June 3, 2020

HGDCC-Finance

analysis business finance

How the coronavirus crisis has helped Spotify’s podcast business

Claudia Sulewski and Finneas O'Connell record their podcast, "We Bought a House," inside their L.A. home. The couple launched their podcast March 23, part of a surge of new podcasts uploaded to Spotify during the coronavirus crisis. <span class="copyright">(Finneas O'Connell and Claudia Sulewski)</span>
Claudia Sulewski and Finneas O’Connell record their podcast, “We Bought a House,” inside their L.A. home. The couple launched their podcast March 23, part of a surge of new podcasts uploaded to Spotify during the coronavirus crisis. (Finneas O’Connell and Claudia Sulewski)

For months, Los Angeles musician and actor Finneas O’Connell and his girlfriend talked about making a podcast about their lives but could never find the time. Then came the COVID-19 pandemic.

“As soon as we realized that most of the rest of our lives was going to be put on hold, we were like, ‘You know what? It would be great to have a podcast right now,'” said 22-year-old O’Connell, who created the “We Bought A House” podcast with his 24-year-old girlfriend, YouTube vlogger Claudia Sulewski.

The hour-long show about life under the quarantine is part of a surge of podcast activity on Spotify. The Swedish streaming service said it had nearly 150,000 podcast uploads last month, 69% higher than February and the largest monthly increase in Spotify’s podcast catalog.

At a time when many Hollywood productions have been shelved and workers are losing their jobs, Spotify is continuing to build out its podcast business. Like other streaming platforms, the company is tapping into a growing hunger for entertainment and news among people stuck in their homes. Because podcasts can be produced remotely without crews, the pandemic has not disrupted Spotify’s slate of shows.

“It’s pretty amazing to see the resilience we have,” said Courtney Holt, Spotify’s global head of studios and video. “I will say it’s certainly easier when you’re not primarily doing video. To be able to do audio content, it really is about good internet connection, good mike and a little bit of quiet.”

The music-streaming powerhouse became a big player in the space last year by buying podcast production companies New York-based Gimlet Media and L.A.-based Parcast. This year, it added the Ringer, another L.A.-based podcast network, to its platform.

Spotify has signed deals to make podcasts with prominent people like the Obamas and is building studios for podcasters as part of its downtown L.A. campus. The company has an expanding staff in Los Angeles, with more than 300 employees, and it plans to hire more in the coming months.

“L.A., it is the center of gravity for Spotify’s podcast business,” Holt added. “We have a pretty great slate of things that we’re rolling out, and because we haven’t really missed a beat on what we’re making, we obviously need help.”

Following social distancing restrictions, Spotify staff and show hosts have been working out of their homes, improvising by using closets, attics and, in at least one case, a tent, to block out noise.

One of Spotify’s most popular shows is “Science Vs,” hosted by Wendy Zukerman, an Australian science journalist. She used to record her show out of a studio at Gimlet’s office in Brooklyn. Now, she works out of her apartment in the New York borough, placing a pillow against her bedroom window to muffle the sound of rain or her neighbors giggling as she does her recording.

Zukerman uses science to examine topics in the cultural zeitgeist. This season, she has pivoted to focus on COVID-19 and doubled the number of episodes to two a week. A recent episode, for example, focused on whether the novel coronavirus that causes COVID-19 is airborne.

Wendy Zukerman, host of "Science Vs," works from her kitchen, as more podcasters are doing home recordings instead of going to a studio during the coronavirus crisis. <span class="copyright">(Wendy Zukerman)</span>
Wendy Zukerman, host of “Science Vs,” works from her kitchen, as more podcasters are doing home recordings instead of going to a studio during the coronavirus crisis. (Wendy Zukerman)

“There were all of these science questions that people needed to know right now and wanted to know and there was so much misinformation online, sometimes from the highest levels,” Zukerman said. “We felt the desperate urgency to get the science out there.”

Spotify has more than 700,000 podcast titles on its platform covering a range of topics across pop culture, news, sports and music. The digital radio programs are available on Spotify’s free streaming service with ads (the company has a $9.99 monthly music subscription service with no ads).

Spotify produces some of its podcast directly. In other cases, it partners with third parties and shares ad revenue with them.

For musicians like O’Connell, internet radio provides another way to reach fans during an extraordinary time. “We Bought a House” launched March 23 and has roughly 100,000 listeners tuning in each episode, he said.

“It’s important when everybody is feeling the same thing, to be having conversations about it and sort of extrapolating upon it and figuring out how you’re feeling about it together,” said O’Connell, who is the brother and musical collaborator of singer Billie Eilish.

Podcasts are important to Spotify’s strategy as it looks for new content to keep consumers coming back to its streaming service. It had 124 million subscribers and 271 million monthly active users at the end of last year.

The company’s share price, which closed Friday at $137.84, jumped 11% in the last month.

Spotify’s revenue grew 24% to $2.4 billion in the fourth quarter from a year ago, with a net loss of $230 million, due to higher-than-expected payroll taxes in Sweden and other countries. First-quarter earnings will be released Wednesday.

The coronavirus has had mixed effects on the industry. Many people listen to podcasts when they are commuting or are at the gym.

“People are at home,” said Mark McCrery, chief executive of Podtrac Inc., a Washington D.C.-based firm that tracks the industry. “They are not commuting. They are staying inside.”

Still, U.S. weekly podcast downloads were up 20% for the week ending April 19 compared to the first week of January, Podtrac said. Some categories such as news saw a 57% increase, while other topics dropped off (true crime was down 26%), according to Podtrac.

Some companies, including New York-based Luminary and San Antonio-based iHeartMedia Inc., have laid off or furloughed workers and cut salaries amid the coronavirus crisis. Luminary sells $4.99 monthly subscriptions, while iHeartMedia has free, ad-supported podcasts and operates radio stations.

Many podcast companies make money through advertising, which has taken a hit during the pandemic.

While travel-related businesses are cutting ads, companies in mental wellness and telemedicine are showing interest, said Jen Sargent, chief operating officer of Wondery, a West Hollywood podcast production company. Wondery has partnered with The Times on podcasts including “Dirty John.”

“It’s been our opportunity and challenge to shift quickly as a business, really following who is in market right now,” Sargent said.

Wondery saw a dip in listeners in cities such as L.A., but by the end of March, the levels had resumed, she said.

In contrast to much of Hollywood, Wondery, Spotify and other podcast companies such as New York-based Wonder Media Network are hiring.

“Podcasting is still an extremely healthy and growing medium,” Spotify’s Holt said. “I think we’re going to be fine.”