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The Great Podcasting Market Correction

AS THE podcasting universe has matured in recent years it has picked up many of the trappings of more established media industries, ranging from a flourishing trade press to its very own awards show circuit. This past year, podcasting finally achieved one of the ultimate signifiers of middle age — an unsettling realization that the best days of its high-spirited youth may now be behind it.

While overall podcasting revenue and listenership continue to grow, the runaway exuberance many felt about state of the medium has dissipated lately, even among some of its most ardent practitioners. “At what point do you have to just call it, and say that rather than being a ‘big thing’ in waiting, it’s just a run-of-the-mill ‘medium thing,’” Nick Hilton, a podcast entrepreneur, wrote in a recent blog post, entitled “2022: The Year That Podcasting Died.”

It was illustrated with a gravestone.

Comic hyperbole aside, there is an unmistakably dour vibe now permeating podcast land — and for good reason. Following a prolonged buying spree, some of the industry’s biggest spenders are now pulling back due to growing concerns about the economy and the possibility of weakening advertising sales in audio.

Sirius XM Holdings, Inc. has slowed down its dealmaking, and Spotify Technology SA is freezing its US budget for new podcasts, according to people familiar with the situation. Amazon Music has pulled back on new deals and instructed its team to reduce offers that were already on the table but unsigned, said two people who asked not to be identified because of the sensitivity of the negotiations. In some cases, all three companies are offering smaller upfront payments to new shows and seeking to keep more of the resulting advertising revenue, according to several people familiar with the matter. Shows that used to be able to claim 80% of advertising sales are now often forced to settle for 50%, two people said.

Representatives from, Inc. and Spotify declined to comment. Scott Greenstein, SiriusXM’s president and chief content officer, said the company feels “very good” about its podcast slate and looks forward to “growing it even further next year” with the launch of several new shows.

“A lot of these platforms acquiring and spending big dollars in the podcast space have made those bets and are putting those businesses to work,” said Chris Peterson, founder and CEO of Modish Media, an audio advisory firm. “This is a little bit of a slowdown period, but we will continue to see more M&A as more companies and money come into the space.”

During the boom years, it felt like podcast licensing deals were ever escalating in value. But lately there have been signs that the steep upward trajectory may be tapering off.

Earlier in 2022, Jacob Weisberg, the founder of podcast producer Pushkin Industries, began looking around for a new licensing partner. Pushkin’s current deal with iHeartMedia, signed in 2020, was about to expire. Pushkin started working out a promising new arrangement with Amazon that would have paid the podcast network more than $10 million in exchange for the rights to distribute and sell advertising on the company’s shows, which include Malcolm Gladwell’s Revisionist History and Rick Rubin’s Broken Record, over a several-year period.

But then the retail giant returned with bad news. Due to spending constraints across Amazon, the audio division could only offer an amount significantly less than the initial proposal, according to people familiar with the negotiations. Pushkin, which declined to comment, has so far balked at the reduced offer.

“There are just so many shows out there, so many good shows, and it’s harder and harder to break through.”

Meanwhile, lucrative exits, once common for podcast entrepreneurs, are getting harder to come by. In 2018, Rob Herting left his job at Hollywood talent powerhouse Creative Artists Agency to start QCode, a podcast company aiming to use his Hollywood connections to capitalize on the booming industry. Mr. Herting raised $6.4 million and assembled a lineup of scripted series performed by A-list performers including Demi Moore, Matthew McConaughey, and Rami Malek.

Earlier last year, Mr. Herting considered cashing out. He was approached by a prospective buyer and over the summer engaged in a series of conversations about a potential acquisition. According to people familiar with the chats, he was seeking more than $100 million. But to date, Mr. Herting has yet to sell. A spokesperson for QCode said the company has received multiple offers but hasn’t yet been able to find the right partner or deal structure, citing market timing. QCode declined to comment on the valuation number.

In the four years since Mr. Herting founded QCode, the number of Americans who listen to a podcast every month has grown to 38 million from 26 million, according to Edison Research. Ad sales have increased to more than $1 billion per year from nearly $800 million, according to the IAB. In 2022, multiple categories of ad buyers, including retailers, surpassed their estimated total spending from the prior year, according to data from Magellan AI, which tracks podcast ad buys.

“It’s not doomsday,” said John Goforth, chief revenue officer at Magellan.

But in recent years, even as revenues kept rising, the number of podcasts competing for attention and ad money grew at an even faster rate. In the first quarter of 2020, Spotify had 1 million podcasts on its platform. By September of last year, the number had more than quadrupled to 4.7 million. A similar explosion in supply happened across the industry. The resulting glut of programming helps explain, in part, how an industry that is still expanding can now often feel like one that is contracting. The overall pie may still be growing but lately most everyone’s relative slice has gotten smaller.

For years, many entrepreneurs believed that podcast advertising would not only continue to grow but also improve on traditional radio ads with more targeted messages and a more automated sales process. Likewise, the big tech platforms hoped that they would make back the money they spent on podcast acquisitions, in part, by instituting a type of advertising that would make podcast ads more like those on the web — easy to buy, no matter one’s budget, and simple to manage.

But for the most part, getting an ad inserted into a show still requires a hands-on sales team and time-intensive dealmaking. As a result, the imagined efficiencies haven’t materialized, which, in turn, has made it harder for the tech platforms to justify new, outsized acquisitions.

The surge in podcasts has also created a new and unresolved technological challenge. How, with so much to choose from, can consumers find something new to listen to? While some companies have invested in or launched products to aid in podcast discovery, a sense of stagnation has taken hold at the top of the industry charts. As of August, none of the 10 most popular podcasts in the US had debuted in the last couple of years. For new podcasts, gaining widespread attention can feel harder than ever — not the best dynamic for producers looking to attract outside investment in new products.

“A big factor in Campside’s growth was in podcasts that landed on or near the top of the charts and stayed there, allowing us to create a network effect for our other shows,” said Matthew Shaer, co-founder of Campside Media, a podcast production company. “If we were a studio starting out in 2022, I think we would find that much harder to do — there are just so many shows out there, so many good shows, and it’s harder and harder to break through.”

The podcast industry is also suffering from the broader, macroeconomic downturn hurting media and tech companies. The Media Titans 30 Index, which includes audio companies like Spotify and SiriusXM, is down nearly 40% over the past year, shedding more than $300 million in market value.

Employment in the podcasting industry is also feeling less secure. Acast AB, which in May signed a three-year deal with Marc Maron, recently laid off 15% of its work force because of the concerns about a potential recession. SiriusXM is planning to reduce its staff. Recently, Spotify also laid off some of its podcast editorial workers in addition to employees at its Gimlet Media and Parcast studios. In November, National Public Radio revealed that it would institute budget cuts and a near hiring freeze.

Even so, many in the industry expect 2023 to be a strong year, no matter what the skeptics are saying. YouTube formally entered the podcast space in August, and networks that have posted shows on the platform hope to benefit from its billions of users. Multiple companies see international markets as an untapped opportunity to distribute domestic hits abroad, and the need for new technology is high, possibly presenting different M&A opportunities.

“I’m optimistic because the same things that have always worked in podcasting continue to work,” said Ben Riskin, principal of Room Tone, an audio advisory firm. “The medium and model continues to evolve, but we have to trust our own instincts about how to grow rather than letting uninformed speculation drive our definition of success.” — Bloomberg

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