Nieman Foundation at Harvard
Welcome to Hot Pod, a newsletter about podcasts. This is issue 216, dated July 2, 2019.
Wondery raises $10 million in Series B funding. The round was led by Waverley Capital, and the sum adds to the $5 million Series A raised last year, plus the seed round that came before that. The new money is meant to fuel the Los Angeles-based podcast studio’s expansion into international markets, dive into daily podcast production, and further grow its show portfolio.
To lead international expansion, the company has hired Declan Moore, who previously headed up the NatGeo-Walt Disney Company joint venture National Geographic Partners. The Wall Street Journal was first to report the news.
I spoke with Wondery CEO Hernan Lopez last week to learn more about round, the company’s current position, and a bunch of other things. You can find that interview in the second half of this issue — it’s a long, sprawling chat, so buckle up.
First Look Media has shut down two of its digital properties, Topic Magazine and The Nib, and the organization appears to be doing so to allocate more resources to Topic.com’s original video content production. Study Hall’s media newsletter first reported the development.
However, I’ve been told that these cuts do not affect the podcast operations at Topic Studios, and that business there proceeds as usual. Over the past few months, Topic Studios has been involved in a few high-profile podcast productions, including the latest season of Dan Taberski’s Headlong and John Cameron Mitchell’s star-studded podcast musical, Anthem: Homunculus.
Meanwhile, in China. I’ve been keeping an eye on Rita Liao’s reporting over at TechCrunch on what appears to be the country’s growing crackdown on its audio app market, particularly those that are driven in part by user-generated content.
From a piece that came out yesterday:
On Friday, a total of 26 audio-focused apps were ordered to terminate, suspend services, or have talks with regulators as they were investigated and deemed to have spread “historical nihilism” and “pornography,” according to a notice posted by the Cyberspace Administration of China (CAC).
The clampdown has, in a way, been foreshadowed by a recent attack of user-generated audio content. Last month, Apple restricted Chinese users from accessing podcasts that aren’t hosted by its local partners, effectively preventing those with a Chinese Apple account from consuming content unchecked by Chinese censors.
Re-upping my column from May, if you need background context on the podcast portion of that ecosystem.
Reality binds [by Caroline Crampton]. It’s safe to say that major broadcasters in Britain were pretty slow to get involved with podcasting. I’ve written about this a fair bit before, mostly in relation to the BBC, but it’s easily applicable to the U.K.’s major private media entities, like ITV and Channel 4. The former, though, appears to have broken through on the audio front over the past 12 months, and it’s becoming a worthwhile case study of how commercial and independent podcasting is developing within a U.K. market that’s been broadly dominated by a major publicly funded radio network.
A primer, for the unfamiliar: ITV is the predominantly commercial television network that was originally created in the 1950s to directly compete with the BBC. Its various regional franchises were held by different companies over the decades, which eventually merged over the decades to become what is now a multimedia conglomerate called ITV plc. The network carries advertising throughout, but also fulfils some public service obligations such as religion-oriented programming, news, and sign-language accessible broadcasts. Because of these public service elements, ITV is free to watch everywhere. As a content creator, the organization produces a steady trickle of television hits — some of the most high profile British drama exports, like Downton Abbey (!) and Broadchurch, came from the braintrust at ITV.
Crucially, though, ITV is also the broadcaster of Love Island, a hugely popular limited series reality show best described to those non-watchers as “Jersey Shore, but if it involved a dozen British strangers on an island.” The reality show is also an important entry point for the network into on-demand audio, because its recap podcast, Love Island: The Morning After, which was tested out last year, proved to be such a success that ITV felt compelled to increase its activities in the audio space ever since.
Since Love Island is on TV six nights a week — with a best of compilation airing on Saturday evenings — the show involves an intense burst of production for the recap podcast, which is set to publish around 50 episodes, averaging between 20 and 40 minutes, over the show’s eight-week run. The case for episode-by-episode TV recap podcasts has long been proven, but The Morning After seems to work especially well because it sits at the intersection of old-fashioned water cooler culture, the always-on world of celebrity Instagram Stories, and a seemingly unquenchable British thirst for summer “banter.” It’s hosted by the 2017 series winner Kem Cetinay (a self identifying “cheeky chappy”) and pre-existing ITV presenter Arielle Free. Past contestants, influencers, and high profile fans make up a rotating cast of guests.
