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Podcast companies see signs of an improved ad market in 2024

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iHeartMedia, Spotify, SiriusXM and Acast reported year over year revenue growth in their podcast businesses during the fourth quarter of 2023. During their Q4 earnings calls, company executives noted signs of an improving advertising market heading into 2024.

Spotify and Acast, in particular, are expecting their podcast businesses to reach profitability for the first time in 2024. Execs at iHeart, Spotify and Acast told shareholders in fourth quarter earnings calls this month that they were seeing the ad market emerge from the slowdown in 2023, especially in the second half of last year.

“We expect 2024 to be back in growth mode, as we continue to see signs of improvement throughout our business and the broader advertising marketplace,” Rich Bressler, president, COO and CFO of iHeartMedia, said in the earnings call on Thursday.

Podcast revenue continues to grow, despite earlier headwinds

Podcast revenue at iHeart – which is generated from ads sold across its podcast network – was $132 million in Q4 2023, up 17% compared to Q4 2022 (and an increase from $96.6 million in Q4 2021). Full year podcast revenue was up 14% in 2023 year over year.

The company said this growth was driven primarily by increased advertiser demand. Podcasts made up 12% of iHeart’s overall revenue in Q4, up from 10% in the same quarter in 2022. Overall revenue at iHeart was $1 billion, down 5.2% year over year.

While Spotify doesn’t break out podcast revenue from its overall business, CEO Daniel Ek said in an earnings call on Feb. 6 that the company is getting closer to a profitable podcast business (he also said this during a third quarter earnings call in October). Spotify narrowed its loss to about $75 million in Q4 2023, compared to about $291 million in Q4 2022.

“I’m pleased to say in Q4, we were very close to breakeven on that business, which gives me a lot of confidence that as we get into 2024, we will achieve the full year profitability target on podcasting,” Ek said.

Spotify is banking on listenership growth — leading to more opportunities for Spotify to monetize its podcasts — as well as the fact that the company has “doubled down on the deals that worked” and “gotten out of a lot of the deals that didn’t work,” Ek said. Spotify canceled the podcast shows “Heavyweight” and “Stolen” in December (in addition to a number of other podcasts earlier in 2023) and renewed its licensing deal for the popular “The Joe Rogan Experience” show in February – though new terms now allow host Joe Rogan to distribute the show on platforms beyond Spotify.

Spotify has also worked to cut costs in its podcast business. It laid off 17% of its total staff, or about 1,500 employees, in December.

In the call, Ek also outlined plans to change the model of exclusivity deals with top podcasters to focus on revenue sharing and paying smaller minimum guarantees. The plan is to broaden distribution and grow ad revenue, he said.

“Because advertising is in such a strong growth position for us, I feel I’m really excited about the opportunity we can bring both the creators and to Spotify itself with that strategy,” he said.

Total ad-supported revenue at Spotify, including its music business, grew 12% year over year to about $541 million.

Total revenue at Sweden-based podcast marketplace Acast grew 9% year over year in Q4 2023, with net sales amounting to about $47.6 million (advertising made up 89% of the company’s revenue, with other businesses like software licensing and subscription accounting for the remainder). Acast CFO Emily Villatte said the company increased podcast ad inventory in the quarter, during the earnings call. She did not say by how much.

The North American market was the main driver of this revenue uptick, growing 19% year over year to about $13 million.

At SiriusXM, podcasting revenue (including advertising and subscriptions) grew 22% year over year in Q4 2023, Tom Barry, evp and CFO of SiriusXM, said in an earnings call. Programmatic podcast revenue increased 97% year over year, he added. Barry did not provide additional details on SiriusXM’s podcast business.

Podcast ad analytics company Magellan AI found that podcast advertising spending grew 29% in Q4 2023, according to its quarterly podcast ad benchmarks report. The study noted that every podcast genre saw an increase in ads in Q4 2023 compared to Q3 2023, with average ad load increasing from 5.9% in Q4 2022 to 7.7% in Q4.

Impact of Apple iOS17 change

Acast noted during its earnings call that the Apple’s iOS 17 update in September, which changed how podcast episodes are downloaded on mobile devices and how podcast listens are measured, had quite the impact on their business. Underlying gross margin was 24%, but excluding this “revaluation,” it would’ve been 39%, Acast CEO Ross Adams said.

“This impact is a one-off, and we’re not anticipating further iOS 17-related revaluations in the future,” he noted.

At Acast, listens decreased in the quarter by 17%, said Villatte. However, she said average revenue per listen grew 24% as a result of the change. (By comparison, the audience of public radio show “This American Life” shrunk by 20% because of the iOS 17 change, said host Ira Glass at this week’s podcast conference Hot Pod Summit.)

Q1 outlook

iHeart expects revenue from its Digital Audio Group, which includes its podcast business, to be up in the mid-single digits in the first quarter of 2024. That’s despite a slow January, Bressler said. Overall ad revenue last month was down 8% year over year, he said.

“However, we are seeing momentum in February/March, which are both pacing up low single digits,” Bressler continued. “So we see this trajectory as further validation that January was an anomaly and a positive sign for us.”

iHeart is expecting political ad revenue this year to help buoy its ad revenue growth, Bressler added. During the last presidential election, iHeart generated $167 million of political ad revenue, he said.

“We continue to see signs of improvement throughout our business and the broader advertising marketplace,” Bressler said. “We expect to see a significant year over year improvement in our adjusted EBITDA performance.” Overall, iHeart expects adjusted EBITDA in Q1 2024 to be $100 million to $110 million, up from $93 million a year earlier.

And like Spotify, Acast is expecting to reach profitability this year. The company had a positive adjusted EBITDA in Q4 2023, a first for Acast, with a margin of 3%, according to Adams. 

Villatte added that Acast is “betting on some uptick in revenue” this year to get there.

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