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Episode # 27 – Apple Looking To Fund Original Podcasts?

With rival Spotify investing so heavily into the funded podcast game, is it any wonder that Apple may be looking to double down on the the platform that they currently dominate?

When Swedish media provider Spotify announced in early 2019 that it was planing to invest up to $500M into the world of podcasts, it was pretty big news. The music app had only begun supporting podcasts in 2015, and it has yet to prove a profitable business model. Still the message was clear as they promised to acquire a series of podcast companies: Podcasts were in fact a legitimate business, and the era of fringe listenership was officially over.

It’s not really shocking that companies are starting to realized that there are serious dollars to be made from the podcasting platform though. Just since 2014, podcast audiences have more than doubled, with an estimated 30% of Americans over the age of 12 tuning in monthly, and just last year podcast companies generated more than $475M in advertising sales just in America.

Let that sink in for a second. This is a platform that was thought of as glorified ham radio just a few years ago. Any yokel could create their own podcast, and often did. When podcasts slowly sauntered out of the gate in the early 2000’s, they were little more than insider audio newsletters for a select group of internet geeks until Apple added podcasts to it’s I-Tunes store. Even then, they wouldn’t really catch on to the majority of the public for another couple of years, and it quickly became evident that businesses had no idea how to monetize the new media form.

By the later part of the decade though, "podcasting" was becoming a bit more of a household phrase, even if listeners were relatively few and far between compared to where we are now. Apple continued to dominate the podcast delivery charts, and even with newer competitors like Stitcher jumping into the game, Apple never really took many steps to monetize the art form- content instead to continue on as an aggregater rather than a publisher. Again- not surprising- their core business of creating some of the worlds most popular hardware has been good to them. As of early 2019, hardware sales of computers, mobile devises, and various other affiliated products remains roughly three quarters of Apples revenue, and the company is sitting on more than $225B in cash. Their Itunes platform makes them billions of dollars as well, mostly off of music and video sales, even as the Ipod has gone away.

Things changed when Spotify publicly embraced podcasts in 2019 though.

Spotify has risen to the number two platform for podcast downloads, accounting for 10-20% of the downloads of podcast (compared to the estimated 50-70% that still go to Itunes), and the company has had several very public legal spats with Apple over the last couple of years. To say that the companies don’t like each other is an understatement.

While Itunes offers a premium product to customers to go along with their free products, Spotify’s premium product has actually outsold it. Likewise, Apple rival Google has begun embracing premium services over the past couple of years as well by creating and investing into a premium version of YouTube featuring its own exclusive content as a way to compete with streaming giants Netflix, Hulu, and Amazon Prime. Apple has shown signs that it is no longer content to sit on the sideline with the content game.

Earlier this year, Apple announced it’s plans to completely overhaul the entire Itunes platform, which had become cumbersome and difficult to navigate over the years in direct defiance to everything Apple is supposed to stand for. With over 700,000 podcasts on Itunes alone, it’s not hard to see where the problem lies, and with the announcement, Apple promised to create a much easier navigation system, a “better” algorithm for recommending content to it’s customers, and a better separation of videos, music, and podcasts with much clearer lines between them.

With Spotify’s announcement that they would be purchasing $500M worth of podcasting companies though, a flag had been planted- they clearly wanted to be the company with the strongest public tie to podcasting, and with first mover advantage, they knew that any other attempt to follow would be seen as just that.

Now the word on the street – thanks to Bloomberg who broke the story- is that Apple is not only ready and willing to follow Spotify into that territory, but that – with their much larger cash reserves at their disposal- Apple is ready to take the game to a new level. If the rumors are to be believed, Apple is looking to skip the podcasting companies altogether and will instead look to fund a large number of exclusive podcasts directly which will only be available on it’s own podcast platform. By funding those podcasts and guaranteeing exclusivity, it will effectively cut off its rivals from growing their own companies around the podcasts that Apple has been offering for free, and the moves will conceivably turn the company into a media company in it’s own right.

The story is new, and Apple has yet to confirm or deny the chatter about it’s supposed plans, but the speculated plan- alongside it’s promises earlier in the year to revamp how their user interface for Itunes works, could well be a very telling sign as to where things are going in the industry.

My take on things 

It’s too early to say for sure when or how this will all play out, but there are certain things I foresee being almost inevitable about this plan.

 

First – I think this WILL end up happening, and I think we will see an announcement before the end of 2019. It just makes sense. Podcast listenership has been growing by nearly 65% yearly for the last three years, and the vast number of new podcasts being launched every day prove that it’s not petering out yet… although there might be something to say for the potential demise of the platform on day due simply to the overall size of the platform with so many new podcasters. Still, that is a topic for another day.

Second- Podcasts will continue to grow on a branded level as well as companies and brands realize the potential of the platform. We’re already seeing several large companies embracing podcasting with their own shows, and while most brands are having trouble understanding that you can’t turn your podcast into a blatant advertisement, enough brands are doing it right to ensure that well produced shows with access to more production capital will continue to be on the rise.

Third- According to the rumors, Apple isn’t just looking to start new exclusive podcasts, but also to invest into some existing ones that will go along with the exclusivity clause. For some podcasts, that will actually make sense. While they lose access to between 30-50% of their potential audiences, they may end up preferential treatment from the biggest player on the block, not to mention the pay day that goes along with it. For a podcaster or podcasters who’s end goal was simply to monetize their show, this is a good way to achieve just that.

Fourth- My guess is that most current shows won’t come close to qualifying for the program. Apple isn’t dumb- they are going to want to invest their money with a clear goal in mind, and a specific plan of how to get there. My guess is that 99.99% of those 700,000 podcasts wouldn’t fit into that playbook. I think that it is possible that they will open the program to “volunteers”, but I would be amazed if the vast VAST majority hear anything back other than a nicely worded “it’s not you, it’s us” rejection letter. If I had to bet, my guess is that they will invest into influencers, brands, and celebrities first and foremost.

Fifth- Stitcher finds itself in an interesting place. It WAS the number two alternative to Apple for podcasts fans, and it still retains popularity with a lot of hardcore fans (myself included) for it’s easy to navigate user experience- after all- it was built around podcasts, so there is less digging around to find what you want. That being said, it’s nowhere near the size of the other two companies, and with Google, Pandora, and several other groups beginning to go deeper with podcast aggregation, Stitcher is struggling to find it’s place. The platform has likewise faced criticism for adding advertisements before and after podcasts without getting permission from the podcast itself, though it has changed it’s TOS to be more clear about how it makes money.

While Apple and Spotify are looking to go into being media companies of their own right, there will be fears that the content that they invest in will be given an unfair advantage- especially during the launch of Apple’s much touted new algorithm. For independent podcasts and those who either choose to turn down- or are turned down by- Apple or Spotifys offers, there will be a concern that their independent podcasts maybe be pushed down in the search process and buried under content that more directly benefits the companies who are paying the bills. Will Stitcher potentially become the “Home of the Little Guy” and become a favorite for the independent creators?

 

Only time will tell.

 

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