Last year, it felt like almost every audio industry person I spoke to here in the U.K. wanted to talk about the surprise success of this show. I was told by Acast, which serves as the hosting platform, that the show has racked up over 3.5 million downloads over its two-month run, and that it had even scored a heavyweight brand advertiser in the cereal giant Kellogg’s, making it a worthwhile production both as a way of bringing more viewers to the TV show and as its own commercial entity.
Also, since so much of Love Island fandom notoriously lives on Instagram — the contestants’ accounts are prone to explode in popularity over the course of the series, and some openly take part in the show in order that they can have an influencer career afterwards [Nick’s Note: which is not unlike the Bachelor universe, by the way] — the podcast is also a rare one that I know of which drew a fair proportion of its listenership from that very image-led social network. To capitalize on this dynamic, ITV’s social media team uses platform smart links in the brand’s Instagram Stories to drive new listeners, and I’m told saw brilliant conversion from it.
The podcast has returned with the latest season of Love Island, which is already well under way, and it has consistently stayed within the top three of the U.K. Apple Podcasts chart. It now features a new sponsor in Uber Eats, but the composition of the show has otherwise appeared to remain the same, at least in terms of format and strategy.
ITV has also expressed intent to dig deeper with audio. Last month, they announceda two-year deal with the commercial radio group Global as part of a bigger push into audio. This tie-up involves promotion for ITV’s podcasts on Global’s radio stations, such as Capital and Heart, plus inclusion of The Morning After and forthcoming shows (such as one based around the 2019 Rugby World Cup this autumn) in Global’s proprietary app, Global Player. Finally, it involves a commercial relationship with Global’s advertising arm DAX, which provides ad injection.
This partnership between two giants of the commercial broadcasting world — one TV, one radio — strikes me as exceedingly interesting. Despite the growth of streaming and the dominance of the BBC, they both do still command millions-strong audiences in lots of areas, and it makes absolute sense to bring the two things together as a kind of commercial airwaves alliance. While we wait for details about how the BBC’s anticipated opening up of their BBC Sounds app to podcasts from other providers, perhaps an alternative audio powerbase is emerging with this Global-ITV axis. One thing that’s certain, though, is that the Love Island podcast has well and truly convinced ITV of the efficacy of on-demand as a way of augmenting its television offerings.
The state of Wondery. “It’s still so early,” insists Wondery CEO Hernan Lopez when we spoke last week. We had jumped on the phone shortly after the Wall Street Journal posted its report on the company’s Series B, and I have to admit: the news surprised me. When I first started hearing rumblings earlier in the week to watch out for a Wondery development, I had fully assumed some sort of acquisition.
That expectation, of course, has everything to do with all the Spotify news in February. Since then, I’ve gotten the distinct impression that a broader surge of acquisition interest was making its way throughout the veins of the podcast community and that for some, this moment in time marks a window of opportunity for those interesting in cashing out to do exactly that. Indeed, by the waning days of May, I even started hearing from a few people who privately wondered whether that window had already closed, and whether it would be closed for good.
Lopez, though, I suppose he’s what you’d call an optimist — or at the very least, a damn good salesman. A TV veteran and the former CEO of Fox International Channels, Lopez founded Wondery in January 2016 and quickly went on to build what would prove to be an exceptionally shrewd and effective operation. Wondery was among the very first podcast shops to build out a Hollywood adaptation pipeline, and it did so with aggression. When it landed on its first breakout hit, the true crime-rooted Dirty John, the company doubled down on the genre and carved out an entire brand identity around that aesthetic. Here was a company that knows its strengths intimately, and plays vigorously towards it.
Anyway, when we jumped on the phone last week, Lopez started off by telling me about how things are still overwhelmingly early in podcasting, and how there is still so much to do. “Don’t forget that two thirds of people in the U.S. still don’t listen to a podcast on a monthly basis, and the number is higher around the world,” he said, before listing out all the things the industry still needs to uncover: new genres, new formats, new hits, new stars, new advertisers, new business models, and so on. We remain a ways away from figuring out what this industry is supposed to look like, Lopez seems to be insisting, even as the recent bursts of money have fundamentally dragged the podcast ecosystem into new, unpredictable territory.
