From Joe Rogan to Harry and Meghan, the podcast cash bubble has burst
When Spotify signed up to host The Joe Rogan Experience in an exclusive deal in 2020, the streaming giant described the podcast’s host as a “driving force in culture helping to lay the foundation for the podcasting renaissance we are experiencing today.”
The deal, later revealed to be worth more than $200m, was described as “a major addition” that would secure the hosting rights for “one of culture’s leading voices.”
Just a few years later and the eye-wateringly large fee now looks like a high-water mark for a cash bubble that ballooned in the podcasting industry in recent years. A war for talent was fuelled by record-low interest rates and a belief that advertisers were poised to throw more and more money at the medium.
Spotify last week announced the departure of Dawn Ostroff, the executive who led Spotify’s podcasting push and signed off on the reported $25m partnership with the Duke and Duchess of Sussex, as well as the Rogan deal.
The company said it was laying off 6pc of its workforce at the same time, with chief executive Daniel Ek admitting he was “too ambitious in investing ahead of our revenue growth”.
Spotify isn’t alone. In September, podcast giant Acast said it was laying off 15pc of staff, while Audioboom, the Nick Candy-backed podcast firm once tipped for a takeover, this week also hinted at possible job cuts as a recession looms over the advertising market.
The flurry of recent cuts raises the question of whether podcasting is starting to lose its shine - and whether the spending spree of the last few years was really worth the money.
“The initial flurry of people making very big bets has calmed down,” says Matt Deegan, founder of radio consultancy Folder Media.
“It’s the transition from bubble land to real-world economics.”
Podcasting is not a new format. It began almost two decades ago, when the release of the first generations of iPods and was a slow burner for many years.
The medium gained momentum after break-out hits such as the first series of Serial in 2014. Figures released last summer by radio statistics body Rajar revealed that 19pc of UK adults (10.5m) now listen to podcasts every week.
Where the audience goes, money follows and the world’s biggest tech companies have pumped in billions of dollars into the market over the last decade in the race for listeners and talent.
Spotify was at the forefront of the gold rush, splashing out €350m to buy podcasting companies Parcast, Gimlet and Anchor in 2019. Rivals Apple and Amazon have followed close behind, as the tech giants vie to establish themselves as listeners’ preferred platform.
At its root, however, podcasting remains a relatively cheap medium. All that’s needed is a microphone and some affordable editing software.
Low barriers to entry mean the market has been flooded with new entrants, making it harder to be heard through the noise. Jokes about naval-gazing millennials setting up their own podcasts have become common currency on social media.
Saturation means even big companies hoping to bankroll the next Serial can be disappointed.
Annie Langston, audio analyst at Midia Research, says: “The podcast market is increasingly fragmented as more creators enter the space. A ‘mainstream’ hit is difficult to achieve, even for a well-known celebrity.”
For Spotify, high-profile deals have turned into headaches.
In the case of Rogan, chief executive Daniel Ek was forced to apologise for a stream of vaccine misinformation and racial slurs on Rogan’s show in a row that led to artists including Neil Young and Joni Mitchell pulling their music from Spotify.
The deal with the Duke & Duchess of Sussex’s production company, Archewell Audio, has also failed to yield the same results enjoyed by Netflix with its Harry & Meghan documentary.
As rising interest rates slam the brakes on podcast investment and an advertising recession looms, the excitement is starting to fade.
The sector is bracing for a looming recession that will hit its advertising-funded business model. UK advertising spend is forecast to decline 3pc in real terms to £36.1bn this year, according to the latest figures from the Advertising Association and Warc.
“The podcast market has been growing strongly for some time but companies have been investing for growth in a market dependent largely on ad revenue, which is always vulnerable during a recessionary environment,” says Langston.
“Some companies may reflect: this is a time to streamline processes.”
Despite gloom on the business side, audience numbers are holding up. Listening figures held steady through the pandemic, despite fears that working from home and the end of commuting meant people would fall out of the habit.
Meanwhile, a number of successful new British shows demonstrate that demand for fresh programmes is still there too.
The News Agents, set up by BBC defectors Emily Maitlis, Jon Sopel and Lewis Goodall and backed by radio group Global’s marketing prowess, has enjoyed huge success. The Rest is Politics, hosted by Alastair Campbell and Rory Stewart, and The Rest is History are other notable hits.
News and factual shows are stand-out winners in the current market, something Deegan puts down to our current “newsy times” and listeners’ desire for a point of view in their coverage.
However, these recent British successes do not involve the kind of huge sums spent by Spotify and its Big Tech peers - numbers that look unlikely to be replicated.
“Everything is a bit more real than it used to be,” Deegan says. “Consumption will continue to grow, but it’s good growth, not stellar growth.”
As advertising starts to dry up, platforms are rethinking their approach to podcasting. Some, such as Apple and Amazon, are pushing subscriptions in exchange for ad-free shows as a way to squeeze more cash out of programmes.
Experts say podcasts' DIY ethos and its robust history mean it is more than just a passing fad, but the war for talent is over.
“Essentially, the chess board has been set,” says Langston.