Amazon's Podcast Play

Issue 84

Amazon announced earlier this summer that it had acquired distribution rights to SmartLess, a popular podcast hosted by actors Will Arnett, Jason Bateman, and Sean Hayes. The e-commerce giant will spend more than $20 million per anum so it can offer new episodes of the talk show on its music service exclusively—for just one week—before they’re released on other outlets. To most outsiders, it seemed as though Amazon had overpaid.  This isn’t atypical of Amazon, many of Amazon’s major plays follow a common theme – buying positioning to further reinforce it’s primary businesses.

But the company didn’t make the deal for distribution rights. It was far more interested in the right to sell advertising space during the show. Podcasting differs from most other media businesses, in which such platforms as YouTube or CBS sell the commercials. In podcasting, individual shows and networks sell their own ads. The platforms then distribute the shows with advertising already included—an attractive opportunity for a company trying to catch up with market leaders Facebook and Google in lucrative online advertising.

SmartLess averages from 7 million to 10 million downloads a month, and it was bringing in about $6 million to $7 million a year in advertising before the Amazon tie-up. While that won’t pay for the deal on its own, it gives Amazon valuable inventory it can add to its expanding podcast network.

In December it signed an approximately $300 million agreement to acquire the podcast platform Wondery. In addition to producing popular shows such as Dr. Death and Bunga Bunga, Wondery operates one of the largest podcasting advertising networks, selling ads for more than 100 shows that reach more than 8 million listeners a month, according to Podtrac.  Amazon is continuing to pad it’s revenue stream with higher margin businesses – as it pretty much is able to buy anything it wants – the valuable digital real estate play signals Amazons intent to expand further into digital advertising

Source: Bloomberg