The data is not encouraging, says Bernstein. The problem is podcast year-over-year growth has stalled and even declined. Global podcast listening for the top 10 publishers jumped from 26.7% year-over-year growth in March 2020 to 51.5%, 52.2% 63.6% and 72.3% in the following four months, according to Podtrac data. But annual growth decreased to 1.7% in February 2021 and fell into negative territory in March and June, when year-over-year listening sank 16.5%.

At the same time, streaming companies’ acquisitions of podcast companies has made the market increasingly crowded. Spotify, Amazon, Apple, iHeartMedia and Pandora have poured well over $1 billion into podcast companies in the last three years alone.

Taken together, Bernstein argues, these factors suggest a heightened risk-versus-return imbalance is not baked into the current share price.

But the Guardian Fund, a Spotify investor, praised the company in its mid-year report for giving creators tool that will expand podcasting’s reach and advertising potential. “It has become a no-brainer for creators to use Spotify,” the report says. “Moreover, by becoming an open platform Spotify is moving away from the walled garden strategy that Facebook and Apple pursue. In fact, Spotify is doing things that are hard for Apple to copy as its business model is invested in controlling the garden.”

The main question is how podcast listening will grow following the increases during the pandemic. As pandemic restrictions fade and people commute more often, podcasting will compete with increases in in-car listening to radio and music.

The podcasting long tail could explain some of the decline in Podtrac’s data for the top 10 publishers. The number of new podcasts per year grew roughly 650% from 119,000 in 2016 to 885,000 in 2020, according to data from Chartable. That number is certain to grow more as Spotify’s 2019 purchase of the Anchor app gives people a simple tool for podcast creation and publishing on its platform.

Spotify’s market capitalization has grown more than $20 billion since the company announced its exclusive licensing deal for The Joe Rogan Experience in May 2020. That’s all the more reason to expect Spotify’s podcast efforts to generate enough cash flow or become a valuable customer retention tool, Bernstein argues.



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