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Depending on whom you ask, Hollywood is already in a recession: Studios are reining in budgets and implementing hiring freezes and layoffs. The podcast industry, which is still settling into its sweet spot in the pantheon of capital-E Entertainment, appears poised to follow suit both as a reaction to the economic downturn and as a reflection of audio’s past years of massive growth.
It’s no secret that podcasting has seen an influx of corporate cash driven by players like Spotify, Amazon, iHeartMedia and SiriusXM. That cash, resulting in an influx of megadeals and new talent coming into the once-niche medium, was largely driven by these companies’ ambitions to create inventory and demand for a ballooning audio ad market by building out their libraries and growing global listenership.
But market declines in ad spending, slowdowns in listener growth, show cancellations and new rounds of layoffs and hiring freezes have led to some industry introspection: What will podcasting’s next era look like during a recession?
Let’s look at the deals. Two podcast dealmakers who spoke with The Hollywood Reporter note that companies have been more judicious in closing deals but were careful to emphasize that those changes weren’t, in their opinions, reflective of an overall decline for podcasting.
Platforms like Spotify now have more than 5.5 million podcasts, according to a Jan. 13 app push notification spotted by Podnews. Exclusive shows like The Joe Rogan Experience and Alex Cooper’s Call Her Daddy bring in millions of listeners from different demographics, allowing Spotify to reach a wider breadth of advertisers and charge accordingly. And now that Spotify can safely say it reaches, for example, Gen-Z and millennial women with Call Her Daddy and the incoming Anything Goes from Emma Chamberlain, the platform doesn’t necessarily need to shell out for additional megadeals with other top creators who reach similar demographics. “Last year, there was a period of time when one of the [more aggressive] companies wanted it, it was theirs,” one dealmaker says. “Now, there’s a little bit more selectivity.”
This dealmaker notes that selectivity could help increase parity in podcasting by allowing more companies to have a chance at bringing shows and creators into their respective networks. “A lot of the same companies were doing the lion’s share of the deals,” this source adds. “[Now, we’re] doing more deals with companies that we maybe didn’t do as many deals with last year.”
At the same time, smaller independent podcasters without traditional representation may not necessarily see that parity extend further outward, at least when it comes to getting deals with companies that are reining in spending. “It feels a little bit premature at this stage because we don’t know exactly what’s going to happen, but it does feel like there’s some panic in the air,” Tangia Al-awaji Estrada, co-founder of BIPOC Podcast Creators and host of That’s What She Did, says. “We’re seeing companies who’d normally be investing in up-and-coming talents, indie creators — smaller companies are pulling back and saying, ‘Well, we’re not doing that right now. We’re not doing that at all.’ So, there’s definitely a feeling like folks are holding their breaths to see what’s going to happen.”
On the ad-selling side, podcast distributors and monetization platforms are doubling down on direct response as brands refocus investments to prioritize sales conversions rather than overall brand awareness, according to Georgina Holt, an executive at podcast firm Acast. “The most typical buying behavior of only buying large show by large show is not truly serving advertisers or audiences. Ad effectiveness is not simply just about the size of the star or the show, but the depth of the listener relationship,” Holt said in an email. “Helping advertisers find their audience accurately, contextually, authentically, safely, and transparently will be absolutely vital in podcast advertising this year to keep demonstrating ROI.”
Max Cutler, a Spotify executive who oversees the company’s partnerships with creators, was also bullish about podcasting’s ad growth, attributing the “slower-than-expected adoption of brand advertising” to “bad tech” (still-being-developed audio technology) and not the medium itself in a LinkedIn post on Jan. 9. Though Cutler acknowledged that the first half of the year would be “rough for the ad market overall,” he emphasized taking a “long-term view” on the industry.
But Wall Street might not be as amiable to waiting. On Jan. 12, investment bank Jeffries downgraded Spotify from “buy” to “hold,” noting that the convergence between “music + podcast + audiobooks + fandom” was happening “much slower than expected,” with gross margins not expected to reach above 30 percent “well beyond” 2024. That, paired with a weaker ad market and the potential for Spotify to see subscriber churn if it increases its prices — like Apple — during a recession, could make it more difficult for the company to “expand fast enough to excite investors.”
Where does that leave creators? An opportunity to lean in on “great niche content” instead of trying to replicate existing shows and formats that audiences may be growing tired of, says Al-awaji Estrada. “Podcasting is going to be just fine. I really believe that podcasting is still so young that a huge market change isn’t going to blow up the entire world,” she says. “There’s going to be some tightening of the belts, probably, across the board. But by the time we come out of this thing, I think we will have seen podcasting continue to grow through the recession.”
A version of this story first appeared in the Jan. 18 issue of The Hollywood Reporter magazine. Click here to subscribe.
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