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Home / Business

Spotify, Apple locked in fierce battle for podcast market

By Olivia Feld
Daily Telegraph UK·
9 Feb, 2019 12:11 AM6 mins to read

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Spotify wants to become the Netflix of audio with podcasts. Photo / 123RF

Spotify wants to become the Netflix of audio with podcasts. Photo / 123RF

The question of whether Adnan Syed killed Hae Min Lee was on everyone's minds in 2014. The murder may have taken place 20 years ago, but the surprise success of podcast Serial, in which Sarah Koenig interviewed Syed in jail, placed it back on the news agenda.

Serial's popularity triggered a wave of podcast successes, with millennials - more used to staring at screens than listening to audio - helping drive the growth.

Now, two of the world's biggest music streaming companies, Apple and Spotify, are locked in a fierce battle to dominate the growing podcast market.

"The bubble is not bursting", says Ellen Horne, the former executive producer of Radiolab. "We're continuing to see increased listenership, increased investment, increased ad dollars. It's still going and shows no signs of slowing down."

The number of weekly podcast listeners has almost doubled in five years, from 3.2 million in 2013 to 5.9 million in 2018.

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Six million people in the UK listen to at least one podcast each week and that number is growing.

With those figures in mind, Spotify this week acquired two podcasting companies, Gimlet and Anchor, a move that it hopes will help it become the "Netflix of audio" and finally topple Apple in the streaming stakes.

But Spotify is facing some tough competition. Apple Podcasts, the most popular app to listen to podcasts, which hosts more than 550,000 active podcasts, says that 50 billion episodes have been downloaded since it was launched.

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Spotify is gearing up for a drawn out fight.

Having launched its own podcast platform last year, Spotify says it's planning to invest a further US$400 million ($593m) to US$500m on more podcast-related acquisitions this year.

Daniel Ek, Spotify's chief executive and founder, said he wants to topple Apple's dominance in the podcast space and says the acquisitions will "position us to become the leading platform for podcast creators around the world and the leading producer of podcasts".

But beyond hosting other people's content, Spotify is also looking to make money in producing its own original productions. Much in the same way that Netflix and Amazon now invest heavily in making their own television shows.

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"From the perspective of Spotify, it pays a lot of money to the record labels for the music," says Tom Webster at Edison Research. But with more listeners comes higher royalty costs, he added.

There's a massive opportunity for platforms like Spotify to control costs by owning their own content.

It's not just Spotify that wants to get in on the action. Audible, which is owned by Amazon, launched its own podcasts a few years ago and now offers original content with its monthly subscription service.

Stitcher and Google, which both have podcast apps (which critically, unlike Apple's, are offered on Android), started to create their own shows in addition to hosting others in the last two years.

The podcast industry is still relatively nascent, having begun life in the mid 2000s. The word podcast, an amalgamation of "iPod" and "broadcast", was first coined by a journalist looking to pad out his article on the then new phenomenon of automatically downloadable radio programmes on iPhones.

Apple added podcasting to its iTunes software first by building a directory of podcasts in its Music Store and then, creating the Apple Podcasts app in 2012.

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The app, which is automatically loaded onto all iPhones, has proved to be instrumental in the growth of the medium.

Shortly after, Serial was launched. The show was a huge hit and was the first-ever podcast to reach 10 million downloads in seven weeks. Its first and second seasons have since been downloaded more than 250 million times.

Some of the biggest podcasts listened to by millions, such as This American Life (out of which Serial was spun) and Radiolab, began life as programmes on the radio. Although they feature topics covered elsewhere, like gun crime and science, they sound very different to a typical news bulletin or magazine programme. Instead of the typical host and interviewee radio format, podcasts can tell stories through narrative long-form storytelling.

"In the early years, people looked at us like we were crazy. Why would you put so many resources into making one hour of radio?" says Horne.

Although more expensive to produce, the investment into long-form narrative podcasts paid off.

"Serial was definitely the turning point for podcasts," says Caroline Ballard, host and producer of Wyoming Public Radio's podcast on human experiences in the natural world, HumaNature.

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Since then the industry has boomed, with gradual and incremental year-on-year growth.

"Podcasting has never had sharp growth," says Webster at Edison Research. "It's been the little engine that could for 15 years."

As well as inspiring a new generation of shows, the success of Serial led to the founding of dozens of new production houses, like Gimlet, specialised in making podcasts.

New York-based Gimlet was founded in 2014 by two former public radio journalists. It produces dozens of podcasts as well as audio content for brands like eBay, Tinder and Mastercard.

One of its podcasts, Homecoming, was recently adapted into a television show starring Pretty Woman actor Julia Roberts for Amazon Prime.

Founded the following year, Anchor, the other company purchased by Spotify, has an app to make, distribute and monetise podcasts.

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Also New York-based, Anchor says it helps to power more than 40 per cent of the world's new podcasts.

The half a billion dollar industry has reached a tipping point, according to Webster.

It's attractive to advertisers and is also benefiting from new revenue streams, including ticketed live shows and adaptations into movies and TV.

The proliferation of smart speaker technology, like Amazon Alexa and Google Home, is also expected to facilitate the market's continued growth.

Roughly 21 per cent of the population has at least one smart speaker in their home, according to research by NPR and Edison.

The investment in podcasting by Spotify has been welcomed by the industry. However, it's not yet known whether the streaming company will put the podcasts, which are currently free to listen to, behind its subscription paywall.

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"I'll be watching closely that listeners can still feel like they can access this without having to pay that monthly subscription fee," says Ballard.

"It's a genre that could be potentially available to all kinds of different people, all kinds of different demographics.

"As a podcaster, you want to preserve that and not create divisions that would make it harder for people to listen or for people to create."

For now, the barriers of entry for listeners remains free, or relatively low, and so far, the bubble is yet to burst.

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