Welcome to Hot Pod, a newsletter about podcasts. This is issue 196, published February 19, 2019.

Sort-of reader mailbag: Spotify edition. It’s Spotify Day +13. My inbox has pretty much started to chill after all the news, which has given me some time to sift through and check out what’s been occupying the Hot Pod hive mind. And from where I sit, there were two threads that stood out.

The first thread is the prevalence of an understandable, but imprecise, assumption: that, by virtue of its spendy acquisitions, we’re looking at an inevitable future in which Spotify is the new dominant — or even monopoly — power over the whole podcast industry. Which is to say, it’s only a matter of time before the Swedish platform usurps Apple’s position as the steward of podcasting, eschews Cupertino’s traditionally hands-off approach that’s allowed the medium to flourish on its own terms, and reshapes the industry on the basis of its own corporate needs.

That’s getting a little ahead of ourselves, I think. To become Nü-Apple, Spotify must first cultivate a meaningful share of podcast listening on its platform — either by converting its non-podcast listening users or by drawing in substantial numbers of podcast listeners that don’t use Spotify as their primary listening option. Then they have to figure out to monetize podcast listening properly on their platform. And then they have to figure out how to create an environment where third-party publishers will keep wanting to play with them over the long-run. (Or, if that fails, how to create an internal supply chain robust enough such that they don’t have to worry about what third-party publishers want.)

Each of those will be difficult to do, to be sure, and we’re especially familiar with the challenge of that first one: growing a meaningful non-Apple podcast listening user base is a task that’s often been attempted, but rarely realized with much success to date. Spotify’s money-slosh suggests greater drive and incentive to figure this one out than others have shown to date — but the fact of the matter is, they’re still a non-Apple insurgent that needs to generate user conversions on a broadly unprecedented scale.

That isn’t to say that it won’t happen in some form or another, of course. I’m just saying there’s nothing inevitable about it. Like all other major things, a lot will come down to execution, and a lot of execution comes down to luck.

Until then, the immediate legacy of Spotify’s Big Podcast Adventure is less presumed dominance than a dominant signal. Consider the following thread: Spotify has committed a substantial portion of its future narrative to podcasting. That is a signal to — or creates a permission structure for — competitors and other well-resourced players to pay close attention and commit more money to the space. Which in turn expands the podcast gold rush that was only moderately scaled before. Indeed, Spotify doesn’t have to eat its way through podcast listening in order to reconstitute the ecosystem. In all likelihood, it’s already triggered an environment where that reconstitution could happen in many other ways. This, by the way, was what I was trying to say when I wrote that the ripple effects of this move are going to be wild.

The second notable discussion trend revolves around hope for some greater balance of power. Several readers — mostly from bigger publishers — expressed optimism that, assuming Spotify does become significant, other distribution platforms will move to similarly match it, ultimately creating a more competitive environment where publishers are able to exercise options and build leverage to create better marketplaces for themselves.

Off the top of their heads, that could involve:

• Pandora actually following through on its Podcast Genome Project ambitions — though, in my opinion, this now oddly feels like a necessary-but-insufficient condition in the wake of the Spotify news.
• A paid podcast platform actually breaking through and reliably offering publishers alternative business model options. (Luminary was the one on most people’s minds, of course, but for what it’s worth, I’m still convinced Audible should still be in play as a vendor you could potentially sell goods to.)
• Apple getting more involved one way or another (the term “sleeping giant” was evoked several times, of course). That could mean actually stepping in as an active middleman, in the vein of its recent Apple News machinations (minus the troublesome rev share problem, hopefully), or replicating whatever it’s trying to build on television side (the efficacy of which remains up in the air) — or even, as one source dared to dream, doubling-down on its position as the steward of open podcast publishing by pushing for more podcast listening on the Apple Podcasts app without fundamentally changing the nature of how it treats the supply side. (Though it’s hard for me to see what’s in it for Apple there.)
• A left-field idea offered up by some readers: The public radio system itself could step up as an alternative podcast platform, both as a distribution point and a business model to publishers up and down the sizing scale. (There’s a nice line that you can draw between this idea and the section below on the U.K.’s new Audio Content Fund.)

The general feeling from this crowd, it seems, is that there’s little to be gained from being anxious about whatever change Spotify will bring to podcasting. For them, it’s more of a matter of whether there will be enough of it. “Change is good,” one source said to me, in a tone that was very “chaos is a ladder.”

Two follow-up reads. First: I thought this Medium post by Edison Research’s Tom Webster, drawing from Share of Ear data, raised an interesting point on thinking through the actual value of the Spotify acquisitions. Here’s the key chunk:

Podcasting is now 4% of the total audio pie. That’s a third of the time we spend listening to our “owned music” — CDs, MP3s, 8-tracks, etc. But you know what you can’t do with “owned music?” Sell advertising over it. When you pop that Harry Styles vinyl on your turntable, Casper Mattress can’t stick an ad between the tracks…

Here’s what all of this means: if we take out all of those non-addressable audio platforms, remove the 11% of our total audio consumption that is basically listening to music videos on YouTube (because they don’t sell audio ads) and the listening to the premium, ad-free versions of Pandora/Spotify/etc., we are left with AM/FM radio, ad-supported streaming audio, and podcasting. That’s 64% of our total audio consumption.

