It’s not every day that an obscure Australian tech start-up is acquired by a group of storied American media organisations. But a little more than nine months ago, that’s exactly what happened.
Pocket Casts, a beloved podcasting app that hails from Adelaide, was bought out by US public radio group NPR and its affiliated public radio stations in New York (WNYC) and Chicago (WBEZ), who are behind some of the audio format’s biggest hits, including true crime series Serial, and the serendipitous This American Life.
While the deal created a little bit of noise in the US tech press at the time, it was largely ignored locally. But with podcasting now rapidly evolving from the
“To give us some credit, this is exactly what we saw coming over two years ago when we started all these negotiations with various companies,” says Russell Ivanovic, the head of product at Pocket Casts, who is still based in the South Australian capital.
Podcasts have been one of the brightest spots in an often bleak media landscape of the past decade or so. But now, the emerging medium is facing an inflection point.
A land grab of sorts in the sector is under way. Nearly a year on from the Pocket Casts deal, New York listed Swedish streaming music giant Spotify is muscling into the sector. Last week, it shelled out a reported $US230 million ($320 million) to acquire Gimlet Media, a prominent creator of podcasts in the US; and Anchor, a tech platform that helps people record and monetise them.
RBC Capital Markets analyst Mark Mahaney says podcasting is now a $US700 million ($980 million) a-year industry globally, with the potential to grow up to 30 per cent annually. But it is also a highly fragmented industry, with no single corporation dominating the sector.
At the moment, it feels like the format is in a similar position to digital publishing before the advent of Google, Facebook, third-party ad-networks and programmatic buying severely damaged the economics of that industry.
There has been an explosion in creative output – from the true crime genre popularised by Serial, to the intimate celebrity interview format (think Marc Maron’s WTF ) to explainer podcasts (this newspaper has a great one of those) and countless other formats serving any number of niches. (My personal favourite is anything from The Ringer.)
And, as things stand, many smaller podcasting operations are managing to make a buck out of it. “Lots of podcasters in the middle tier of podcasting are making great money,” says Ivanovic. “If they have between 10,000 and 100,000 listeners and are good at selling ads, the ad rates are incredibly high.”
Yet measurement of the audiences podcasts are generating, and the efficacy of ads on them, remains fairly primitive. That is fine for a certain subset of advertiser with a certain budget – on-demand consumer products, and small business-focused tech providers – but not for big brands.
So, if someone could figure out how to unlock the format for advertisers with the biggest budgets, the rewards could be substantial.
For its part, Spotify clearly senses an opportunity in the space, and advertising may not even have that much to do with it.
The overwhelming bulk of the money Spotify takes in from subscriptions goes straight back out the door to music publishers and record labels in royalties. Podcasts are much cheaper to make, and don’t typically involve royalties. So if Spotify can entice users to listen to more of them, its margins could improve significantly.
As well, if it chooses to make the podcast content it now owns exclusive, at least for a window, that could help differentiate its service from rival platforms operated by tech giants such as Apple Music and Google’s YouTube.
Of course, this is the strategy Netflix has pursued to great success in streaming video. (Directly producing original music is tricky terrain for Spotify. Doing so risks upsetting the major record labels, who control rights to the back catalogue that its subscribers sign up to listen to).
Terrestrial radio will, of course, play a role in the unfolding battle for control of podcasting. Southern Cross Austero, for example, has declared ambitions to be the Netflix of podcasting in Australia.
And, after all, the organisations that acquired Pocket Casts are all radio companies at heart.
Ivanovic says the new US ownership has benefited Pocket Casts. Enthusiasts of the audio format, and anyone who has a grasp of recent digital media history, will just hope that the new corporatised era for podcasts will drive good outcomes for creators and listeners.
“If an Apple or a Spotify locked up the entire market, that would inevitably be bad for everyone except Apple or Spotify,” he says.