An “arms race” among the big podcast platforms has taken shape, according to Barclays media analyst Kannan Venkateshwar. He said the ongoing struggle of podcast discovery, and interest by tech companies could push podcast platforms to step up spending on marketing while at the same time pay for talent that is already widely recognized and “discovered.” Venkateshwar said it is not unlike how satellite radio carved out its niche during the past two decades.

“Non-music audio content is more like video in being longer in duration and tends to require more active engagement with content than music does,” said Venkateshwar. “As a result, the consumption of non-music audio doesn’t necessarily overlap with music consumption windows, which should help expand the overall audio consumption pie instead of making audio a zero-sum game between music and podcasting.” It is why he believes broadcast radio “is not really that disadvantaged” competitively versus streaming services. 

Yet podcast algorithmic recommendations are not as efficient as a Netflix recommendation since, unlike video, where recommendation algorithms have to flag shows that people like, audio services have to flag specific songs in an album or a specific episode of a podcast that people may like. And that is where competitive forces begin to play.

“The volume of audio content is exponentially higher than [in video]which makes this task even more difficult,” said Venkateshwar. It is why he believes some podcast companies are opting to sign lucrative exclusive deals with established names, shows, and brands with a ready-made audience and marketing engine. Spotify’s reported $100 million licensing deal with The Joe Rogan Experience is the best example of that to date, but it has also inked deals with reality television star Kim Kardashian West and former President Obama.

“Either platforms have to pay up for talent that is already widely recognized and ‘discovered’ or that platforms have to step up spending on marketing,” said Venkateshwar. In a report to clients, he said the precedent for this strategy is SiriusXM, which has paid Howard Stern roughly $100 million per year since 2006 to attract subscribers to satellite radio. It also struck lucrative contracts with the NFL and other sports leagues. But Venkateshwar thinks the online audio space could be even more pricey – and more competitive – since streaming companies like Apple and Amazon have the wherewithal to bid prices up. He thinks it is likely to make sourcing and marketing non-music content “a lot more expensive” in the coming years. And Venkateshwar also believes the closer integration and consumption of audio on devices such as Alexa provides another edge for the larger tech platforms.

“What could make this arms race even more expensive is the fact that there appears to be some natural cap on non-music consumption,” said Venkateshwar. He points out that broadcast radio continues to offer a variety of spoken word content, but Nielsen data shows 70% to 80% of consumption remains to music stations. He also notes that Spotify CEO Daniel Ek has said that he expects podcasts will contribute about 20% of his app’s listening.

In terms of podcast monetization, Venkateshwar told clients the industry is still in “very early stages,” suggesting other models may yet be tested. He thinks content brands like the New York Times and Wondery will increasingly look to distribute their own podcasts rather than rely on aggregators, similar to what Disney is attempting with the Disney+ video streaming service. That theory already got a boost this month as Wondery this month launched its own app.