4:51 PM PST 1/18/2021
in
Natalie Jarvey
The iPhone giant explored the addition of a paid audio product, a risky move, given the proliferation of free programming with advertising.
In the past decade and a half, Apple has built a significant influence on the podcasting industry, allowing creators to reach their large audience of device owners without charging a penny. But the company’s recent talks with creative partners about introducing a subscription product into its podcasting business signal that its reign as a benevolent distributor may be coming to an end.
Conversations, first reported by The information, have been underway since last fall, at least, sources tell the The Hollywood Reporterand finally, it can end up taking many different forms. Regardless, it’s clear that Apple led by Tim Cook – after spending the past two years watching rival Spotify in streaming music invest hundreds of millions of dollars to align with some of the most prolific producers and most popular personalities in podcasting – is no longer happy sitting on the sideline. “There’s a huge opportunity right in front of you with 1.4 million iOS devices globally,” says Daniel Ives, an analyst at Wedbush Securities, “and they don’t want to lose.” Apple declined to comment on its podcasting plans.
Much of the growth of the podcasting industry over the past decade can be traced back to Apple and its former CEO Steve Jobs, who in 2005 declared that he was “bringing podcasting into the mainstream” by adding support for the medium to iTunes. A few years later, the company launched a separate Podcasts app that quickly became the leading distribution platform for the medium. But Apple, which grossed $ 275 billion in sales in fiscal 2020, refrained from transforming podcasting – still a relatively small industry that the Interactive Advertising Bureau estimated would generate nearly $ 1 billion in advertising revenue in the U.S. last year – in a profitable venture.
Now, however, Apple’s position as the primary podcast listening platform is being threatened, as the company faces fierce competition from tech and media giants, including Spotify, Amazon and SiriusXM. In the years since it added podcast support for the first time, Apple has also placed an emphasis on its growing service business, through which it now offers subscription products for music, television, video games and fitness videos.
But Apple will have to proceed with caution when exploring the introduction of podcast subscriptions, a business that has long been financed largely by advertising sales. Many longtime podcasters are vocal advocates of keeping the medium free and widely accessible, and listeners have yet to show a strong appetite for paid podcast services like two-year-old startup Luminary. Even Spotify, which has a robust 144 million member music subscription business, has refrained from putting any of its podcasts behind paid access. And Citi analysts recently questioned whether Spotify’s podcast investment could bear fruit, noting on January 15 that the company’s cadence of premium subscriber additions and download data “shows no material benefit.”
Ives says Apple may find it easier to sell a podcast subscription if it offers a select selection of unique and original talent shows on demand, just as it does for video programming with Apple TV +, which was launched in 2019 with drama The Morning Show starring Jennifer Aniston and Reese Witherspoon. Apple has released a handful of internal podcasts and has discussed making podcasts that serve as companions to its original TV shows, the sources say, but has not yet gone after high-profile projects or talents like Spotify. Last fall, Spotify paid a lot to bring The Joe Rogan Experience, regularly show # 1 on Apple’s podcast chart, exclusively for its platform.
Apple currently reinforces Apple TV + subscriptions by offering a free subscription to those who buy new devices. It also encourages people to pay for multiple Apple subscriptions by offering discounted Apple One packages. LightShed media analysts recently wrote that they “believe Apple can succeed” with a subscription podcast product if it leverages its new packages with its “leading position in podcasting”.
The Patreon membership platform has shown that podcast subscriptions can work on an individual level, with fans paying for exclusive content or without ads for their favorite personalities. Apple could employ a similar feature, which allows people to pay à la carte to listen to programs without advertising. But to attract podcast partners, Apple’s business would need to cover any loss of advertising revenue.
“It’s not like this is a layup,” says Ives, “but given how aggressive Spotify in particular is going after this market, they have to do something.”