Music companies are adopting a new outlook when it comes to podcasts: If you can’t beat ’em, join ’em.
Perhaps nothing competes more closely with music for fans' ears these days than podcasts -- so now the music industry is cranking out its own. On May 16, Sony announced a joint venture with WNYC veteran Laura Mayer and NPR's Planet Money co-founder Adam Davidson to produce original podcast series. Universal Music Group in April announced a partnership with independent Dirty John podcast producer Wondery to develop new programs around UMG's artist roster. Warner Music Group began podcasting with Atlantic Records' What'd I Say and Inside the Album and a Rhino Records catalog-specific podcast last year, and has more on the way. Each of the major record companies is now looking at developing podcasts in collaboration with artists, though none have launched.
The major-label podcast push comes as Spotify readies to more actively steer its 100 million paid subscribers toward the growing slate of podcasts on its platform, after it acquired podcast firms Gimlet Media (for a reported $230 million) in February and Parcast ($56 million) in March. Increased podcast streaming could come at the expense of music, given the limited time users have for audio listening.
For Spotify, which is under pressure as a public company to cut costs, promoting podcasts could improve its profitability. That's because what the streaming service pays podcasters may be less in many cases than what it must pay copyright owners for music; a song's record label and publisher typically take about 70% of revenue per stream. (Spotify doesn't disclose its deal terms with podcasters.) Also, if Spotify decreases its dependence on music alone, it could gain more leverage in licensing negotiations with record labels down the road.
"Spotify can own original and inexpensive podcast content, unlike music, and build its own back catalog," says John Tinker, a media analyst with Gabelli & Company. "Why promote music that you do not own?"
So record labels are punching back, developing podcasts that could produce some revenue while, more importantly, driving listeners back to the labels' music on Spotify's platform.
"Podcasts are a natural extension of our companywide audiovisual initiatives," UMG executive vp Michele Anthony said in a statement, explaining that podcasts are part of the label's multimedia strategy in film and TV. "Our labels and our rich and storied catalog are a gold mine that enable narratives around artists, genres, cultural events and timelines. Podcasts, film and TV also provide our artists with another medium for expression and creativity, and we also want to continue to create opportunities for fans to spend time with our artists and their stories."
Total podcast advertising revenue is expected to hit $514.5 million in 2019, according to projections from the Interactive Advertising Bureau and PwC's annual Podcast Revenue Study. That figure is expected to rise to $659 million by 2020, which would mark a 454% increase in the market since 2016. Podcasts can also develop into TV and film projects, as Dirty John and Homecoming did, or spin off with live tours and TV specials -- see Pod Save America and 2 Dope Queens. But it's not clear how Spotify will share its podcast revenue with the music companies that make them.
For now, a big part of the labels' podcast play is simply to grab real estate -- both on streaming services' homepages and in fans' jam-packed lives. Spotify is increasingly promoting podcasts through search recommendations and its app design, where it's placing podcasts directly next to or second to music in different interfaces.
Spotify is also encouraging artists to create their own podcasts using the free creation service Anchor, which it purchased in February. "So, you've spent a bunch of time making music, and you work hard to get your music into fans' ears via Spotify," the company wrote in a May 16 blog post. "But have you ever considered speaking directly to them?"
Record companies are certainly considering it. "Podcast listeners are engaged, podcast listeners do what you tell them, they listen and you have their attention," says Atlantic Records vp marketing catalog Tom Mullen, who has run his own Washed Up Emo podcast for eight years. "You've got somebody listening for 45 minutes out of their day of entertainment -- that is a huge piece."