Issue 251,  published March 24, 2020

Uncharted Waters

Like the rest of the United States (well, almost), the American podcast business experienced a sudden disruption over the past week as an increasing proportion of the American populace was made to sharply limit their time outdoors as part of the effort to slow the coronavirus pandemic. New York and Los Angeles, hot-beds of both podcast creation and consumption, are now under strong lockdown measures to combat worsening conditions, a state of affairs that has pushed podcast publishers in those cities to rapidly reorganize in order to navigate their new reality. Offices were vacated, productions were adapted to remote workflows, and Ira Glass was left recording barefoot out of a closet.

But as disruptive as the past week may seem, it will almost certainly pale in comparison to what lies ahead. The stark reality is that the worst of the crisis has yet to come, particularly in this country, and it is simply unclear what American life — let alone the American economy — will look like in a few months. Come fall, we may find ourselves locked under even more aggressive social distancing measures, paying the cost of the Trump administration’s inadequate crisis management today. We may find ourselves in the punishing throes of a global economic catastrophe, unparallelled in modern times. Indeed, we may very well find ourselves buried under several worst-case scenarios, all at the same time.

The present moment is thick with uncertainty as we skirt the edge of a cliff. Things are bad right now, but it will definitely get worse before we can even dream of things getting better, both epidemiologically and economically. Just how much worse, and what kind of worse, are the operative questions.

And so, much like the rest of the country (again, almost), wide swathes of the podcast community are bracing for impact. “There’s no real way to think about this based on previous models, like past recessions,” said Bryan Moffett, Chief Operating Officer of National Public Media. “We’re in uncharted waters.”

As more Americans find themselves largely homebound, some in the podcast community have started fixating on whether there will be steep declines in listening, given that one of the fundamental environments for podcast consumption behavior — the daily commute — virtually evaporated overnight.

There’s a straightforward answer to this query: it’s too early to tell. Still, there have been some discernible changes over the past week. Chartable, a podcast analytics company, found that overall listening across the shows they measured took a dip, but to a smaller degree than they had anticipated and in a manner that’s distributed unevenly across different show types. To put specific numbers to the trend, Podtrac, the analytics company that publishes those industry rankers, found that weekly podcast audiences in the US decreased by 8% in the week of March 16, a greater drop than the 2% decrease in the previous week, at least for its measurement set.

(Podtrac will publish the graph of this data point, along with several other points of information, on its website later today, and plans to update the report weekly throughout the crisis. Longtime readers know I have my caveats when it comes to Podtrac, but this is a situation where their data is unambiguously useful, given that this report will be tracking changes over time on the same pool.)

Stitcher, which operates one of the bigger podcast portfolios in the business, saw similar things. Erik Diehn, the company’s CEO, told me that they saw drop-offs on Monday and Tuesday — again, unevenly distributed between shows — but that listening numbers had broadly stabilized by the end of the week, even picking back up slightly. “Given that people have basically stopped commuting, I’m pretty happy to see where things are,” he said.

Not everybody appears to be experiencing the same things, however. Some companies claim seeing audience bumps, fueling some confidence at least in the short term. “We’re seeing increased listening for the majority of our shows,” said David Raphael, President of PMM, which serves as the ad sales partner for podcasts like The Joe Rogan Experience and Anna Faris is Unqualified. “We expect that to continue.”

It’s tempting to assume that this highly newsworthy moment would foster universal listening bumps for news podcasts across the board, along with the crop of podcasts that have popped up around the coronavirus story. At this point in time, there doesn’t seem to be much that suggests otherwise. A Vox Media spokesperson told the New York Times that its podcasts have been downloaded “50 percent more than usual,” with newsier shows like Today, Explained seeing more prominent increases. Meanwhile, Slate tells me that its audio division saw downloads increase by 47% in the past month, largely driven by their coronavirus coverage.

