Tech Brew Ride Home - Emergency Bonus- Nick Quah on Today's Podcast News

Episode Date: February 6, 2019

THE expert on the Podcasting Industry breaks down today's big news. Subscribe to Nick's newsletter, HotPod. This episode has a full transcript. Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to a special emergency episode of the TechMeme Ride Home podcast. I'm Brian McCullough. As I said on today's normal episode, when I heard the news this morning about Spotify and podcasting,

I reached out to Nick Kwa on a whim, but I didn't expect to hear back because I knew he was in Malaysia visiting family. Ain't that always the way? It's when you go on vacation that the news beat you basically invented has its biggest news cycle ever. Well, Nick was kind enough to jump on Skype right away. It might be a good idea to listen to today's episode for context first, but you're about to have some analysis of today's news from the foremost authority on the subject. And also. Okay.

And now as promised, Nick Kwa on the day's big podcasting news. Thanks for being willing to jump at a moment's notice there. Oh, my God. been I'm so tired. You know what? I have to turn around another piece for Vulture in a couple of hours. You know what? Can we be recording now because I want, let's start there.

I'll go right ahead. I'll tell you, this is my setup right now. I have like a beer open and I'm like cheering on a bun. So I take it the last, I don't know, 72 hours have been a little crazy for you? Yeah, it's not great. All right. Well, then let's start with the most recent news. By the way, full disclosure, anchor is our web host or our podcast host.

So where did this anchor deal come from? Well, I can't speak to the sort of the TikTok of what exactly happened behind the dealmaking. But on the face of it, the Spotify acquiring anchor makes a ton of sense. We do know that Spotify would benefit from a back end that would work for podcasting for its interest and adventures in podcasting. And we also know that Spotify has some interest around figuring out the advertising monetization side of whatever podcast way they're going to get into. And so by acquiring Anchor, they get two pieces there, right, to get the hosting aspect. And they get the anchors recently launched Anchor sponsorships, advertising, which is an in-platform advertising marketplace. It was sort of their attempt to figure out how to let the shows or help the shows that are hosted on their platform be able to find advertisers and make money.

Essentially, it's a marketplace, right? And again, I have direct knowledge of this. It's super nascent. Like, I think they've had less than five ads in the system so far. So it's not like, you know, this is some sort of ad sense for podcasting that has, you know, been around for six or even a year and made, you know, a ton of money. Like, this is super early days for their marketplace. Right, absolutely. But my understanding is that it's a sort of like, you know,

they could try to jerry-rig whatever hosting solutions they have that they use music on their end, or they could acquire something that was built specifically for this community and this sort of creative, this creative asset class. And my understanding is that they won't actually need the advertiser sort of base that's on the anchor sponsorship marketplace because they have their own brand relationships, They have whatever's coming in with Gimlet. What they need are the pipes and some sort of structural, you know, pathway forward to make this work. And so I think that that was the thinking behind the anchor acquisition.

Of course, it's all, it's barely been a couple of hours as we're talking. I'm still trying to dig through the details of this, including the price, which I still don't know. And I'm hearing like a wide range of gossip right now. But on the face of it, the anchor acquisition makes perfect sense within the context of what Spotify is one thing to do. The Gimlet thing is a little bit more surprising, specifically because of the price that they paid, which is, as I reported, at $230 million. Have you, you were able to confirm that? I was able to, this is before the deal closed. So I published that on Friday.

And it closed a couple of hours ago, and so the price might have changed before that, but that was the number that I could report that was floating around. So just, you know, I live here in Brooklyn, where, you know, center of the podcast universe. Friends of mine in the podcasting industry are super, super shocked at that price tag, over $200 million. Are you surprised by that? I'm very, very surprised. To put this in context, the closest comparable deal was last fall's acquisition by IHeartMedia of Stuff Media, which is the publisher of such fine programs. That's how stuff works. Stuff your mom knows, stuff you should know, et cetera, et cetera, et cetera.

and that company stuff media publishes about the same number of own and original shows and has about a hit the staff size that's about half of gimlets gimbled's gilett has 120 employees stuff media has 50 and that that acquisition went for 55 million and so it's quite a jump to go from 55 to 230 which raises the question of what exactly is Spotify acquiring here or is this just their way of being really really excited or want to make a big statement about they are foray into podcasting, or if they're seeing something else that we're not quite sure of on the outside. Well, what's your theory on that then?

