| Three Hollywood stars are about to cash in on the podcasting gold rush. Talent agency CAA is shopping the distribution rights to "SmartLess," the show hosted by Jason Bateman, Will Arnett and Sean Hayes. The field of bidders has narrowed to three, including Amazon, per several people familiar with the talks. (Nobody involved would comment to me on the record.) CAA is asking for as much as $20 million a year – the same price Spotify paid for "Call Her Daddy." The number has surprised many of the companies that considered a bid. "SmartLess" isn't as popular as "Call Her Daddy," generating about half as many downloads a month. And the price for "Call Her Daddy" was already a big number. But even people who have dropped out of the bidding concede the show could get get its asking price. It's hosted by three famous actors, and is one of the only new podcasts to break out in a big way. Almost all of the most popular podcasts are at least four years old and spoken for in one way or another. "SmartLess" is less than a year old and unattached. More important than any of that, at least from a macro perspective, is that the market for podcasting rights is growing a lot faster than the actual market for podcasts. Buyers are convinced podcasting is going to be a huge industry, and so they are spending a lot of money upfront to stake out their positions. Spotify has been the biggest culprit (by a mile). It paid upwards of $100 million for Joe Rogan, tens of millions of dollars for the Obamas and the royals, and millions more for everyone from Dax Shephard to Esther Perel. (Spotify looked at "SmartLess," but is not one of the final three.) Spotify's spending has forced Amazon, SiriusXM/Stitcher and iHeartMedia to get more serious about paying for podcast rights. Amazon acquired Wondery, and SiriusXM acquired both Stitcher and 99% Invisible. These companies are really, really, really tired of seeing Spotify grab exclusive rights to so many shows. The same could be said of Apple, which remains the top distributor, but it has thus far only dabbled in exclusive shows. There are many executives (and listeners) who feel this arms race is bad for the industry in the long term. It's going to make people use different apps to find different podcasts they love, kind of like what's happening in streaming TV right now. Podcasting was founded on broad distribution. But let's set aside that existential debate for a second and ask a simpler question: Do these deals make any sense? There are a few ways of looking at this for the buyers (and sellers). - Do the shows pay for themselves right away?
The answer to the first question is a definitive no. There are almost no podcasts able to generate $20 million a year in ad sales, so it's hard for anyone who licenses those shows to make up the money. In fact, any company that makes a show exclusive to its service is limiting the potential advertising sales. Almost every show has suffered a steep drop in listeners since going behind the Spotify paywall (more on that later). Spotify, Amazon and SiriusXM have spent more buying podcasts in the past couple years than the entire industry has made in revenue. But these companies didn't make those deals to immediately turn a profit on them. They want to use podcasts to attract new customers and grab a larger share of the audio market. Some of those customers will decide to upgrade to a paid subscription, while the free users serve as the foundation for an audio advertising business. That brings us to question 2: - So, are these deals helping services strengthen their position in podcasting?
The answer to this question is less clear. The number of people who listen to podcasts on Spotify has grown. The share of Spotify customers who listen to podcasts has increased. The company has all but cornered the market for podcasting in many foreign territories and boosted its advertising business as well. Seems like a win. And yet, doubts persist. Investors cheered Spotify's investment in podcasting as a way for the money-losing music service to turn the corner towards profitability. That hasn't happened yet. And while Spotify said it would take a while, Wall Street's initial enthusiasm about the company's move into podcasting has waned. Its stock is down more than 30% since its peak in February.  It's also not clear whether Spotify's individual deals have worked out. The company has spent more than $1 billion on podcasting companies and shows to buy audience. Apple has done nothing, and is still the dominant player in the US. The fact that Spotify keeps doing more and more deals could mean the strategy is working. Or it could mean the podcast audience hasn't moved over as quickly as Spotify would like, and the company is throwing more money at the issue. (I've heard both arguments, from people inside and outside the company.) It's a little too soon to see if the spending thus far by Amazon or SiriusXM has moved the needle. It will be interesting to see which route "SmartLess" takes. If it goes with Amazon, it may still distribute its show on other platforms. If it choose to go exclusive some place, it would suppress its audience. Podcasts that signed exclusive deals with Spotify have lost anywhere from 25% to more than 50% of their listeners. Shows that signed exclusive deals with Luminary never found an audience. Bill Simmons, now a Spotify employee, has never made his podcast exclusive to its app. Gimlet Media, a division of Spotify, has never made its biggest show, "Reply All," an exclusive either. Michelle Obama made a show just for Spotify, and then released it on Apple several months after its initial debut. All of these podcasts know they can still reach more listeners and make more money by going broad. But there's one thing that exclusivity does deliver: lots of money. Hayes, Arnett and Bateman will get to pocket millions of dollars a year to sit around and chat a couple times a week. The annual cost of producing the show is less than one episode of "Ozark." As one industry executive told me this week, the tech companies buying up podcast rights all have more money than time, so they are spending a lot of money to make up for lost time. — Lucas Shaw The best of Screentime (and other stuff) | 
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