Coping with Podcasting’s Bubble

I’ve been trying to sit down and write some predictions for 2022 since before Christmas, but a bit of a writer’s block has taken over. I think, for most audio operators, this year will be about trouble-shooting and consolidating. Like most of the world post-COVID, people just trying to get their shit together will be work enough.

That’s not to say there won’t be some splashy acquisitions, some talent acrobatics and some tech innovations, I just think for most people at the coal face, trying to build a credible business around the new opportunities in audio, particularly podcasting, will require a renewed focus.

I’m fortunate to have lots of conversations with audio folk and many are grappling with what they’re “supposed” to do around podcasting. There’s two broad groups. The first is pro-bubble. These people know there’s somewhat of a bubble in audio, particularly podcasting at the moment – and their strategy is to embrace that, try and build out scale at pace – and then get out whilst valuations are high, and unconnected to whether what they’re doing is sustainable. Others think there’s a bubble and whilst there will likely be a correction, the general growing use and revenue will usher in a new audio-consumer sector. The view being that the bubble will actually be the new market. If they’re still around after that, they’ll be in a good position.

Others are trying to cope with the existence of the bubble and all of its effects, whilst trying to ignore it and build more regular businesses – ie ones that make some money. These again are split into two groups. The first are existing broadcasters and publishers. The problem is, it is virtually impossible for a regular media business to look at the podcast investment case and justify the required costs to ‘do it properly’.

Let’s take the sector I’m closest to, radio. As I’ve mentioned before, commercial radio in the UK is very efficient. It’s got relatively high profit margins and has generally pretty manageable talent costs, in front of and behind the mic. Indeed, outside of the biggest on-air talent, radio companies are paying the internet people far more than the audio people. Strange, but it’s the radio parts of the business that they’re super-comfortable with and knowledgable about. They know exactly what they can spend to get what they need, and audio talent has always wanted to work for these radio companies – excellent leverage to have. On the internet-side meanwhile, developers and such, are employees who put little value on where they work, and can happily move across any sector, providing price competition for their skills.

Today, if you want to be a radio DJ on a station/network of any scale, there isn’t much flexibility, of course not helped by there only being four main radio station operators in the country. Many radio presenters have somewhat stomached the guidelines and wages of their radio jobs, and supplemented it with other work. It’s similar for production talent too. Radio companies have historically benefited from this seller’s market.

When these radio companies look at podcast production talent costs, the lack of many on-mic talent wanting to give up control and the difficulty of establishing new shows, they scratch their heads and look fondly at their radio transmitters.

I pick radio, but it’s the same conversation with other content publishers. Do they all know that on-demand audio is a massive opportunity? Yes. Do they know that the business model will eventually catch-up? Yes. Can they get buy-in internally to deliver the scope of change necessary? Er, not so much.

I think it’s telling how many media employees choose not to do podcast projects with the media companies that employ them. I think it shows that the talent relationship is often one-sided with the company unable to think about their teams as more than suppliers to deliver their own projects.

I don’t think, in most cases, this is even malicious. It’s just the mindset driven from the success of their heritage business. The danger is that this puts them way behind the new entrants, without this baggage, when these media companies really should have all the relationship advantages.

It’s perhaps no surprise that many talent-led podcasts are now incubated by the agents or management teams of celebrities. They have a history of being joint-venture partners with their talent, they need to be ensure they get their 15%! But often the manager relationship is a pretty deep one, the trust that’s built up from the work managers have done to help talent’s careers, puts them in a great position to develop new businesses with them.

The idea of “we must be the ones to disrupt our own business” often gets a glib eyebrow raise or is regarded as a somewhat hackneyed phrase. If a media company’s corporate strategy is to embark on success in a new market, it’s essential that attitudes and structure are re-evaluated to make that able to happen. And that’s difficult when it’s at such odds with where success has historically come from.

Many companies find the only way to do this is to set up new units. It can be successful, but often falls prey to political in-fighting or budget battles. In a large corporation, that can be hard to win when you’re haemorrhaging cash whilst trying to build something new.

New companies and start-ups in the audio space also face challenges. For those in podcasting, who don’t have the resources to embrace bubble-like growth, they face the challenge of competing, whilst still trying to be a business with a road to profitability. This is tough whilst the bubble-embracers have seemingly endless cash and the media companies have a strong balance sheet and a variety of routes to market for their product.

For me, it’s essential that these companies are specialists or occupy a specific topic, or vertical. Trying to be a generalist podcasting firm, in an accelerating market, would seem a challenging place to be. For specialist firms, building audiences around a subject would seem to provide greater opportunities in and around podcasting – whether that’s events, publishing or other digital content. It doesn’t stop you putting podcasts at the heart of what you do, but it does provide opportunities to broaden revenue if the goal is medium-term profitability.

I also think being in a vertical gives you some broader potential exit opportunities, allowing you to swim with other companies in your topic, as well as other podcast businesses who are after more scale.

Overall though, the companies that will do well in the podcast space are those that either have a lot of money, or the ones that have real focus and drive. Both probably need a decent helping of luck too.

How will companies tackle podcasting in 2022 (6 minute read)