My gut feeling is that, so on the one hand, you have a couple of different things. You have the fact that Gimlet is a particularly buzzy brand, and you have a sort of a really, really willing buyer on the part of Spotify, which is flush of cash, and it's able, is in a position to pour the kinds of money into the space that podcasting simply has not seen before. podcasting is a small village. It's not used to wealth. And my my big theory revolves also around Gimlet Creative, which is Gimlet's branded podcast division. It's essentially their team that produces both advertising, like in episode advertising, the sort of experiential stuff to promote, I don't know, you know, Ford, MasterCard, you know, whatever Casper mattresses companies that

advertisers on podcast. And they also create a number of branded shows. I, my feeling is that some of that team will inform whatever advertising experiences will go throughout Spotify podcasts in general or podcasts on Spotify in general. So, right. Actually, we'll get to Spotify in a second, but would the theory be that there would still be ads on podcasts on the Spotify platform? Yes, I would imagine that would be the case. And that on top of the fact that Spotify would practice some form of exclusivity around the shows that they've, from Gimlet that have acquired.

What's your, I'm rapidly trying to look through your emails here, but what's your tinfoil hat theory? My tinfoil hat theory is the fact that Gimlet creative accounts for a significant proportion of the sort of difference in value. Why it's significantly more than 55. My tinfoil hat theory is that they bring something to the table that stuff media couldn't, and that Spotify values the branded podcast stuff quite a bit, or the possibilities of it anyway. And because Gimlet already has relationships with people like Ford and beyond even the universe of Casper's. Right, right, right. And Gimlet is a very, very busy podcast company, perhaps the busiest.

The press loves them. They have inroads to Hollywood at this point in time. It's just sort of a sexy company a bunch of different ways. The question is, is it $230 million sexy? And I don't know. You know, I'm not a corporate development person, so I really don't. I'm unfamiliar at this world. All right, but then let's look at the Spotify angle here.

So a smart person was telling me over the weekend, and I think you've talked about this too, that it doesn't matter if you're one of these companies that is making that sweet, sweet recurring revenue from subscriptions. It's all about people's time. So should we be thinking of this as Spotify understands that and that it doesn't matter if it's audio, video, or whatever, as long as they have your time,

that's the thing that they want to grow and monetize and turn into a huge platform? Yes, absolutely. I believe the CEO, Daniel Eck, explicitly said that in an interview a couple of hours ago, in which the point is about their sort of pushing to podcasting is that a unit of podcast is able to drive more time spent on the platform than a unit song. Actually, can you underline that because I was surprised by that? You're saying that they're seeing that people that listen to podcasts on their platform, actually they can convert those into paying subscribers and those people end up listening to more

music as well. No, I don't know. They outline that specifically. I think the theory is that people who listen to a, people who listen to podcasts tend to be really, really engaged audiences in general. That's sort of one of the fundamental tenets this medium. And sort of, that's been its sort of narrative for the longest time. And B, it's sort of like the very straightforward, you know, a podcast only goes for longer than a song. A song goes for three minutes, five minutes.

Very rarely does it go to 10.20. But podcasts, episodes average, you know, 20 to an hour. And so, you know, a unit podcast, you know, keeps a person on the platform longer than a unit song. Well, and then there's the obvious Netflix analogy where with music, Spotify has to play ball and give a ton of money to the record companies. But potentially with podcasts, there's less of that. And then there's the whole, again, Netflix concept of you would have your own library of content in-house. Right. again, interestingly enough, Spotify CFO, I forgot his name, but he is the former CFO of Netflix,

and he explicitly mentions that they're sort of shadowing or mirroring that strategy in the early goings for this podcast thing. So do you think, again, looking at Spotify specifically from a larger lens, I think I read you say once that you wouldn't be surprised if Spotify also evolves into video and other mediums as well, not just audio. You wouldn't be surprised if a few years from now, like Spotify would launch its own, say, streaming video series or something. Actually, they've already experimented at that. So a couple of years ago, they rolled out something called Spotlight, which is their take on original video content. First of all, I mean, I think video is just incredibly difficult at this point of time, especially on the one hand, you have YouTube basically commanding the majority of the universe when it comes to, you know, shorter or shorter form or user uploaded video content. And then you have whatever war is going on between Apple, again, Netflix and Amazon with the longer form feature presentational programming.

And so my sense is that they tried video, didn't work out, and now they're trying podcasts. And also could also broadly think about it as talk radio or talk audio content more broadly. So I've heard some talk that there are other players that have been sniffing around as well. And, you know, again, the analogy to streaming video where Disney's going to have its streaming video, Universal is going to have its streaming video. Have you heard any talk of other players sniffing around podcasting companies at the moment? So you're saying, will we see other acquisitions, not by Spotify, but podcast companies? You know, maybe Apple, seeing us how they're the sleeping giant forever in this space, potentially they might.

