E very once in a while, someone comes along and thinks they can crack podcasting’s data problem. They believe they have the tools to unlock dynamic, personalised and highly-targeted messaging delivery. But each time one of these radical propositions emerges, it’s scuppered against the same rocks: every party involved in the process of making a podcast has a different set of priorities, and every party is financially disincentivised from streamlining that process.
For example, I might make a podcast called The Nick Hilton Show (fyi, I don’t, though if the price were right…). I’d be the first party involved in that show, as the production company (and that may come with internal divisions, though, for clarity’s sake, let’s say this is a self-hosted show made by my own company, in which I am the majority shareholder). I do a deal with, let’s say, Acast, to sell advertising on that show — suddenly I have a second party who share my interest in the show’s success but have a totally different set of priorities to me. And even though we’re working together, that relationship cannot be transparent — they can’t share analytics and they can’t share leads — otherwise I might be inclined to circumvent them and take a 100% cut of revenue, rather than a 67% cut. And with that — poof — their business model would be up in smoke.
That’s a very simple relationship, but there are further parties that are involved in the production line between me making the award-winning The Nick Hilton Show and it reaching my thousands, nay millions (*cough*), of listeners. There are the parties who sell advertising via Acast, who are paying a premium to have dynamic insertion (not to mention the ease of broadcasting to a curated suite of shows, rather than going out on the town looking for individual shows to have a good time with). Then there are the distributors — Apple, say, or Overcast — who, to some extent, want to undo the commercialisation of the podcast at Stage 2 in order to prioritise the UX. And then there’s the listener: the humble, disinterested listener.
And so, it’s been very hard to do anything too radical in podcasting, because all these services have been very atomised and have worked together yet at cross purposes. They didn’t emerge at the same time, but sprung into existence as the medium very gradually professionalised. Their presence is symbiotic yet secretive. And podcasting, in its first 15-odd years, hasn’t quite had the financial clout to make an investment in drawing these threads together worthwhile… until now.
Spotify has, this week, acquired Megaphone in a deal that The Verge reports as being worth $235m. It’s no secret that Spotify’s been on aggressive manoeuvres lately, buying up real estate across the industry, including big money deals for companies like Gimlet and Anchor, and this is the priciest item in their shopping basket. In a way, Megaphone was the last piece of the puzzle — a pure hosting company (Anchor is also that, though in techland it’s value is perceived as being podcast creation, rather than hosting). They can now offer a nose-to-tail experience for podcasters, from creation with Anchor, hosting with Megaphone, dynamic advertising with their own Streaming Ad Insertion (SAI), and distribution with Spotify. And they’ll use creator acquisitions — like Gimlet, The Ringer, Parcast and Joe Rogan — to try and set this as the industrial default for emerging podcasters. And there’s a good chance that they will become the industrial default, because they can do it; they can crack podcasting’s data problem. Anchor won’t hold out on Megaphone, Megaphone won’t hold out on SAI, SAI won’t hold out on Spotify; they’re all cogs moving the same wheel, working towards a shared purpose.
The danger, as I see it, is to the ecosystem more generally. Most podcasters cannot make a living from podcasting, and that has been a fact since Day 1. Nothing is going to change here, and if you think that Spotify is going to flush the industry with that beautiful Swedish VC krona, you haven’t paid attention to the squeeze they’ve put on the music industry.
The lack of clear application for data in podcasting has had multiple impacts. It has definitely meant that the quantity of advertising has been slow to emerge — most advertisers would rather stick with tried and tested routes, or look to new social avenues without an upfront spend. But it has also allowed some middle tier podcasts to price their product competitively with the larger professional market. $20/30 CPMs have been frustrating to many, but those look great when compared to what Spotify pays musicians or YouTube pays creators. At $0.00318 per stream, thats a $3.18 CPM that Spotify were reported to pay artists earlier this year; YouTube’s CPM is in the region of $3/5, though many creators seem to get frozen out entirely.
There’s a chance that Spotify’s full-system-podcasting will mean that Joe Podcaster (not Rogan) gets to take home some money from his show, however few people listen to it (remember that most current ad-insertion companies don’t deal with sub-10k shows at all). And maybe that will be written up as hugely democratic, even if it’s just beer money at the end of the month. But there will be consequences to CPMs declining, even if money is being distributed more equitably.
The advertising industry — and, indeed, the industries that supply advertising with its clients — are not staked in the success of podcasting as a medium. If CPMs are being driven down by the single biggest player in the game, everything will adjust to reflect that. Dynamic ad-insertion is there to improve the situation for advertisers, not podcasters. And the more that Spotify has the whip-hand over the podcast industry, the less incentivised they are to generosity when sharing ad sales. I suspect that, in a couple of years time, recouping two thirds of your agency ad-sales (the current standard) will seem like a dizzy daydream.
And so, in conclusion, once again this is a move that favours broadcasters whose imperatives are not solely advertising sales. It will favour podcasts within the Spotify family, certainly. It will favour private publishers like the New York Times, The Athletic and The Atlantic, for whom a prong of their podcast strategy is integrating people to a subscription model. And, as ever, it will favour public broadcasters. As Noel Coward might’ve said, the rich get richer and the poor get a three-buck CPM.
Follow me on Twitter if you can stand the idea, and do check out my podcast documentary, The Town That Didn’t Stare, available on most good podcast platforms. And you can always email me to email@example.com if you want to chat podcasts.