Major Media Starting to Dive in on Podcast Growth

With growth rates and audiences that investors can’t resist, podcasts are attracting media’s biggest players — including streaming giant Spotify, which has made its mark with the acquisition of a sector heavyweight.

To acquire Gimlet Media — considered by some to be the industry’s most advanced podcast creator — the Swedish firm did not hesitate to shell out $230 million, according to estimates from specialist site Hot Pod. And it has not stopped there, announcing other acquisitions for a global portfolio worth between $400-500 million this year. In a media sector experiencing rapid changes, podcasts are a ray of sunshine, easily adapting to consumer habits, whether it’s listening on a smartphone or through car speakers. Just 15 years ago, they barely existed — but 73 million Americans listened to at least one a month in 2018, according to a study by Edison Research.

Behind Spotify’s huge bet on podcast market’s growth https://t.co/zbic5APzMs pic.twitter.com/dF3UpDv1fo

— billboard (@billboard) February 8, 2019

Some mergers and acquisitions have already taken place — including Midroll’s 2015 purchase by broadcaster Scripps for $50 million, or iHeartMedia’s acquisition of Stuff Media for $55 million. But the time for splashing big cash has arrived — in a universe still mostly dominated, at least in the US, by NPR. The public radio station boasted nearly 17 million monthly listeners of its podcasts last year. “The ripple effects of this deal is going to be wild,” wrote Nicholas Quah of Hot Pod, predicting that media companies will now jump on the podcasting bandwagon, “regardless of whether they have an actual, informed strategy around such an acquisition.” These days, nine-figure sums are the norm — on Wednesday, Californian startup Himalaya Media announced it had raised $100 million to launch its podcast network, backed by China’s Ximalaya FM.

As well as being the latest media trend, podcasts are attractive to investors and advertisers thanks to, from a business perspective, highly desirable audiences: young, well-educated and earning a higher than average salary. In fact, about 51 percent of monthly podcast listeners in the US pulled in at least $75,000 a year, according to the Edison Research study. Of the entire US population, 38 percent earn the same figures. But a key question is podcasts’ economic model going forward. For now, it is based primarily on advertising. The sector’s advertising revenues are growing fast, and should reach $659 million in 2020, according to a 2018 study by PricewaterhouseCoopers and the Interactive Advertising Bureau. But that is still far from the amounts generated by radio.

The two main podcasting platforms — Apple and Android — are free, offering creators no revenue. Others, such as Stitcher, offer paid subscriptions — while Castbox allow producers to implement a paywall which makes the listener pay after a few free downloads. Spotify has yet to reveal its Gimlet integration strategy, but has already been pushing the dual revenue opportunities: advertising on one hand, paid subscriptions on the other. Himalaya is starting on a free model, but allow listeners to “tip” their favorite shows with micropayments. Eventually, it plans to offer paid content. “The US market has shown that it can support paid content and other large international markets have developed models even stronger in premium,” marketing Vice President Peter Vincer told Variety magazine. “This is the end of an era, the one that was kicked off in 2014 with the ‘Serial Boom,'” wrote Quah, referencing the most-downloaded podcast of all time. “I’ll miss it.”