Business

Record Labels Lean Into a Pivot to Podcasts: 'People Will See the Profitability'

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"Sony's point of view is, if podcasts are going to take time away from people's music listening, then they should be listening to Sony podcasts."

After record mogul Jason Flom mentioned his latest discovery, Atlanta quartet Hero the Band, to his old friend Jared Gutstadt, the CEO of the Audio Up production company had a vision. He would introduce the band to the world via Sonic Leap, an upcoming podcast combining science fiction, comedy and music, and Flom's Republic Records-backed label, Lava, would fund the enterprise. "We almost had to create a template," Flom says. "It's definitely a new model. I would need our business-affairs team to tell you exactly how the deal works, but in success, everyone will do well."

Sonic Leap is set to debut early next year and is one of several new and upcoming podcasts backed by major labels and other big music companies: Def Jam's new-artist hip-hop serial Here Comes the Break is also out in early 2021; Justin Bieber manager Scooter Braun's company, Ithaca Holdings, launched Country Shine with Graham Bunn in October; that same month, Sony Music started My 90s Playlist, a podcast devoted to TLC, Celine Dion, Mariah Carey and other label acts.

"[Labels] are definitely about to become a major player in the space," says Chris Morrow, CEO and co-founder of Loud Speakers Network, whose hit podcasts include The Combat Jack Show and The Premium Pete Show. "They have a lot of resources at their disposal, which they've been a little hesitant to put into play, but you're seeing them start to make a bigger commitment."

Podcasts are an estimated $1 billion advertising business, according to IAB, which predicts 15% growth in 2020. Streaming and broadcast giants have made major investments: Spotify partnered with content companies like Gimlet and The Ringer and, in May, licensed Joe Rogan's hit show for $100 million; iHeartMedia (a partner in Sonic Leap and Here Comes the Break) recently bought podcast specialist Voxnest and announced its third-quarter podcast revenue grew 74% compared to 2019. But after years of tinkering with the medium, unsure whether to devote time and money to shows like Sony's The Lost Art of Liner Notes, which launched in 2017 and hasn’t been updated in more than a year, labels and other music-content companies are moving to the next level.

"Our goal is certainly to be a big player, similar to the way we are in music" says Emily Rasekh, Sony Music Entertainment senior vp podcast business development and operations. "It's really about finding top-tier creators and expanding the slate in those areas." Adds veteran longform journalist Vanessa Grigoriadis, co-founder of spoken-word podcast specialist Campside Media, which partnered with Sony Music in September: "Sony's point of view is, if podcasts are going to take time away from people's music listening, then they should be listening to Sony podcasts."

Labels won't discuss their podcast investments, which they generally view as low-risk, mostly promoting their own artists and catalogs. Flom says Sonic Leap is looking for "appropriate brands to come on board and sponsor." Rich Isaacson, Def Jam exec vp and GM, says the label is a "content partner” and “not investing capital" in Here Comes the Break. Warner Music's Atlantic built an entire podcast studio called Jefferson, named for the hotel where co-founder Ahmet Ertegun once ran the label. Its podcasts, which are mostly based on in-house artists, include Digging Deep: The Robert Plant Podcast and The People's Party with Talib Kweli, with the latter produced by Uproxx with promotional help from Atlantic/Jefferson. Universal Music's 2019 partnership with podcast publisher Wondery led to October's Jacked: Rise of the New Jack Sound, which also mostly employs the label's own catalog tracks, suggesting that overhead is probably low.

Labels won't discuss their podcast investments, which they generally view as low-risk, mostly promoting their own artists and catalogs. Flom says Sonic Leap is looking for "appropriate brands to come on board and sponsor." Rich Isaacson, Def Jam exec vp and GM, says the label is a "content partner” and “not investing capital" in Here Comes the Break. Warner Music's Atlantic built an entire podcast studio called Jefferson, named for the hotel where co-founder Ahmet Ertegun once ran the label; its podcasts -- from long-running, Uproxx-produced hit The People's Party with Talib Kweli to the year-and-a-half-old Digging Deep: The Robert Plant Podcast -- are mostly based on in-house artists. (A rep for Atlantic’s parent company, Warner Music, says the studio will be a central part of WMG’s evolving podcast strategy.) Universal Music's 2019 partnership with podcast publisher Wondery led to October's Jacked: Rise of the New Jack Sound, which also mostly employs the label's own catalog tracks, suggesting that overhead is probably low.

 

Labels and other music-content companies have a crucial built-in advantage compared to other podcast producers: the ability to clear rights for music, affordably and quickly. For years, podcast producers have complained about how they lack the resources and permissions to clear, for example, KISS songs for their KISS podcasts. By contrast, master recordings for Here Comes the Break will be "cleared by Def Jam and artist's lawyers in the normal course of business," Isaacson says, adding that the producers, Double Elvis, will have to clear publishing rights.

"Generally, this process is not difficult, especially when dealing with developing artists, whose publishers are generally amenable to lower fees for exposure early on," Isaacson adds.

In addition to direct revenue from advertising and promotional value from breaking new artists, big music companies can benefit from crossing over artists to streaming success. The results have been spotty so far, however, as no podcast has broken a bona fide hit, and Natalie Imbruglia's "Torn" and Ricky Martin's "Livin' La Vida Loca" have had minimal streaming spikes, if at all, since they were featured in My 90s Playlist, according to ChartMetric data. "Labels definitely have a role to play," says Brady Sadler, co-founder of Double Elvis, the podcast company behind Here Comes the Break. "We want to continue developing partnerships and experimenting with things like this, but it's still early days and there's still a lot to be figured out."

When Tom Mullen, founder of long-running DIY podcast Washed Up Emo, arrived at Sony Music in 2012, the label was still obsessed with a YouTube-era "pivot to video" promotional strategy. He tried to convince labels to build up “equity" in podcast content, employing new and archival interviews with major artists, but it was too early: "Podcasting just wasn't on the tip of the tongue." Over time, he persuaded Sony, then Atlantic, where he moved in 2017, to devote more resources to the space, building new shows and promoting existing ones like Digging Deep with Robert Plant.

Mullen, who left Atlantic earlier this year to work for entertainment-brand archiving company Inveniem, believes labels have finally recognized the tipping point for podcast profits and are acting accordingly. "It will happen," he says. "Labels are going to realize they're sitting in it. They’re smelling it and breathing it -- they’re going to hone in on it. People will see the profitability."