All of which is to say it’s been a mix of things, and again, that it’s still too early to get a firm sense of how things will ultimately shake out. These are observable changes that played out as the majority of Americans begin to settle into their new reality. Among the many podcast producers and executives I checked in with, there is an emerging belief that the important structural impacts will only reveal themselves as we begin to get a full sense of how bad the pandemic will get in this country, as we see weeks under lockdown conditions potentially turn into months, and as we wade deeper into the layers of negative economic impacts that will result from the sum of all these cataclysms.

Questions and speculation abound. Some suspect that we will only see the true declines in podcast listening in a few weeks, when the Apple Podcast app triggers stops in automatic episode downloads due to inactivity. Others wonder about how tastes will change as life drifts into a prolonged state of heightened crisis. Will listeners burn out on news and coronavirus coverage? Will there be strong appetites for escapist fare? Will demand sharply bifurcate between shows that lean hard into coronavirus coverage and shows that lean far in the other direction, with little interest for what lies in-between? (On a related note, here’s a curious factoid I heard in my conversations over the past few days: the true crime genre was said to have taken a hit over the last few weeks.)

And of course, what will happen to the business side of things?

The podcast business is still predominantly powered by advertising, a channel that’s especially tethered to the ebb and flow of the greater economy. Speaking with over a dozen podcast makers last week, I’ve heard about several instances of ad cancellations and preemptive non-renewals. These pullbacks were said to be mostly clustered among industries directly affected by the pandemic, like travel and live events businesses, but not always.

Cancellations also popped up among direct response advertisers that are experiencing supply chain disruptions. One indie producer told me that a company had to pull out of a buy because they literally ran out of inventory and are uncertain when they can restock. It’s very possible that we’ll see more of this kind of cancellation as the crisis worsens. “We’re teetering on the edge of what could be disaster to advertising revenue,” said Allyson Marino, who runs the podcast company Lipstick and Vinyl. “While podcasts can continue to be produced, products advertised may not be viable in a prolonged quarantine state or worse.”

Again, the podcast advertising story isn’t a completely straightforward one. Consider that audio divisions of a larger diversified media operation will be generally less precarious, as the total risk is spread across multiple lines of businesses. (Unless, of course, said audio division isn’t taken all that seriously by management, in which case they will probably be benched.) And not everyone has seen cancellations just yet: Slate made it a point to note that they haven’t seen any advertisers pull dollars up to this point, and that they are still making sales.

Meanwhile, other podcast-first companies are still sending sales teams out into the field, with the mandate of forging ahead and bringing as many new advertisers, wherever active and operational (food and entertainment brands were cited, as were several types of internet companies), into their mixes as possible. Some claim to be seeing returns in these efforts, even under these abnormal circumstances. But they nonetheless carry an overarching concern of whether they can beat simply treading water — i.e. adding enough new buys to just make up ones that are lost — and whether they can sustain upcoming shockwaves as more advertisers begin to reconsider their confidence in future quarters.

The way several podcast executives put it, the focus right now is to keep making episodes, control costs as much as possible, and prepare to ride out the coming storm until a “new normal” is identified. In the context of podcast advertising, that means a state of relative steadiness where the aggregate pool of advertisers is able to project their business forward with some measure of confidence, such that they are able to make ad buys at volume again.

In my experience, ad sales people tend to be natural optimists as a species, and their perspective on the matter reflects that tendency. Many in these ranks phrased this moment as a period of temporary destabilization, and any lull in ad spends is a consequence of advertisers reacting, assessing, and calibrating to the situation. The next quarter will be rocky, but at some point in the later quarters, they argue, these companies will have to start advertising again, because they simply have to market to customers in order to survive — even if those customers are sheltering in place. Indeed, a few even went further by noting disruptive moments like these also represent a kind of opportunity: past recessions often saw brands spending to win new market share over competitors and incumbents.

Which is true, I suppose, but then again, they’re calling what we’re currently living through unprecedented for a reason. Regardless of how those advertising dynamics play out, though, one thing is for certain: podcast advertising, previously projected to beat $850 million by the end of this year, will almost certainly miss its mark.

