Specialist
Former C-level executive at Stitcher
Agenda
- Operating environment for iHeart (NASDAQ: IHRT) and Spotify (NYSE: SPOT) – demand drivers for advertising on podcasts over the next 12-24 months
- Evolution of open RSS feeds vs exclusive subscription content and subsequent knock-on implications
- Evolution of monetisation schemes between advertising and subscription and ability to better leverage listener data
- Outlook for H2 2021 and beyond – M&A themes, industry winners and losers
Questions
1.
Could you give a brief overview of the operating environment for podcasting, pulling out 2-3 key drivers or trends in the industry?
2.
Why do you think listenership is outpacing ad dollars? The market has just surpassed USD 1bn in revenues in the past 12 months and is only expected to grow to just above USD 2bn in the next 2-3 years relative to that rather large monthly user base. What are the remaining obstacles for those ad dollars to start pouring in?
3.
Do you expect longer-term tailwinds to come from the form of programmatically delivered podcast advertising? I appreciate your point that the attribution challenges have been worked out. Is that’s only from a brand-reach standpoint? Is there solid programmatic measurability on the ROI?
4.
Is there a good way to frame the listening user runway relative to Spotify at over 300 monthly users? How much smaller is the audio listener relative to a music listener?
5.
How do you expect the competitive dynamics to play out? Will it remain largely as that private per individual-driven RSS delivery or will this turn into a less open distribution over time?
6.
How does Clubhouse diverge from what the typical podcasting model seems to be, growing the reach with ad revenues coming second? What are the monetisation schemes from the early days as well as the formatting differences?
7.
What are the key things for Acast, Amazon, Spotify, Apple and YouTube regarding where each is headed? Is it the content slate or the reach that they’ve been able to garner? Is it how they approach the monetisation scheme? Who might win out the most here?
8.
What are the longer-term factors that would allow these exclusive deals to be ROI positive? Is there anything to be said around the listener data over time? What are you focused on that might come successfully as a result of The Joe Rogan Experience and Call Her Daddy?
9.
You referenced the USD 60 per hour served from a monetisation standpoint. How do Spotify and iHeart go about monetising a typical podcast? Is there a difference between what Spotify can do vs others regarding a particular dollars per hour served?
10.
What is Spotify’s reliance on music labels, insofar whether or not podcast is a medium through which it can lower that reliance? Do you think podcasting can contribute enough, whether it’s at the ARPU level or just as a percentage of consumption, to wean it off the high royalty and headline rates the company has to pay to music labels?
11.
I read that Spotify takes a 30% cut of any ads it sets up on its own service. Does that seem to be a hindrance from the advertiser perspective as to buying fully into anything programmatic delivered or just delivered by the platform on behalf of the advertiser?
12.
What is your outlook for subscriptions? you’re expecting this to play? It sounds like it will be very niche, with a handful of that 80 million weekly listeners being so tuned into podcasts that they’re willing to pay for their niche passions.
13.
What are the key flaws around doing podcasts à la carte? What is the likelihood that enough people will pay USD 3-5 per show, or even in the case of Spotify as high as a USD 7.99 a month, or is it more daunting on an à la carte basis and the bundle price feels better for the end consumer?
14.
What do you think comes of the fees that are taken off the top of the subscriber revenues? I think a lot of the Apple-ethic distribution on behalf of applications or creators is a big sticking point right now. I think Spotify is at a 5% cut of subscriber revenues. How do you expect the platforms to attempt to monetise the actual subscribers themselves?
15.
App stores have come down from typically 30% in the first year and 15% thereupon. Are there dealings that exist out there that might make it hard for subscription revenue to be profitably sustainable for the platforms themselves? Does that necessitate focusing more on advertising than subscriptions, because you can’t get that higher fee?
16.
How are shows priced at a premium? Is it the show itself in its entirety or exclusive or bonus content? What do you think is perceived as worth paying for over time for listeners? What might drive that most efficiently?
17.
Did you say that you would expect subscription to be higher than that USD 60- to USD 80-per-hour-served monetisation level that we could consider as a good rule of thumb for advertising?
18.
Have you thought about how much that CPM, on average, would get dampened as programmatic grows? How do you expect that mix to play out? You mentioned host reads probably maintain CPMs, but will those CPMs drop materially here?
19.
Is there anything you would highlight in the landscape as it relates to M&A? It’s been high velocity as of late, but what are you monitoring within distribution platform, ad type or content that might drive a lot of the consolidation?
20.
Do you think it will be many years until podcasting is a USD 10bn market opportunity? Which players will be partaking?
21.
Is there anything structural about the podcasting business, especially relative to the label dynamics that we’ve talked about music-wise, that will contribute to more attractive profitability metrics, whether it’s at the gross margin or profit margin level? Alternatively, do you think a lot of the investment being made right now is not dissimilar to what’s going on in music and it will inherently be a low profitability business for a while?
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