Podcasting might be 4% of that total audio consumption, but it’s 6% of our addressable audio consumption. If we take the total addressable audio market at a very conservative $20 billion in 2018, that means podcasting “should” already be pulling in $1.2 billion of that. Podcasting is still growing, of course, and with any new ad-supported medium the dollars lag behind the actual listening. But I think it’s going to catch up, and soon.

Webster concludes with a comment on the Spotify acquisition: “As the terms of that deal have become public, I’ve seen some of the pundits in the various podcasting groups to which I belong posit that they drastically overpaid. Given what I’ve just laid out here, isn’t it just the teensiest bit possible that they bought low?”

Second: Stratechery’s Ben Thompson is always worth a read, and his read on Spotify’s guts and gore is no exception:

…it is worth considering if this is good for the podcasting industry generally. After all, to return to the web analogy, the price of the Internet finally monetizing effectively was the shift of content to centralized platforms like Facebook. Is the web better today than it was when we were punching monkeys?

I do think the answer is yes, but I don’t mind if you disagree: granted, most supply has moved to Facebook and other social networks; it is no longer possible to build a viable web business with display ads. At the same time, the web is still as open as can be, which means there is room for new business models like subscriptions, a model that has only gotten started and is already producing far better content than the old mass market media model ever did (I’m obviously biased in this regard!).

I can see a similar future for podcasts: Spotify, if they are successful, may end up being the biggest player, but that doesn’t mean new and different business models that directly link suppliers and consumers won’t emerge. It will, in other words, look like everything else touched by the Internet: very large winners on one end, and small niche winners on the other.

Speaking as the proprietor of one such niche Internet shop, some days I see this as a good thing, and on other days — like this one, when I am jet-lagged, grumpy, uninspired, and in deep want of co-workers and a managerial structure around me so that I don’t have to do everything on my own — I sometimes maybe think I wished mid-sized, middling, inefficiency-enabled companies stood a better chance.

Also, ICYMI:

In SEC filingSpotify said it paid ~ $340mm for Gimlet Media and Anchor, which means it paid $110 for Anchor. Company raised $14.4 mm per @PitchBook. ht @nwquah, again.

— Peter Kafka (@pkafka) February 14, 2019

Revolving door. Jason Hoch, the head of new initiatives at Stuff Media, is leaving the organization (and parent company iHeartMedia) to join Imperative Entertainment, where he will lead the expansion of its new podcast division. Part of the Friedkin Group, Imperative is a Santa Monica-based entertainment studio that’s produced Ridley Scott’s All The Money In the World and Clint Eastwood’s The Mule. Hoch had been with Stuff Media for over four years and was part of the acquisition by iHeartMedia that took place last fall.

This is the second notable departure from iHeartMedia’s podcast division this month. Chris Peterson, the company’s EVP of podcasting, announced a few weeks ago that he was joining Liontree in New York as the new president of Kindred Media.

The funding gap: A primer on the U.K.’s new audio content fund [by Caroline Crampton]. A new Audio Content Fund has been announced for the U.K., which takes the form of a nonprofit backed by a three-year £3 million government grant from the Department of Digital, Culture, Media and Sport (DCMS). It’s apparently designed to primarily fund public service material from production companies — especially independent ones — that would likely otherwise slip through the cracks of the larger commissioning processes at the BBC and elsewhere.

It’s pretty cool, in theory, and I think the fund could be the beginning of a bigger and longer-lasting change to publicly funded journalism here in the U.K. (For a recap on how the license fee is collected and currently supports the BBC and other public broadcasters, see this primer from last year.) And since what happens at the BBC has a powerful ripple effect through the whole media industry, this fund is worth paying close attention to right off the bat.

Here’s some background on the fund, for those curious: Its origins can found in a white paper published by DCMS in May 2016, during the consultation process before the BBC charter was renewed at the start of the following year. (The Royal Charter is the constitutional document that created the BBC in 1927, and it is updated every 10 years to reflect the changing broadcasting landscape and the aims of the incumbent government; it has a big red wax seal and everything.)

The report contained some musings on how to “enhance plurality in the provision of public sector content,” which is government-speak for “spread the wealth beyond just the BBC and its typical providers.” This was part of a wider approach from then-Culture Secretary John Whittingdale — who lost his job just a few months after this document was published, post-Brexit referendum — to insist on greater transparency about how public money was used by the BBC and to require more competition in commissioning processes.

More specifically, the 2016 report recommended that a new contestable public service content fund be created for television commissions, with the aim of boosting productions in genres that commercial broadcasters traditionally find hard to fund. Children’s television was singled out as an example, since that’s an area of output that’s almost entirely dominated by the BBC, and DCMS clearly felt that it was worth giving a leg up to the competition in the hope it would result in “new, fresh content.”

