Sony Music’s just-announced venture in the podcast space is only the latest in a string of moves by record companies to grab a share of podcast listening. The move isn’t entirely opportunistic however. Some see it as a defensive play as streaming music services offer content that pulls users away from the songs and the streaming royalties that record companies are increasingly relying on.
John Tinker, a media analyst with Gabelli & Company, tells Billboard there’s also an incentive for companies like Spotify and Pandora to steer some listening to podcasts. “Spotify can own original and inexpensive podcast content, unlike music, and build its own back catalog," Tinker said. Not only do music royalties take about 70% of the revenue from the streaming companies, but they also make them reliant on the labels for content. Tinker said if they are less dependent on record companies it could improve their hand when negotiating new licensing agreements in the future.
Spotify CEO Daniel Ek played down the benefit of having non-music content on his platform when speaking with analysts on a recent conference call. “Having great content is the long and the short of it,” he said. But as Ek thinks as much as 20% of Spotify consumption could be to non-music programming, he acknowledged that over time it will shift the company’s expenses from variable costs related to music to more fixed costs tied to podcasting. That shift, he said, created “an enormous amount” of operating leverage at Netflix as it developed its own programming. “That won't be true for us initially, but I think that will become part of the equation over time,” Ek said.
In the meantime record labels are moving deeper into podcasting. Sony Music announced this month it had partnered with two veterans of public radio and podcasting, Adam Davidson and Laura Mayer, to form a joint venture designed to find and develop original podcast talent and programming. Davidson and Mayer will lead the yet-to-be-named Brooklyn, NY-based company that looks to leverage Sony Music’s existing capabilities in audio production, marketing, sales and distribution, and data and analytics. Davidson and Mayer each reportedly own 25% of the venture with Sony Music holding a 50% stake.
Sony Music isn’t the first record label to branch out into podcasting. Universal Music Group last month struck a development deal with podcast creator Wondery. The two companies will jointly develop and produce podcasts that draw on UMG’s music catalog as well as its roster of artists and labels.
Universal EVP Michele Anthony tells Billboard they see podcasts as a “natural extension” of the company’s audiovisual initiatives. “Our labels and our rich and storied catalog are a gold mine that enables narratives around artists, genres, cultural events and timelines,” Anthony said in a statement. “Podcasts, film and TV also provide our artists with another medium for expression and creativity, and we also want to continue to create opportunities for fans to spend time with our artists and their stories.” UMG has been producing podcasts since 2012.
Rhino Records says it’s proving there’s an audience for music’s deep archives, but also musically-focused podcasts. A year after the Rhino Podcast launched, the label said last month that it has surpassed one million downloads for the biweekly show. The Rhino Podcast dives into classic artists and albums and includes interviews with artists offering their behind-the-scenes stories. It’s produced by PopCult and Rich Mahan, who co-hosts the podcast with Dennis Scheyer.
In recent months there have been a number of other music-related moves in podcasting. They include the soon-to-release Bear and a Banjo podcast on iHeartRadio that will feature an album coming together during the eight-episode series. And indie rock darlings Pixies are working with Signal Company No. 1 to produce a podcast series following the process as they produce a new studio album. The 12-episode Past Is Prologue documentary podcast series will release on a weekly basis starting June 27.
Survey data released in April by Edison Research showed American podcast audiences are craving more music. When asked which topics they were interested in, 39% of monthly podcast consumers said music. That was the strongest response for any genre.