I don't know. I don't want to put words in your mouth, but have you heard other players sniffing around this? Right. I can't speak. Obviously, I can't speak on behalf of Apple or any of these companies. And, you know, I again, I've heard rumors flying in all directions. Then again, I also heard, you know, rumors that the Earth is flat, you know, but that's just finally not true.

I cannot verify any other rumors I've been hearing, but the theory is that with Spotify making such a big, loud leap into podcasting, my guess it'll shock some sort of arms raise. You've got Spotify locked in heated battle with a bunch of different other platforms, including Pandora, which itself. has its own podcast play going. They just released something called the podcast Genome Project a couple of months ago. And I wouldn't be surprised if Apple changes or shifts this position somewhat as a result if it ends up caring. Again, it really depends on how they view their focus in the services department right now.

But, you know, we're also talking about companies that are on platforms. So we're also talking about, like, how will, you know, Kahn and NASDA React or something like this? how will, you know, other media companies react to this. You know, this is a signal that this is a pie worth eating. And, you know, FOMO is a really strong driver, even if it's not obvious that it's FOMO. All right. The final question, and again, this is zooming out to the big picture. You talked about this in your most recent emails.

But what do you think that this says about podcasting as an industry? This is clearly some sort of a semantics. moment. Just I'd be curious your big picture take on where this puts podcasting right now. I mentioned in my news center and in very melodramatic terms

because I'm a melodramatic person. This is not a turning point, but it's an end of an era. We have been living through quite an interesting couple of years. I would argue that this specific era started with 2014

when you had this confluence of events, you had cereal exploding, and you also had the fact that Apple had bundled the podcast app by default with the latest iOS version that year. And it sort of was this chain reaction that drew a significant amount of attention to an industry that already have been growing, sadly year over year.

It's just kind of supercharged it in a bunch of different ways. And throughout this past couple of years, there was this sort of sense that there were many different competing, visions that stood a chance to win. We have communities that still believe in podcasting as the frontier for open publishing, and we have communities that see it as a space to build new empires. And with this big acquisition that brings in money, the kind of money that we've never actually seen before, it raises the stakes a whole new level. I don't know what comes next. It's going to be

incredibly messy. People are going to get upset, but it's also generally, it's just generally change and it's both good and bad and I think people are just going to have to move really quickly to figure out how they fit into this new landscape. I lied. Real quick, two more questions. Do you think, you know, I've heard for years now people talking about, well, somebody's going to build a Netflix for podcasting, the idea being its subscription, it's paid walled, that sort of thing. Do you think that this, is this a play in that direction or do you expect Spotify to still to go in the ad supported and still anyone can listen direction. I obviously I don't know.

Right, right, right. I'll say a couple of things. One, we will see a clearer, a pure sort of Netflix for podcasting play come out soon. There's this company called Luminary Media that raised $30 million plus plus at the beginning of 2018. that wants to be or wants to test out the theory of whether you could create a pure paid podcast platform. And we'll see that model get tested out. And we don't really know how to Spotify thing is going to shake out. It's a big swing.

Again, it comes up to execution. We have to really see whether they're able to drive its users to podcasts and whether it's able to create podcasts if you want to listen to or they're able to surface a wider universe of podcasting to an audience that's never heard before. I hear it's heard podcasting before. And so we are at the beginning of a lot of different movements. And whether, you know, I mean, the idea is always that the opportunity is always there for a paid podcasting platform. That's an opportunity has always been there for like Google podcasts to actually make Android users finally listen to podcasts. But all of this comes under execution. And we'll really have to see who plays with who and who implements a better feature.

It really, you know, it really comes down to a better all of attrition at this point. And then the final thing I want to say, I want to amplify something that you said in your newsletter. Alex Bloomberg, you owe us a new episode of startup that talks about this entire process. Obviously, you've got to wait for the dust to settle and hopefully Spotify is on board with it too. But, man, I need that startup episode talking about this whole process. You know, what I also find additionally interesting is I was re-listening to the first season of startup over the weekend. And it's a completely different show now. And I personally, as a person who also reviews or writes podcast criticism for New York Magazine,

I'm curious as to how Alex Mover is ever going to make another show again or make another episode again. He is not the same person. His power has been in his relatability. It's incredibly difficult to relate to a multimillionaire. And so I'm curious to see what his next artistic face looks like. Yeah, but the story there is what does it feel like to become a multi-millionaire? millionaire. Anyway, Nick, thank you so much for taking time out on the drop of a hat to talk about this and enjoy your so-called vacation, right? Yeah, you know, fuck everybody. I just want to, you know,

be on the beach. I'm stuck here right now. Nick asked for no more news. Thanks, Nick.