The data is not encouraging, says Bernstein. The problem is that the growth of podcasts year over year has stagnated and even declined. Global podcast listening for the top 10 publishers fell from 26.7% year-on-year growth in March 2020 to 51.5%, 52.2%, 63.6% and 72.3% in the four following months, according to Podtrac data. But annual growth fell to 1.7% in February 2021 and fell into negative territory in March and June, when year-over-year viewing fell 16.5%.
At the same time, acquisitions of podcast companies by streaming companies have made the market increasingly crowded. Spotify, Amazon, Apple, iHeartMedia, and Pandora have invested over $ 1 billion in podcast businesses in the past three years alone.
Taken together, according to Bernstein, these factors suggest that an increased imbalance between risk and return is not built into the current stock price.
But the Guardian Fund, an investor in Spotify, praised the company in its semi-annual report for providing creators with a tool that will expand the reach and advertising potential of podcasting. “It has become obvious to creators to use Spotify,” the report says. “Additionally, by becoming an open platform, Spotify is moving away from the walled garden strategy that Facebook and Apple are pursuing. In fact, Spotify is doing things that Apple struggles to copy because its business model is invested in controlling the garden.
The main question is how podcast listening will grow following the increases during the pandemic. As pandemic restrictions fade and people move more often, podcasting will compete with increased listening to radio and music in the car.
The long tail of podcasting could explain part of Podtrac’s drop in data for the top 10 publishers. The number of new podcasts per year has increased by around 650%, from 119,000 in 2016 to 885,000 in 2020, according to data from Chartable. This number is sure to increase, as Spotify’s purchase of the Anchor app in 2019 offers people a simple tool for creating and publishing podcasts on its platform.
Spotify’s market capitalization has grown by more than $ 20 billion since the company announced its exclusive licensing agreement for The Joe Rogan Experience in May 2020. This is all the more reason to expect the efforts. Spotify’s podcast programs either generate enough cash flow or become a valuable tool for customer retention, Bernstein argues.