By Anne Steele
The battle for podcast dominance is on.
A pair of announcements this week-- Apple Inc.'s introduction of
paid podcast subscriptions and Facebook Inc.'s new partnership with
Spotify Technology SA to spur discovery and listening on the social
network's platforms--are the latest for a rapidly growing medium
that is attracting top talent and top dollar.
"With Apple making its move into subscription, there is this
platform war emerging," said Josh Lindgren, head of Creative
Artists Agency's podcast department.
Podcasting, already on a tear before the coronavirus pandemic,
exploded in popularity during the lockdown, and is on track to
bring in more than $1 billion in revenue this year from advertising
in the U.S. for the first time. An estimated 116 million Americans,
or 41% of the U.S. population over the age of 12, are now monthly
podcast listeners, an 11% increase over 2020, according to Edison
Research and Triton Digital.
For years, competition in podcasts has been a lopsided one:
Apple--responsible for the namesake of the industry, a portmanteau
of "iPod" and "broadcast"--enjoyed its status as the default
destination for listening while doing relatively little to enhance
offerings or profits. Spotify, meanwhile, has lavished hundreds of
millions on popular creators and companies--sparking an arms race
among iHeartMedia Inc., Audacy Inc. (formerly Entercom), Sirius XM
Holdings Inc., and Amazon.com Inc., which all now see podcasts as
vital for keeping customers engaged with their services.
Dawn Ostroff, Spotify's chief content and advertising business
officer, said the rush of other bets on podcasting validates the
company's early moves.
"We saw the opportunity before anybody else did, and we've been
at it significantly longer than anyone else," she said.
To some observers, Apple's podcast news this week is akin to the
awakening of a sleeping giant. More than 15 years after adding
podcasts to its iTunes software, the tech company introduced a way
for podcasters on its platform to sell subscriptions. Until now,
the company has neither offered paid access for podcasts nor earned
a commission from ads that appear in the more than two million
shows on its platform. Apple declined to comment.
"Apple, where podcasting originated, cannot lose out on the
podcasting battle," said Daniel Ives, an analyst for Wedbush
Securities. "It's now or never. It's both a defensive move toward
Spotify but also offensive in terms of monetizing."
Podcasters will pay Apple $19.99 a month to enable
subscriptions, and set their own prices for listeners. Apple will
take a 30% cut of subscription revenue the first year, and a 15%
take thereafter.
"For any industry to be sustainable, we have to be able to
generate revenue from more sources," said Donald Albright,
co-founder of Tenderfoot TV, the maker of hit shows including "Up
and Vanished," "To Live and Die in L.A." and "Atlanta Monster."
Tenderfoot will keep its shows free for now, but will explore
releasing exclusive bonus content and early access to subscribers
via Apple's new program, he said. "It creates a more healthy
industry."
Spotify, the big spender on exclusives, talent and technology,
has also sought to make the medium more financially viable through
advertising and eventually subscription.
Spotify now carries more than 2.2 million podcasts on its
service, up from 450,000 in 2019. The Swedish streamer's podcast
listenership in the U.S. is on track to overtake Apple Podcasts'
this year, according to a forecast from research firm eMarketer.
Though Apple's service has grown along with the medium, it has lost
market share, falling to 24% in 2021, from 34% in 2018.
Apple's podcast subscription, which rolls out next month to
users, will have company. Spotify plans to announce its own
offering next week, according to people familiar with the matter.
It will not charge podcasters, nor take a cut from their
subscriptions, and will allow them to set their own pricing, one of
those people said.
Users of Spotify's iOS app who subscribe will be routed to a
website for the transaction, meaning that Apple won't take a cut of
that revenue, the person said.
Stitcher (acquired by SiriusXM), Wondery (acquired by Amazon),
Patreon and Pocket Casts have offered paid subscriptions with
varying success. Luminary, thought to be the most established
player in subscriptions, will make its original podcasts available
to Apple podcast listeners through the new program. Apple and
Spotify, which command many more listeners than those apps, are
likely to make paying for podcast content more mainstream.
The broader competition between Apple and Spotify is
intensifying. Aside from competing for music subscribers (Spotify
is far ahead of any other service, with 155 million globally as of
Dec. 31 while Apple last reported 60 million subscribers in June
2019), Spotify has been among the tech company's most prominent
corporate critics, claiming that it uses its strength to compete
unfairly, which Apple denies.
Apple's new podcast subscription option within a revamped app
reflects one of Chief Executive Tim Cook's core strategies, which
has focused on building out digital services to fuel growth. That
strategy--which generated almost $16 billion in sales in the fourth
quarter, a 25% lift from a year before--put Apple in closer
competition with companies that operate on its devices. Spotify,
among others, has complained that Apple uses its App Store in
anticompetitive ways.
Spotify set off a feeding frenzy with deals for podcast makers
like Gimlet Media and Bill Simmons' the Ringer, along with its
blockbuster $100 million-plus licensing agreement with Joe Rogan.
It has sewn up other deals with Michelle and Barack Obama, Kim
Kardashian, and Prince Harry and Meghan Markle, while also
investing in studios and services for up-and-coming voices.
"Spotify making these investments has helped increase the market
and push up the value of creators' work," said CAA's Mr.
Lindgren.
Apple, whose TV studio has released original podcasts including
"The Line" and "For All Mankind," is in talks with podcasters about
creating original and exclusive shows for its service, according to
people familiar with the matter.
"Even though they have the keys to the kingdom in terms of
overall customer base and the App Store and broader content, what's
going to differentiate them is not just aggregation, it's exclusive
content," said Mr. Ives.
Spotify says it welcomes competition.
"The opportunity in audio is massive. We feel there is room for
everybody given the scope and scale of what this medium has
become," said Spotify's Ms. Ostroff, who added that Spotify is
distinct from rivals because of its singular focus on audio. "Other
companies are looking at audio as a side business--it's our core
mission."
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 23, 2021 05:44 ET (09:44 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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