This story originally appeared in Hot Pod Insider, The Verge’s newsletter about the biggest events in audio. You can sign up here.
It feels like 2022 was the year when podcasting came back to earth. After years of go-go growth, podcast hits going mainstream, major corporate investment, and hype about the market to come ($4 billion by 2024!!), optimism about the industry hit the wall of an uncertain economy. M&A took a breather, advertising got tighter, and companies started laying off audio employees after years of frenzied hiring.
What does 2023 have in store? If we have learned anything at all from the decade so far, it is to expect the unexpected. But seeing as I am in as bad a position to predict the future as anyone, I spoke to some experts about what they anticipate for the year to come. The top line: if the economy avoids any big downturns, we will see more of the same for podcasting — slowing, but manageable, growth. If there is a recession, then it could set the industry way back.
What exactly is going on with the advertising market?
The advertising market, to use industry terminology, is soft. It is not awful — there are still plenty of ad dollars flowing to various types of media — but it is not growing as much as it had been. And there is potential for it to get significantly worse in 2023.
This is going to sound really basic, and certainly many of you reading this already know how this works, but advertising is extremely susceptible to economic disruption. And there have been quite a few disruptions in 2022: the war in Ukraine pushing up energy costs; high inflation making everything from vegetables to auto insurance more expensive; and rising interest rates pushing stock prices down. Altogether, these factors make it more expensive to run a business. It also could force consumers to spend less on goods and services, and although that has not really happened yet, it is something that easily could if these economic conditions continue.
So businesses that would otherwise be spending money on advertising are either feeling the pain or are being conservative in the face of uncertainty. And when those businesses have to make a choice between things like staffing, operations, consumer experience, and marketing, marketing is usually the first to go. That means fewer ad dollars flowing to the businesses that depend on them: traditional media, digital media, and social media.
“The uncertainty that people talked about as an abstraction for most of 2022 is really only just getting started.”
Which is not to say that the ad market has collapsed, but it is wobbly. Max Willens, a senior analyst at eMarketer, says that he noticed something odd when he spoke with an ad agency executive. The executive noted that only 5 percent of its client base had submitted their ad budgets for the year. According to Willens, that is highly unusual this close to the end of the year. Normally, more than half of those companies would have done so by now. “The uncertainty that people talked about as an abstraction for most of 2022 is really only just getting started,” Willens said.
So what happens next in the ad market is really dependent on what happens in the rest of the economy. The job market is still tight (even if it doesn’t feel that way if you work in media, but more on that later) and inflation is starting to slow. But a Bloomberg survey of more than three dozen economists is more pessimistic. They put the likelihood of a recession in the next year at 7 in 10.
What does that mean for podcasting in particular?
Barring all-out economic disaster, podcasting should be okay. Not great, not terrible, but fine. The problem is that the industry has been operating under the assumption that podcast growth would continue to be as strong as it has been for the past several years.
For 2023, eMarketer estimates that podcast ad revenue should still grow by 28.8 percent — nearly the same growth rate as in 2022. But that is also about half the growth rate podcasting experienced in 2021. Worse, that rate is expected to drop by more than 10 points in 2024. “People overestimated and misinterpreted the bounce back in 2021 as a sign that was going to be a springboard into real sustained blockbuster growth,” Willens said. “And you see across media that has proven to be quite incorrect.”
During the boom time, companies like Spotify, Amazon, and SiriusXM invested hundreds of millions of dollars in podcast tech and content with the expectation that the sector would continue to grow. Even if investors are not thrilled with how much they spent (and their current podcast profit margins), they are in a better place to capture what ad dollars are flowing into the market. With the biggest podcasts on the market (Spotify and Joe Rogan, Wondery and SmartLess, SiriusXM and Crime Junkie) and most sophisticated tech stacks, they are in a better position to weather a downturn. Independent creators, who are already having a tougher time breaking out than they did a few years ago, will be left to pick up the scraps.
Can we expect more layoffs?
Probably. Even as layoffs have been avoided in many sectors of the economy, that has not been the case in tech and media. Like I mentioned up top, businesses will cut ad budgets before cutting workers. But those ad cuts just end up resulting in layoffs in ad-based businesses. (Lucky us!)
The back half of 2022 was littered with freaky layoff news, and there is no reason to think that will be the last of it. CNN and Spotify cut podcast producers, Twitter ousted nearly all of its Spaces team, and Bloomberg reports that SiriusXM layoffs are on the horizon. But the job cuts are more likely to be a correction than an all-out gutting.
Matthew Harrigan, an analyst at The Benchmark Company who covers SiriusXM, said he would not be surprised if SiriusXM cut some jobs. He pointed to CEO Jennifer Witz’s recent comment to analysts about using a “disciplined approach to cost management” as an indication that some roles could be cut. Even so, he does not expect widespread cuts. “I don’t think there’s any ‘oh, gosh’ moment where they looked at the business model and really wish that they had done all that much differently,” he said. “It’s just a matter of trimming a little bit.”
But even a handful of layoffs can rattle people working in the industry, and not all companies are in the same position. NPR, which is a nonprofit, is pretty dependent on corporate sponsorship, another line item businesses cut when the economy is messy. With an expected $20 million decline in such sponsorships, the network took the drastic move of cutting its summer internship program. Audacy needs to manage its massive debt and is reportedly considering selling off podcast studio Cadence13, which has otherwise been a big success for them. If Cadence13 lands elsewhere, job security could be tenuous.
“There’s nowhere to hide in a tougher economic environment. From an advertising standpoint, everything will get hit.”
Then there are the news media outlets that have invested in podcasting in recent years. Publications that are dependent on digital display advertising and subscriptions are experiencing deep cuts, including Gannett, Vice, and, soon, The Washington Post. Many audio workers are embedded at such companies and could be at risk of losing their jobs, but how many will be let go is dependent on the company’s priorities. On one hand, audio advertising is faring better than digital display advertising, so those jobs could be seen as more valuable. On the other hand, they are not necessarily considered part of the core business and could be among the first to go.
Media industry analyst Craig Huber does not expect that publications are going to pull back from audio altogether. But if the economy does get significantly worse, any job could be at risk. “There’s nowhere to hide in a tougher economic environment,” Huber said. “From an advertising marketing standpoint, everything will get hit.”
On that light note, I wish you a very happy holiday. And don’t despair! Things go in cycles. As my personal lord and savior Bruce Springsteen wrote, “Everything that dies someday comes back.”