Things are similarly too early to tell on the direct support side of the equation. Patreon, perhaps the biggest facilitator of direct support dollars in podcasting, claims that they’ve seen increases in creators launching on their platform along with increases in patronage, both in terms of actual Patrons and dollars pledges. (They’re not sharing any specific numbers on the record at this time, nor were they able to provide breakdown between verticals.)

But this early surge strikes me as soft, and I’m less confident about its viability in the longer term. I’ve heard from a handful of independent podcasters, whose business models relied heavily on direct listener support, that have indicated seeing some declines in paying supporters, with one of the main reasons for cancellations being that they’ve lost their jobs. Unemployment is skyrocketing as part of this economic upheaval, and as it gets worse, more and more people are going to be aggressively cutting back on non-essential costs. A lot of independent podcasters will probably be hard hit.

Some podcasts can survive cuts in direct support. Some can survive losses in advertising revenue. A great many can’t. Does it need to be reiterated that not everyone in the podcast community will survive this? And that the podcast landscape will probably look very different whenever we end up in a steady state, however long that will take?

The podcast economy is like any other economy, in that if someone’s not spending, someone else is not getting paid. Though many publishers are still committed to upcoming show launches, there are others that have already suspended development, postponed roll-outs, and cancelled projects outright. This means that some producers, talents, and production studios won’t be seeing that revenue, which could push them into financial hardship and lead to the end of their businesses.

Some companies and talents are more exposed than others, depending on the nature of their contracts, commitments, and investments. Companies that are stacked with more flexible revenue-share agreements are probably better off than those with fewer (at the expense of the talent). Conversely, talents on contracts with guaranteed money are probably better off than those with more variable payouts (at the expense of the podcast company, pending clauses that give them an out).

It should also go without saying: what comes next will be really hard for companies carrying a ton of debt that haven’t really figured out their position in this space. Many of these operations will almost certainly be cooked.

Meanwhile, I imagine some processes and trends will probably be accelerated. Anchored by a voluminous premium subscriber base that’s still sizable even if it takes a hit, Spotify will likely find new lanes in all this disruption, particularly as it pertains to dealmaking with talent. Speaking of which, I’ve started hearing that more entertainment industry talent — locked out of film, television, and live events circuits — have started eyeing podcast development work. Indeed, this could very well be a moment that accelerates the corporatization and consolidation of the podcast business, as bigger companies with deeper reserves weather the storm that washes away the smaller.

Look, you’re free to believe what you want. Me, I’m bracing for the absolute worst. But if there are any hopeful arguments to be made (even if they’re mere consolations), I’ve found two that hold some currency with me.

The first is the notion that podcasting is among a handful of other media formats that are uniquely suited to the highly specific limitations that have been imposed on daily American life right now. In a few months, film and television productions may still be on hold, but podcasts — news, fiction, comedy, and so on (maybe not sports) — will continue being made with relative ease. And in that scenario, they would be proving their value to advertisers by sheer value of simply being around.

The other is a sense that podcasting still possesses a kind of hardiness that will help it survive whatever lies ahead, and even thrive whenever we come out the other end to a new normal. I’ll leave the final word to Sarah Van Mosel, the Chief Revenue Officer at Stitcher and an alum of Market Enginuity, Acast, and New York Public Radio, who put it pretty well, I thought.

“Podcasting was born from adversity,” she said, referencing the fact that the modern podcast business and many of the bigger shows we know today — like WTF with Marc Maron, 99% Invisible, and Comedy Bang! Bang!, among others — originally started in the immediate wake of the Great Recession. “I think podcasts are the scrappy survivors of the media industry.  We’re not so big that we’re too fixed in our creation process and vulnerable to changes like this, but we’re not so small that we’re entirely dependent on a small group of advertisers to keep us alive.”

Natural optimists, indeed.