Here’s the interview, which has, of course, been shortened, condensed, and edited for clarity:
Also, I think it’s well known by now that we came to fame due to Dirty John, the podcast we did in partnership with the LA Times. That show really put us on the map, and a lot of opportunities we’ve had came to us from the popularity of Dirty John. So if I had to start all over again, that would be the guiding principle of my first moves: how do I get my new Dirty John?
We realized that we just needed more capital to do the things we want to do: expand globally, get into daily podcasts, and grow beyond the core genres we have now (business, tech, entertainment, true crime, personal growth, and sports). Content production is expensive and time-consuming. It’s also way riskier than the partnership side of the business, which is still growing and will continue to be a significant part of all the things that we do. So we decided to raise new equity funds, and we were lucky to have multiple people who wanted to participate in the round.
Waverley Capital [which led the round] was incredibly thoughtful in their approach. They’re led by Daniel Leff, who was a former in Roku and is a current investor in The Athletic, and Edgar Bronfman Jr., who probably doesn’t need any introduction as the former CEO and chairman of the Warner Music Group. Combined with the investors we already have [including Shari Redstone and Bertelsmann, among others], the fact that we have sold television shows to NBC Universal and WarnerMedia, and that we have active partnerships with the L.A. Times and The Boston Globe, we are probably one of the most connected podcast companies today.
And I think all those connections translate into lots of opportunities to bring podcasts to the global stage. I know that sounds hyperbolic, but these companies have incredible reach around the world. They have great content and great brands, and I believe these partnerships will be important for us to things far beyond what we could do on our own.
But yes, what we tried to do over the past few years is borrow parts of the Hollywood model, both from the television production side and the television marketing side, and see if they can be applied to the podcast world. (But of course, in the podcast world, you’d have to remove at least three zeros from the budget.) And I think the result was positive. I think we’ve been able to prove that shows that sound like Hollywood series and have TV industry-style marketing campaigns — taglines, key art, special trailers, and so on — all of that works. I think that’s one of the reasons listeners have responded very well to us.
But those are the main three buckets, outside of advertising. Wondery Plus is the smallest of them right now; we’re trying to build something similar to Slate Plus, which would give listeners ad-free and early access experiences but within the apps of their own choice.
On the adaptation side, we have five shows in development right now — with studios like Universal Content Productions, FX, and Warner Media — and we’re working on deals to have other shows made as well. We haven’t seen huge revenue yet because of the stages that these adaptations are in; you typically make the most money when the show actually gets put into production and you eventually collect profit participation.
We haven’t found our way into the latter just yet, partially because, speaking as a publisher that’s in a constant sell-out situation (and I think this is true for many other premium podcast publishers in the U.S.), we’ve had less incentive to plug into those research tools than we would if we weren’t selling out inventory.
Also, because we’re selling out pretty well right now, we’re not particularly motivated to try out a programmatic marketplace and risk seeing what happened to digital media publishers when programmatic became a big thing.
If you look at the marketplace all over the world outside the U.S., I think you’re pretty much going to find a situation to what the U.S. had pre-2014. There hasn’t been a Serial-level hit yet, for a combination of reasons. And I believe that we have the opportunity — through the great fortune of the funding that we have, of the expertise that we have, of the great content that we have and will continue to create — to expose more people, languages, and markets to this medium.
I can’t tell you exactly how we’re going to do it, market by market, because we’re still working on the plan, but I think we’ll have a better idea by the end for the summer. I will say, though, that I’m extremely excited about the prospect. I think the time has come.
People often say that because podcasts don’t have more listeners, it needs better discovery tools. I would say we need more hits. That’s been the founding principle of this company for the past few years. How do we make the most buzzworthy, zeitgeisty hits?
As far as the acquisition marketplace is concerned, I suspect you’re going to see more activity this year. Clearly, we are out of the market. One of the reasons we raised money is that we wanted to remain independent. But I think you will see other companies get combined or acquired.
Today, we drive around 60 percent of our revenue from original shows and 40 percent from partner shows. I’d like to change that a little bit but not by much, maybe 70/30. I believe original shows need to be the cornerstone of our business, but I also believe in the importance of our partnerships. And I want a larger share of our revenue from non-advertising channels. Right now, that’s about 15 percent, and I want that number to increase.
