If it’s still too early to declare platform-exclusive podcast deals dead as we move into 2023, it’s becoming ever clearer that this business model is likely not long for this world.
Spotify in particular has spent the past few years building up its arsenal of exclusive podcast content, shelling out more than $1 billion to acquire studios, lock down popular shows and secure marquee names. Those include podcasting behemoth Joe Rogan, former Presidential couple the Obamas (through their Higher Ground media company) and even the Duke and Duchess of Sussex.
But the tide is turning as we enter what many observers project to be a difficult year for the podcasting industry. As in the streaming video space, the major audio players are reportedly reining in their spending amid economic pressures, bringing the booming market of the last several years toward a close.
This sea change has huge implications for the platform-exclusive model, which was never a great business proposition to begin with but will only become less attractive as economic conditions worsen.
For one thing, as the digital ad market continues to sag in the months ahead, competition for podcast ad dollars is going to intensify further — bad news for any creator whose show is limited to a single platform.
Despite exponential growth in the number of shows available to listeners — on Spotify alone, that number grew from around 700,000 at the end of 2019 to 4.7 million in September 2022, per company reports — the podcast ad market, while still growing, has not expanded nearly as rapidly. Spotify’s U.S. podcast ad revenue is projected to steadily increase by about 40 percent year-over-year through 2024, far down from the explosive growth rates of 2020 and 2021 as its podcast operations expanded.
As a result, it will be increasingly difficult for any but the most popular podcasts to claim a sizable chunk of the ad dollars available. Creators will therefore need to maximize ad revenue as much as possible, and limiting their potential audience through an exclusive distribution model will be increasingly untenable.
Indeed, some creators are already chafing against this model, which evidence suggests usually reduces a show’s listener base. The Obamas reportedly became frustrated by the limitations of their exclusive Spotify deal, which fell apart last year; in June, Higher Ground struck a new deal with Amazon’s Audible, which does not make the company’s projects exclusive to the platform.
Meanwhile, this past fall, Spotify canceled 11 of its original podcasts from the Gimlet Media and Parcast studios, which the audio streamer paid around $250 million total to acquire back in 2019, and laid off employees from both divisions. In the wake of the layoffs, a joint statement from the Gimlet and Parcast unions claimed that making the canceled podcasts Spotify exclusives “caused a steep drop in listeners — as high as three quarters of the audience for some shows.”
Even Spotify’s biggest performers are not immune to this phenomenon; a report by The Verge in 2021 showed that Rogan’s observable impact diminished after his blockbuster podcast became a Spotify exclusive. Before the move, Rogan’s guests would gain about 4,000 Twitter followers on average in the week following their episode, but afterward that number dropped to around 2,000, suggesting Rogan’s audience shrank after the podcast went exclusive.
That dynamic works in reverse as well. According to data shared with VIP+ by podcast company Acast, the popular Spanish-language show “Se Regalan Dudas” (now distributed by Acast) grew its audience significantly after its Spotify-exclusive deal expired. Listens were up 25 percent for the three months following the podcast’s last 90 days as an exclusive; one year later, listens were up 56 percent, according to Acast. (The company did not provide exact listener numbers.)
Contrary to film and TV streaming, it seems, content is not king in the podcasting space. If large numbers of listeners will not follow even popular shows to an exclusive platform, such deals will look less and less attractive in a declining market, and the prospect of greater reach (and the ad revenue that comes with it) will likely start to trump the paydays offered by the major audio platforms.
Indeed, given the current economic climate, it’s hard to see companies like Spotify and Amazon continuing to shell out huge sums for exclusive podcast deals over the next year. Dawn Ostroff, Spotify’s chief content and advertising business officer, recently told Variety that while the streamer will continue to pursue such deals, “there aren’t many of them that are at that level” still on the market.
It's worth considering whether exclusive deals still make the most sense for audio platforms in any case. Spotify’s rationale for making such deals was to build itself up as the go-to podcast platform, and to lure audiences from other platforms — a strategy, as we’ve discussed, with limited success.
Spotify may be better served, instead, monetizing its popular original podcasts by licensing them out to other platforms, particularly considering the fairly dismal margins on its podcasting business. (According to CFO Paul Vogel, Spotify’s podcast business had negative gross margins of 57% in 2021, and losses were expected to peak in 2022.)
Podcasting remains a growth business, even if that growth is decelerating. But as in any maturing market, business practices must shift with the times — and in this case, that means the walled gardens are going to start opening up soon.