The TV Fund was created using £57 million of unused government money that had been earmarked to support broadband internet infrastructure, and it’s now administered by the British Film Institute specifically for new shows aimed at young audiences. After lobbying by bodies like Radiocentre (which represents U.K. commercial radio) and AudioUK (the trade body for independent audio producers), a further £3 million was found for a separate fund to support audio that also meets the requirements set out by the government report — a recognition that radio commissioning faces many of the same challenges as TV and that even this relatively small investment could deliver a lot of new public service radio content.

The similarly-spirited Audio Content Fund was formally announced in October and began operations last week. It’s chaired by Helen Boaden, a former director of BBC Radio, who is also joined by a panel of experts including the consultant Kate Cocker, the independent producer Mukti Jain Campion, and former commercial radio executive John Myers. The day-to-day process will be run by a managing director who takes up office in April.

The two funds, TV and Audio, are pilot schemes to be run for three years as the government measures how effectively they deliver on their missions. I’ve already mentioned that children’s broadcasts have been singled out as an example of where the funds might be applied, so I fully expect to see plenty of successful bids from that side of things, as well as current affairs and entertainment ideas.

But there’s an opportunity of scale as well as genre here, with one criterion in the bidding guidelines emphasizing the fund’s intention to bring new voices to the industry. As well as other nodes of diversity — it names gender, disability, age, ethnicity, and sexual orientation as focus points — ideas are sought which will be produced by “staff who are relatively new to the industry, or from a smaller company.” (One potentially complicating note: Groups must be incorporated as a production company to bid. But beyond that, the application process looks much more streamlined than a conventional commissioning round.)

So that’s a few different ways this scheme hopes to shake things up, then: greater diversity of content, greater diversity of providers, and an alternative route to national broadcast. Another fascinating aspect is what impact this new funding pot could have on commercial radio, which has traditionally avoided resource-intensive formats like audio drama or comedy in favor of more cost-effective music programming. We’ve already seen commercial radio companies like Global experiment with podcasts aimed at children, such as the new David Walliams show made via their ClassicFM music station, and the fund could result in more of this sort of thing.

Let’s be clear: If the Audio Content Fund can deliver on any of its aims around diversity, inclusion, and accessibility, it will be a good thing for U.K. audio. If it can fill in some of the gaps caused by the BBC’s scale and inertia, that too could be very positive, as could any way it opens up ideas about what constitutes “public service” audio.

But there are aspects worth being cautious about, and in my mind, the biggest one has to do with political context. The BBC often comes under pressure from center-right and right-wing politicians in Britain — i.e. those especially fond of free markets over closed, state-funded systems — to deliver more for its chunk of public money, and it’s a common move in the playbook to politicize different aspects of the state broadcaster. Speaking personally, I think the BBC does a pretty good job delivering public service content for the U.K., and while I don’t hold back on criticism of the BBC when merited, it’s because I believe in its importance and would like it to continually improve.

However, over the past decade, there has been a rising undercurrent in British politics that needles this point about “competition” as a way of making the argument for a smaller or even subscription-supported (i.e. limited) BBC, and I’d hate to see this new fund become ammunition in that fight. If all goes well, the Audio Content Fund will be a superb addition to how broadcasting works in the U.K., not a replacement for the system we already have. But only if it’s allowed to do what it’s supposed to do on its own terms.

Tracking:

• Shouts to former Nieman Fellow Katherine Goldstein for launching The Double Shift, a new independently produced narrative podcast that will produce reported stories on the contemporary generation of working mothers. It’s being distributed as part of the Critical Frequency podcast network — one of the two Supporting Cast launch partners, by the way — and it’s directly funded in large part by foundations, counting the Ford Foundation as its major patron.
• Heads up: The Winter Podcast Upfront, held in decidedly not-wintery Los Angeles, takes place tomorrow.
• Last week, RadioPublic launched a new feature called PodSites, described as a “custom website builder” for podcast publishers.
• Vox Media launched a new site for its podcast network this morning. Spiffy.
• Looks like the trend of podcasting politicians won’t fade away. Almost three years after Newt Gingrich gave Michael Barbaro “more than enough to start your blog” (see here, start at 29:41), Gingrich has launched his own audio blog, Newt’s World, courtesy of Westwood One.
• Another Panoply show finds a home, post-divestment: Sam Dingman’s Family Ghosts gets picked up by Spoke Media.

This time last year. To refresh: I’m copping this new feature from the very smart Ali Griswold, who writes a damn good newsletter on the sharing economy called Oversharing, where we go over the headlines from this point last year.

In the February 20, 2018 issue, The Daily invaded public radio stations courtesy of American Public Media — and I was meh about the move, still am — KQED put out its own local daily podcast called The Bay, Audioboom pursues an ultimately ill-fated deal with Triton Digital, and “Amazon launches a Polly WordPress plugin that turns blog posts into audio, including podcasts.”