There's no doubt, podcasting's hot right now. Conan O'Brien has a new podcast! Maria Shriver has a new podcast! Ron Burgundy has a podcast, and he's not even a real person! It feels like everybody has a podcast and soon, everybody will have a podcast network, too. Hubbard invested in PodcastOne while Entercom put money into Cadence13. iHeartRadio bought How Stuff Works for $50 million and Spotify, not to be outdone, bought Gimlet for a rumored $230 million.
With so many radio companies looking putting cash in to podcasting, it's a good time to look at how a radio company can get money back out of podcasting. There are a number of different revenue channels at the moment, but they're not all equal. And their relative importance may shift over time.
Let's take a look:
1. Advertising / Sponsorship
The vast majority of money revenue generated in the podcasting space right now is made through advertisements. While podcast ads differ in format from radio ads, the concept is basically the same: interrupt audio that people do want to hear with promotional messages that they probably don't. That's why Seth Godin calls this traditional method of advertising “interruption marketing.”
While the advertising model is working at the moment, I have reservations about it in the long run. For starters, I can fast-forward through ads with my podcatcher — that's fancy lingo for a “podcast listening app” — in a way that I can't with my radio.
Moreover, for a podcast to see serious advertising dollars, it needs to get enough downloads. Some say the magic number is 5,000 downloads per episode, while other advertisers insist on 50,000. Only a small percentage of the 600,000+ podcasts in existence hit these numbers.
There's also a question of whether programmatic ads will eventually become the norm in podcasts and what effect that will have on CPMs. I suspect that it will, and that this will drive CPMs down, meaning that a podcast will soon need more listeners or more ads — or both! — to generate the same amount of revenue.
The advertising model might work better for radio companies with large enough footprints to launch national podcasts, such as iHeartRadio, NPR, or Westwood One. For smaller, regional broadcasters, alternative revenue models may make more sense.
Podcasters can put some of their content behind a paywall. There are various different ways to do this. Some podcasters make their recent episodes available for free but require a subscription to access their back catalog. Others offer ad-free versions of their podcast with a paid subscription. And others offer bonus content to paying customers. There is no one-size-fits-all model for podcast subscriptions, and in a world where everybody from Netflix to Audible to The New York Times is charging a small monthly fee, there are legitimate questions about how many subscriptions the average consumer is willing to pay for.
3. Intellectual Property
Increasingly, podcasts are getting turned into properties for other mediums. 2 Dope Queens, StartUp, Lore, Dirty John, Homecoming, Serial, Crimetown, Atlanta Monster, and more have all spawned television shows. At CES this year, a panelist in one podcasting session predicted that in the coming years, we will see a quarter of all television shows and movies being developed out of podcasts. (I guess there's a limit to how many times you can relaunch the Spider-man and Batman franchises.) As a result, this panelist predicted a boom in scripted podcasts, with the hope that the hits would find a profit in the licensing of intellectual property rights.
It's not just TV, though. Grammar Girl‘s Mignon Fogarty has parlayed her hit podcast into a podcast network which in turn produced a number of books.
Increasingly, podcasters are touring behind their shows. My Favorite Murder, Pod Save America, and Smodcast are just a few of the shows that generate revenue from ticket sales. Of course, not all podcasts lend themselves to live events. It's hard to see how a podcast in the mold of This American Life-style storytelling journalism could be recorded in front of an audience; it simply requires a level of research, storyboarding, and pre- and post-production that isn't compatible with a live studio audience.
Moreover, as anybody who's ever produced a radio station concert knows, events are hard work and take a lot of time. This is not a revenue option for the faint of heart.
While t-shirts, hats, and keychains might make some ancillary cash, it's hard to see how this becomes a major stream of revenue for most podcasters.
5. Content Marketing
Many podcasters are actually podcasters second; they use podcasting a means of promoting their primary good or service. For example, a lawyer might produce a legal podcast as a means of attracting new clients.
More and more, you are starting to see movies and television shows come with an accompanying podcast as a way to further engage with fans. I love NBC's The Good Place, which has led me to listen to the accompanying podcast hosted by recurring guest star Marc Evan Jackson. This is solid content marketing.
6. Branded Podcasts
Because podcasts can be such an effective content marketing tool, some podcasters are producing podcasts for companies or other paying clients. McAfee's Hackable, Tinder's DTR, and Inside Trader Joe's are examples of branded podcasts. I believe that for many radio companies, producing branded podcasts for local businesses may eventually prove to be a more reliable revenue stream than trying to consistently produce a parade of hit podcasts.
7. Individual Listener Donations
A number of podcasters make money by appealing directly to their listeners. Patreon, a service that allows podcasters and other artists to accept donations from fans, is a commonly used tool for this. In the radio industry, the closest thing we have to this is the pledge drives held by public radio stations.
8. Technology and Other Services
A number of people in the podcasting space provide services for other podcasters. Panoply, the podcasting network that spawned from Slate.com, decided to pivot away from producing content last year and transform itself into a tech company by offering a hosting platform for other enterprise podcasters. In the long run, this move may prove lucrative, as it is much easier to scale technology solutions than it is to scale hit content. Meanwhile, there's an entire Facebook group full of podcast editors offering up their services to new podcasters. We're also seeing podcast studios that can be rented by the hour, such as Podcast Detroit's recording spaces or PRX's Podcast Garage outside of Boston. For some radio companies, revenue dollars may be found in supporting podcasters, not becoming podcasters.
Most of us have spent so long working in an industry that generates revenue by selling ads that it's tempting to focus on advertising as the only way to make money from podcasts. But it's not the only way, and whether it's the best way may have a lot to do with the nature of your company. The revenue models that make sense for larger broadcasters may be different than the models for smaller companies. Broadcasters that specialize in talk-based formats may have different opportunities than companies which rely heavily on music. And we all might benefit from a broader mix of streams than we rely on with our radio stations. Podcasting is still a new medium. Question any assumptions you may be carrying with you.
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