Business models

Podcasts haven’t reached their peak yet

And 5 other takeaways from the latest Reuters Institute report

A widely acclaimed “pivot to video” in the media industry has been eclipsed by an actual “pivot to audio”. Driven by young audiences, podcasts have seen double digit growth in many markets, a new study shows. 

What’s more, that growth is set to continue, bringing with it new and more promising revenue streams.

The presentation by Reuters Institute for the Study of Journalism fellow Nic Newman at this week’s Hacks/ Hackers event in London – a gathering of journalists and tech gurus – drew in crowds, many of whom either published podcasts or are thinking about it.

Together with his co-author Nathan Gallo, Newman looked at the podcast markets in five countries – Australia, France, the United Kingdom, the United States and Sweden. They spoke to over 30 publishers, including the Washington Post, Slate, New York Times and The Economist.. 

Here’s 6 takeaways from the report – for the full version, follow the link

We haven’t reached peak podcast yet

Recent years have seen an incredible growth in both podcasts overall and news podcasts specifically. Cheap data, convenient tech and an on-the-go lifestyle have all contributed to the rise of the global phenomenon.

Some 90 million people listen to podcasts each month in the US – twice the number from 2015, the report notes. In the UK, the previous year saw a jump of 40% in consumption.

Source: RISJ report

But have we reached peak podcast? “Not yet,” argues Newman. 

Looking at what will drive demand going forward he expects technological innovations (more affordable and convenient wearable gear), content innovation and a demand for quality to continue to push the market forward.

The tech companies have also noted this trend and are now investing into improved distribution and content. Google is improving podcast search and developing its own service for Android phones. While a risk for media companies, better products and accessibility will also no doubt fuel the industry’s growth.

News is small in podcasting – but punches above its weight

Podcasts loom large in the minds of journalists. Not so much for users.

News podcasts made up only 6% of the 770,000 podcasts catalogued by Apple, the biggest platform. The biggest categories – religion, music, comedy, society & culture, as well as food.

But in a winner-takes-most market, news is surprisingly strong. Close to a fifth of the most popular podcasts in the US, Sweden and Australia were in the news category, with a whopping 34% in France (the UK lagged at just 16% of top podcasts being news).

This is driven by successful podcasts from leading publishers. The single biggest player is the New York Times’ podcast, The Daily, which reaches about 2 million people per episode.

Impressively, this is typically driven by quite small teams – the New York Times is by far the biggest, with 15 people producing The Daily, but most publishers produce podcasts with teams of 4 to 8 people.

Podcast advertising has taken off – in mature markets

The English speaking markets are starting to show a long list of companies making serious cash off of podcasts. Half of US digital-native Slate’s revenue now comes from podcasts, while public broadcaster NPR is expecting $55 million in podcast revenue this year. 

The Economist said there was so much advertising demand their podcast was making money within 6 months, Newman noted.

Advertising is the dominant model for podcast monetization. Rates are currently high in the US – CPMs or costs per thousand listens – for podcasts tend to exceed even some videos. However, Erik Borenstein of the New York Times notes that has been the case for many new digital formats in the beginning. 

Perhaps more worryingly, large platforms may end up capturing much of that revenue, using scale and larger data sets to better target audiences and extract more value from the relationships.

Platforms also seem set on capturing the emerging premium market of paid content – with Sticher, Luminary and Spotify, among others, all announcing plans to invest in original content that they can sell to audiences for $5 to $10 a month.

That said, we should expect hybrid subscription models to appear, Newman predicted, particularly as the technology to effectively implement audio paywalls catches up.

This is also the case for non-English markets, which show much more modest advertising revenues. In Denmark start-up Podimo aims to offer a ‘superior discovery and recommendation experience for around $6 a month. 

Spotify is betting on original content to get people to pay for podcasts

Its all about the getting young people – and keeping them

Podcast consumption is driven by younger audiences in all the markets surveyed (see graph). As a result, many publishers have decided to launch podcasts irrespective of the fact whether they can monetize them effectively or not. 

“It’s a form of editorial that happens to be very effective marketing and also pays for itself,” according to Tom Standage of The Economist [which happens to be a particularly lucrative podcast – Editor’s note]

Source: RISJ report

But podcasts are about more than just getting to new audiences, Newman noted. They have a habit-forming quality that helps you keep that audience once you have it

Notes Chris Duncan, Managing Director of The Times and Sunday Times: “You can see consumer habits changing to include audio more in daily routines […] ‘It feels like a positive opportunity but also it’s a threat for attention – so it’s a place that we have to be.” 

Local conditions matter

Despite being a global phenomenon, podcasting looks very different across markets. 

Availability and cost of data are the first barrier. Pricy mobile data in many African countries have stymied the development of audio content, while places like Brazil are absolutely booming, Newman explained.

Language plays a similar role. The US was arguably the pioneer and source of most quality, highly produced content. As a result, English-speaking countries soon saw their markets swamped by American content (see graph below), a trend unlikely to be reversed in coming years.

Source: RISJ report

Non-English markets were much slower to embrace podcasts, although this ended up favouring local producers. France only has 13% of foreign content, with a majority of podcasts being “catch-up” (meaning they are actually new incarnations of existing radio of TV shows), rather than native podcasts like for the other markets. 

Linguistic factors can also delay (or straight out block?) the development of podcasts. In particular, many East European markets have yet to catch on to the trend – but whether this will be a persistent feature, or an opportunity for local players, is still to be determined.

There’s an opportunity for publishers, and a risk of losing to platforms

The markets surveyed differed significantly by who actually produces the podcasts. Broadcasters – TV and radio – are the largest in each market, but range from absolutely dominating in France (80% of content), to just being a plurality in the US with 35%.

The US, meanwhile, stands out by the strength of podcast production companies (like famed example Gimlet, bought by Spotify for $230 million in 2019) and independent publishers/ individuals, with 19% and 14% respectively.

Source: RISJ report

But that doesn’t mean the print/ digital media are losing out.

“Although broadcasters are the largest podcast producers in all five countries studied, print and digital media companies produce more of the trending native podcasts overall”, the study notes.In particular, personality driven episodic shows are showing a lot of promise.

The big risk for media companies comes, once again, from losing control of distribution. This is currently driven by the dominant Apple and heavyweights like Spotfiy, as well as new, Netflix-type paid content models. 

“Many publishers worry fear they could be helping platforms build profitable businesses on the back of their content,” the report concludes. “Others worry that they could lose their direct relationship with audiences.”

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