The global podcast market is undergoing a correction after several years of rapid growth.

Starting from October, one of the leaders in the global podcast market, the Swedish streaming service Spotify, will change the monetization system for some of its podcasts due to unsatisfactory results. Spotify reported a loss of €530 million across all of its operations in the first half of this year alone, while the company had previously invested about €1 billion in podcasts. And at the end of last year in the United States, for the first time in history, the share of Internet users who regularly listen to podcasts decreased . Experts started talking about the fact that for the first time since its inception, the podcast market found itself, if not in crisis, then at least in the stage of correction. The initial rush of demand from the public and advertisers has begun to slow, and many companies will now have to rethink their podcasting business models.

Stake more than profit

In early September became knownthat from October 1, Spotify will exclude podcasts with so-called white noise from the Ambassador Ads content monetization program. Tracks with the sound of waves, forests, rain, etc. fall into this category. White noise podcasts collect up to 3 million listens daily on the platform, and their creators earn up to $18,000 per month. Spotify promoted noise podcasts as part of a policy to attract new users to the podcast service, but were unhappy with the result: such tracks work “in the background” instead of engaging active listeners.

This is not the first report that one of the world leaders in the podcast market is experiencing problems with their monetization. Late July Spotify reported on its results for the second quarter and first half of 2023. The company’s net loss in the second quarter amounted to €302 million against €125 million a year earlier, and for six months – €530 million. After the publication of reports, Spotify shares fell in price by 15%.

Investors were disappointed by the quarterly results, even as subscriber numbers, the main metric by which streaming companies are measured, beat forecasts.

Experts say that despite strong subscriber growth, Spotify’s financial results are not looking so good as its costs continue to rise. This is due, among other things, to the expansion of offerings such as podcasts and audiobooks, as well as an increase in royalties paid to music artists. Since 2019, Spotify has spent about €1 billion on investments in podcasts and new agreements with famous people and leading actors. But, according to unofficial data from sources within the company cited The Wall Street Journalthese costs are not justified.

Analysts note that Spotify has invested more in podcasts than other major players in the podcast market, such as Apple, Amazon or Google. And Spotify, along with Apple, is the leader in the podcast market: the global share of Apple Podcasts is 37.4%, Spotify – 26.8%. Following closely behind are platforms such as Google Podcasts (2.4%), Castbox (2.0%) and regular web browsers (2.9%) (see table).

Already in the spring, it became clear that Spotify’s big bet on podcasts was not working as expected. For example, in April, the Swedish company did not renew the license for podcasts featuring Bruce Springsteen, as well as Barack and Michelle Obama. In early June, Spotify announced plans to cut 200 jobs, mostly from its podcasting operations.

It’s time for a rebuild

Analysts polled by WSJ note, that the increase in investment in the development of podcasts in some cases, against the backdrop of many years of hype, turned out to be excessive and did not bring the expected profit. It also played a role that in the US market, the world’s largest podcast market, in 2022 the share of podcast listeners decreased for the first time: from 41% of the total number of Internet users to 38%. And although the number of podcast listeners continues to grow steadily in the rest of the world (see infographic), market participants are already saying that the industry survived the first stage of excitement and hype and began to enter the period of maturity and, as a result, correction.

“The era of easy money is over,” quotes The New York Times Podcast market analyst and co-founder of the independent podcasting studio Magnificent Noise Eric Nuzum.—More recently (market participants.— “Kommersant”) scattered money left and right, spending it on everything they saw in hopes of increasing their audience. But now everyone has started to behave more reservedly.” Even before Spotify’s June layoffs, two major podcast publishers, Vox Media and Pushkin Industries, announced staff cuts in February. Companies like Amazon, SiriusXM and NPR have also decided to cut podcasting budgets, not renewing or even canceling some projects.

The game has moved into the “do less with less effort” stage, The New York Times quotes one NPR producer as saying.

However, some analysts note that a correction in the market will not necessarily result in a crisis or recession. “A decline in investment is not necessarily a crisis indicator,” Lauren Jarvis, former head of Spotify partnerships, explained to the newspaper. “It may mean that the industry has reached a new point of development and now it has to adapt to this with new, more sustainable business models.”

The fact that the industry needs to rebuild after the first years of rapid growth in profits and investment is evidenced by the fact that the number of podcast listeners continues to grow worldwide. According to forecasts Market.us, in 2023 the number of listeners will reach 465 million, and in 2024 – 505 million. In the USA alone, by the end of this year, the number of regular podcast listeners will cross the 100 million mark. The COVID-19 pandemic also played in favor of podcasts: forced self-isolation led not only to Explosive audience growth—as recently as 2019, there were only 275 million active listeners worldwide—and the number of podcasts in the market, but also increased smart speaker sales by 22% in 2020-2021. Smart speakers are now the most popular means of listening to podcasts.

• 78% of American adults say they are familiar with podcasts
• 28% of them listen to them every week.

Following the USA, other markets are catching up:

• 38% of Canadian adults said they listened to a podcast in the past year.
• in Italy, these were 48% of the total number of Internet users surveyed.

Eric Nuzum notes that audience growth is a good sign for market participants. “If there is an audience and it is growing, it means that business will find a way out of the situation,” the expert believes. “We are not seeing a recession among listeners. So (the current situation.— “Kommersant”) this is not a problem with podcasts as a media channel – it is a problem with the business model that many have followed. So market participants have room for further growth.”

Evgeny Khvostik