While much of the talk in podcasting circles lately has been around Luminary‘s venture capital-backed endeavor to become the “Netflix of podcasts” — that is, to create top-tier shows and make them available only to subscribers — the folks at Slate have quietly introduced Supporting Cast, a membership platform for podcasts. In essence, it lets any podcaster create their own “Netflix of podcasts.” In return, Slate takes a “small percentage” of the revenue that a podcaster generates from its members.
The contrast between the two companies' approaches highlights a question I've been pondering for a while: In a world where there's a glut of content, is the most profitable approach to try to create the best content and reach a wide audience, or to develop technology that allows your company to reap a small piece of lots of content? In other words, what's the easiest way to scale up — through content or through technology?
The content route to scalability is very familiar to those of us in the media industry: create a hit show, attract a large audience, and sell ads. Once you've produced the show, there's little or no added cost in obtaining each new fan, so your content scales. The hard part, of course, is producing a hit. Even if you do manage that feat, hits inevitably fade. If an eight-year run for a show like Game of Thrones is unusual, the 20-year run of Law & Order is exceptionally rare. That's why producers try to parlay their hits into franchises — so they don't have to start over from scratch.
Podcast networks are the equivalent of franchises: Crooked Media aims to be the liberal political franchise while Nerdist Industries turned its podcast success into a geek culture empire. In this light, Luminary's decision to become the Netflix of podcasting is curious, because there's no common thread that connects the different shows on Netflix. Unlike, for example, Star Trek, or DC Comics, or Harry Potter, where you know what you're going to get when you consume more of the same content from the brand, there's nothing that intuitively connects the shows of politico David Axelrod, actor Michael Rappaport, and the two women who host Guys We F*****d. They're all produce high quality podcasts with large fanbases, but after that, the similarities end. If you love a show by one of them, it doesn't follow that you will also enjoy a show from the others. The lack of connective tissue will probably make it harder for Luminary to achieve scale.
This explains why Li Jin on Andreessen Horowitz, in a comprehensive report titled “Investing in the Podcasting Ecosystem 2019,” expresses enthusiasm for for vertical audio platforms. He explains:
We’re excited about startups that are going deep within a particular vertical and building a full-stack audio experience tailored to that vertical. There’s less chance of incumbents competing directly here, given the more niche focus and fundamental differences in feature sets needed to enhance the user experience. We also see greater willingness for users to pay for content that has higher perceived ROI — for instance, various fitness and meditation/wellness audio apps have already gained high levels of traction in usage and monetization.
In short, it's better to have the best content in a specific niche than an unconnected assortment of high quality shows.
Achieving scale by technology is an altogether different beast. You've got to invent a better widget. Once you do, there's only little to no extra cost for each additional widget you sell — just profit.
Hosting platforms like Art 19, Blubrry, and Libsyn are examples of companies that have achieved scale through technology, rather than content. Interestingly, Megaphone, the company formerly known as Panoply which spun off from Slate, found itself at a crossroads last year. The company had a stable of successful podcasts, but had also developed an enterprise podcast hosting solution. It decided to double-down on its technological solution and exit the content business. It apparently decided that technology was the more profitable way to scale up.
Spotify's Split Decision
A few months ago, when Spotify acquired Gimlet and Anchor in the same day, I was puzzled by the purchase. Gimlet produces a small number of best-in-class podcasts. Anchors makes it easy for anybody anywhere to create a podcast, even if they have no experiences, and the quality of the output largely reflects that fact. I compared it to buying a couple of Teslas and a Pinto factory on the same day. These acquisitions struck me as incongruous; they didn't seem to work together as part of a larger coherent strategy.
Is Spotify is wrestling with the same question of scalability? Unlike Megaphone, perhaps it decided to hedge its bets on both the content and technological routes to profitability. After all, there's nothing that says this the two are mutually exclusive. Moreover, Spotify's technology-only approach to distributing music that it does not own has proved cost-prohibitive. Perhaps the best path to scalability lies through both content and technology.
We could see an example of this in the television industry when Disney launches its streaming service this fall. Disney owns some of the most popular content franchises in the world, including the Marvel Cinematic Universe, Pixar, and Star Wars. It has decided that owning the content isn't enough; it also wants a technology play. So it's pulled its content from distributors like Netflix and built its own service. Arguably, Disney could generate even more revenue by giving each of these brands their own streaming service — and perhaps they're just waiting for each franchise to have enough content to justify the split.
In the podcasting world, the buzz tends to focus on content plays. After all, content is just sexier. But pay attention to the players who are attempting to achieve scale through technology. In the long run, they could be the big winners.
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