. Why the big noise about a small business?

 

One reason is growth. Global podcast listeners will exceed 2bn by 2025, Omdia reckons, from 800m in 2019. Ad sales may nearly treble, to $3.5bn. As giants hoover up shows, advertisers put off by fragmentation can buy many spots in one place.

 

Second, podcasts give audio-streamers a chance to own content, which they cannot do with music. Most of the worlds tunes are owned by three record labels, which skim off about 70% of the streamers revenues. No matter how much they grow, firms like Spotify find their costs grow with them. The fixed cost of acquiring a podcast means that growth can boost margins.

 

Last, the ability to own podcasts gives streaming services a way to differentiate themselves. In contrast to video-streamers, which compete on content, Spotify, Amazon and Apple offer roughly the same library of 40m songs. Artists, who see streaming mainly as a way to promote their more profitable live shows, have little incentive to be exclusive to one service. Original podcasts are a way to lure fans.

 

If their valuation model for podcasts is based on music catalogues, the streamers may be overpaying for some of them. Will Page, a former Spotify chief economist, notes that whereas back catalogues like Bob Dylans, recently sold to Universal Music Group, are valuable because the songs are replayed for years, podcasts are perishable. A podcast about Dylan is of its time; a Dylan song is timeless, he says.

 

Spotifys move into podcasting has helped its share price double this year. But rivals like Apple and Amazon, which offer bundles of audio, video, gaming and more, can attract stars with promises of a spin-off TV show or game. Tech giants can also lean on hardware: iPhones come with Apples podcast app and Amazons speakers default to Amazon Music. The battle for consumers ears is only likely to get noisier.







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