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US podcast industry adjusts for slower growth

After years on the rise, the digital audio sector has been marked by layoffs and cutbacks by production companies

Spotify
DADO RUVIC (REUTERS)
Luis Pablo Beauregard

Spotify is still in the doldrums. The audio streaming company confirmed last Thursday that it has ended its relationship with Prince Harry and his wife, Meghan Markle. Archewell, the company owned by Britain’s sought-after royal couple, signed up with the Swedish tech company in 2020 for $20 million. Their podcast, Archetypes, was launched in August last year and climbed to the top of the charts. Although Harry and Meghan will look for a new channel to distribute their content — as the Obamas did by moving to Amazon — the split emphasizes the transformational times of the podcast. After the furor, the industry must now adjust to slower growth.

Last week, Spotify announced it was laying off 200 employees, about 2% of its workforce. Most of those affected by the cuts were sound engineers who worked servicing the extensive podcast menu that the company bet on some time ago. Spotify invested like no one else in this medium and signed contracts for exclusive programs with figures such as Joe Rogan, whose podcast is the most listened to in the country, and celebrity interviewer Dax Shepard.

Prince Harry and Meghan Markle in New York in 2021.
Prince Harry and Meghan Markle in New York in 2021.ANGELA WEISS (AFP)

Spotify also bought production companies such as Gimlet and Parcast to multiply its catalog offerings. To show its power in the sector, the company opened Pod City in 2021, a large building in the Arts District in downtown Los Angeles, with the capacity to house 600 employees, 18 recording studios, an auditorium and a rehearsal room for musicians.

Paul Vogel, the company’s CFO, admitted in April that investors had to be patient, as the podcast business is not yet profitable, although they expect it to become so in the next two years. The company headed by Daniel Ek has more than 100 million monthly consumers of audio content. Analysts at Constellation Research believe that the podcast market has been saturated with too many programs that simply do not find an audience. Ek himself has stated that they will have a more “diligent” policy in their growth with the medium, meaning wasting less in scoring star contracts and more business acumen. He appointed an executive with experience in developing products that will whet the appetite of advertisers and who is tasked with drawing in more suscribers.

This is not a problem unique to the European company. This year alone, it has happened to Vox Media, Amazon, SiriusXM and Pushkin Media, the audio company of journalist Malcolm Gladwell. U.S. public radio, NPR, one of the country’s most popular media brands, is also going through a similar situation. At the end of February, it announced that it was letting go 100 people, 10% of its workforce, in what has been its worst financial predicament since the 2008 crisis. The reason? Lack of advertising revenues. The industry took in about $1.5 billion from advertisers in 2022, a minuscule fraction compared to the big slice taken by television ($70 billion). Spending in this area will be even more conservative in the future, according to projections.

NPR’s podcast department was the hardest-hit section. The station canceled three acclaimed programs: Invisibilia, a popular science program; Louder Than a Riot, on hip-hop history; and Rough Translation, where foreign correspondent Gregory Warner presented stories from around the world. It also saw the end of the comic Everyone & Their Mom, which premiered in 2022. Last year, the company, which receives less than 10% of its budget from public funds, laid off 40 employees and canceled 11 programs.

NPR recently reported that weekly listens to some of its flagship broadcasts such as Up First, a newscast to start the day, and Fresh Air, a talk show, have gone from 10.6 million downloads in 2020 to 8 million in 2023 on the Apple Store.

Megan Lazovick, the vice president of Edison Research, says consumer trends have returned to normal patterns after the boom represented by the pandemic. She notes, however, that podcasting is here to stay among U.S. consumers. Last year, 25 million episodes were released. “The growth of online audio and the record levels of podcasts are an interesting” thing to consider, she says. A report conducted annually by the firm confirms the maturity of the market: 64% percent of the country’s population has listened to a program, up 2% from last year. Three out of ten have listened to one in the last week. The average consumption among fans is nine programs a week.

Although podcasting is enjoying a great moment, media is suffering from the industry’s economic recovery. Social media has been filled with journalists who have lost their jobs due to company adjustments and are looking for new opportunities. This week it was the turn of LAist, an independent, community-funded local radio station. About 20 employees, 10% of the staff, were laid off. “This is a wild time for audio makers looking to make work that is both beautiful and impactful,” tweeted Sophia Paliza-Carre, one of those affected by the layoffs.

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