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One of the biggest reasons Spotify’s podcast ambitions have received so much coverage over the last two years is that it’s locked down so much valuable content IP. It did this by spending hundreds of millions of dollars to acquire major podcast networks (including Gimlet and The Ringer) and also secured exclusive distribution rights to podcast stars like Joe Rogan and Joe Budden.
But IP ownership alone isn’t what makes Spotify such a formidable player in the podcast space. Its potential dominance hinges on the fact that it competes in virtually every part of the podcast ecosystem. Its app guarantees distribution to over 200 million active users a month. Its existing ad tech and brand relationships will allow it to scale up podcast advertising, both on and off the Spotify app. And it already generates billions of dollars in annual subscription revenue. Its ownership of the entire podcast stack -- from content to distribution to revenue -- will allow Spotify to do for podcasts what YouTube did for video.
It’s for these same reasons that I think we should take SiriusXM’s podcast ambitions very seriously. A few years ago, it had almost no podcast footprint at all; if you wanted to listen to a SiriusXM show you needed to pay up to $16 per month to stream its satellite broadcasts. Its star host Howard Stern declared in 2015 that “podcasts are for losers.”
But then last year SiriusXM acquired Pandora, a company that is known primarily for its music streaming but had already experimented with licensing podcasts for its platform. Pandora’s since expanded its efforts, providing distribution to a wider array of podcasts and even launching a few exclusive shows. In June Sirius XM acquired Simplecast, a podcast hosting and analytics service.
And then this week it plopped down $300 million to buy Stitcher from Scripps. With the purchase, SiriusXM now owns the Stitcher podcast app, about 50 popular podcasts, an ad network that sells sponsorships for an additional 200 shows, and a premium subscription service through which it sells exclusive and ad-free content.
With this acquisition, SiriusXM owns, like Spotify, virtually every part of the podcast stack. The question is whether it’s actually in a position to challenge Spotify for dominance in the space. Let’s examine its strengths in IP, distribution, advertising, and subscriptions.
Stitcher operates around 50 podcasts, ranging from Conan O'Brien Needs a Friend to Freakonomics to Comedy Bang Bang. Through its advertising network, it also has close relationships with over 200 other popular podcasts. This is a significant content footprint, and I wouldn't be surprised if some of these shows end up on SiriusXM’s satellite broadcasts, thereby strengthening its offering to its already-existing audience.
But SiriusXM also owns a lot of content that could easily be adapted for podcasts. In fact, it’s already launched a number of podcasts on Pandora that curate some of the best moments and interviews from SiriusXM shows (including, yes, Stern’s), and I wouldn’t be surprised if many of these podcasts migrate on to Stitcher as well. Thus far, SiriusXM hasn’t converted full shows into podcasts -- you’ll still need a satellite subscription if you want to listen to Stern from beginning to end each morning -- but now the parent company has even more incentive to dive head-first into the podcast waters.
SiriusXM now owns two podcast distribution platforms -- Pandora and the Stitcher app.
Pandora has the advantage of a huge user base that consists of 6.3 million paying subscribers and 63 million total users. Sure, most of those signed up for the music, but, like Spotify, it’s attempting to convert many of those users into podcast listeners. Pandora’s updated its app so podcasts are featured more prominently and built out the Podcast Genome Project, an algorithm that recommends shows and individual episodes based on a user’s past behavior. It also expanded its podcast library significantly so that any podcaster can apply to have their show distributed on Pandora.
It’s unclear how many users the Stitcher app has, though it’s regularly namechecked as one of the major podcast listening apps. Anchor data put it at about 4.6% market share.That would place it at about 5 million monthly users. Not insignificant, but a far cry from Apple and Spotify’s listening dominance.
Controlling its own distribution affords SiriusXM with a few advantages. It can leverage user listening data to better inform its own content development. It can create a better user experience and favor its own exclusive shows. It can also deliver better ad targeting. Speaking of which…
SiriusXM is particularly well positioned to excel with podcast advertising. Between its satellite broadcasts, Pandora, and Stitcher, it probably has greater reach in the audio space than just about any other company besides Spotify. Pandora has spent the last 20 years perfecting its ad tech platform.
What’s more, its acquisition of Stitcher included the Midroll ad network, which employs probably the most experienced team in the world when it comes to selling podcast advertising. Midroll already has partnerships with over 200 podcasts, including WTF with Marc Maron and My Favorite Murder.
Finally, there’s its Simplecast acquisition. By serving as both host and distributor for thousands of podcasts, it can roll out a truly scalable advertising partnership program similar to YouTube’s. "Empowering podcasters of any size to create, distribute, analyze, and monetize their work is the next natural step in pursuing our vision,” said Alexis van de Wyer, who runs SiriusXM’s ad tech division. If SiriusXM can get such a partnership program up and running, it’ll have the capacity to drastically scale its advertising revenue, as it’ll have access to a vast inventory of shows.
It’ll be interesting to see how SiriusXM approaches subscriptions moving forward. It now runs three separate subscription offerings -- satellite broadcast, Pandora, and Stitcher Premium. All operate at different price points and offer different kinds of content. There’s probably not a tremendous amount of existing overlap with their subscribers.
Will SiriusXM roll out a single subscription login and price that works across all three platforms? Will it offer a discounted bundle, similar to what Disney now does across Hulu, Disney+, and ESPN+ (it was rumored to be considering a Pandora + SiriusXM bundle six months ago)? Or will it allow all three to continue operating autonomously?
My guess is it’ll go with the bundle option. Pandora’s subscription offering presents all sorts of thorny issues since so much of its revenue is tied up in music royalties. I could also envision a scenario in which Stitcher simply gets absorbed into the Pandora app. Why divide your IP assets when Spotify’s already operating on a unified front?
So can SiriusXM seriously challenge Spotify in the podcast space?
It depends on how well it can integrate all its various acquisitions into a single, cohesive strategy. Will this be like Google’s acquisitions of YouTube and Android? Or will it be more like Yahoo’s acquisitions of Flickr and Tumblr? Acquisitions are like organ transplants. You never quite know whether they’re going to be accepted or rejected by the host.
That being said, I think all the necessary building blocks are there for SiriusXM to become a podcasting powerhouse. It has ownership of some of the best audio talent in the U.S., as well as the distribution and revenue technology needed to fully leverage it. Now it’s time to sit back and see how it puts all these pieces together.
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