As Podcast Advertising Revenues Near $1 Billion, Can An Antiquated Music Industry Be Reinvigorated?

Eufemia Didonato

Joe Budden Podcast Live – New York, NY WireImage The podcasting space continues to thrive with ad revenues projected to grow by 14.7%, hitting $1 billion in 2020, making the audio medium a now proven, lucrative entry point for once weary advertisers and adjacent creator ecosystems.  Consumers are on board […]

The podcasting space continues to thrive with ad revenues projected to grow by 14.7%, hitting $1 billion in 2020, making the audio medium a now proven, lucrative entry point for once weary advertisers and adjacent creator ecosystems. 

Consumers are on board too – more than 100 million people in the U.S. listen to at least one podcast each month. With minimal production needs and the ability to create stories virtually, monetizing this fairly simple type of content sets up podcasting as a viable business during the pandemic.

Record companies who are primed to pivot to podcasts with intact distribution pipelines, marketing departments, and signed talent, are finally starting to make substantial commitments to grow podcasting within their organizations. 

Sony Music, the second-largest music company, last week announced their intention to release 40 or so new [podcast] shows by the end of the year along with 100 additional original programs in development during the Interactive Advertising Bureau’s (IAB) “Podcast Upfront virtual conference. Sony Music kicked off a soft move into podcasting last year through a joint venture with Adam Davidson, New Yorker writer and co-founder of NPR’s “Planet Money,” and renowned WNYC and Panopoly producer Laura Mayer, along with four other strategic partnerships. 

With a “bottom line” mentality typically driving music companies to innovate, it’s no surprise that upon billion dollar advertising projections, movement is visible. “We have a broad strategy and we want to be in every genre,” Sony’s global head of digital, Dennis Kooker told Bloomberg, “we feel like we have a great story and want to be attracting advertisers, there is a tremendous opportunity for advertising in podcasts.” 

The world’s largest music company, Universal Music Group, who just struck a new multiyear licensing deal with Spotify (deals are already in place with Sony Music, Warner Music, and Merlin), first made moves in podcasting last April with indie podcast publisher Wondery to develop audio-first content. Last fall, Universal Music Group’s Executive Vice President of Content Strategy and Operations, Barak Moffitt hinted at concerns around podcasting potentially diverting listener’s attention spans,  “at current rates of consumption and rates of growth, [podcasts] could potentially rival the share of ear for music consumption, so obviously that’s something we are keeping our eye on.” 

Spotify recently pivoted messaging from a music streaming company to an “audio-first” platform with the intention of growing market share to include podcasts. With early bets on podcasting, the company bulked up executive hires, acquired podcast creation and distribution tool Anchor, podcast networks Gimlet and Parcast, and followed up on their expansion strategy with exclusive content partners like Joe Rogan, whose licensing deal was north of $100 million, Michelle Obama, and social media influencers Rickey Thompson and Denzel Dion. The nearly half a billion dollar investment into driving an audio-first experience seemed to be paying off early on for Spotify but when the company reported its Q2 2020 earnings, a 21% loss in ad revenue was attributed to a decrease in listenership at the start of the pandemic followed by a hopeful burst of momentum in June. 

Competitor Apple
, who arguably popularized podcasts first through their proprietary iTunes offering, is playing a selective exclusive game as well – Apple Books just announced the launch of “Oprah’s Book Club” podcast highlighting “Caste: The Origins of Our Discontents,” by Pulitzer Prize-winning journalist Isabel Wilkerson which was an Oprah’s Book Club pick and bestselling title. In addition to podcasts, Apple moved heavy on audio early with Beats 1, recently renaming the 24/7 radio platform Apple Music 1. While Apple diversifies audio offerings, the company’s primary revenue generator is their product segment – with iPhone raking in $26.4B in Q3 2020 alone. 

While some labels see podcasts as a potential threat to music in the streaming ecosystem, others champion content diversification. “I believe personally that there will be people that come to Spotify for a podcast and stay for music, and that there will be people that come to Spotify for music and stay for a podcast,” said Warner Music group’s CEO Steve Cooper on the company’s latest financial call. Fielding questions from analysts, Cooper went on to explain how the company is looking at the monetary side of podcasting from a label standpoint, “We are looking at the podcast ecosphere, and we currently, with a number of our recording artists, create podcasts. That being said, the economics of podcasting remain pretty opaque, and while we are prowling around that space, we haven’t really found anything yet that has really caught our eye.” 

Pandemic or not, music companies should be thinking about developing “talent” in every genre – not just music. Development is in the DNA of the music business but since things went digital, it seems many have prioritized finding an already existent hit rather than creating one from the ground up. Now that proven revenue models and consumer adoption traits are showing a future for podcasting, the first to invest and innovate with their internal resources and talent will likely see great returns within the next few years. Yes, it may be a long game, but if this pandemic has proven anything in the music business, it’s that innovation is in demand. Perhaps leaning into development can reinvigorate a stale, archaic culture, potentially catching the music industry up to the year 2020.

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