The principle noun behind the ‘podcast’ portmanteau may be obsolete, but the growth of the format itself is far from over.
The popularity of podcasts has survived a rotating cast of distribution platforms, devices, competition and (now) revenue models. Americans are now listening to more podcasts than ever before, leaving the industry to ask: where do we go from here?
For some, the answer was clear: premium content for a premium fee. 2019 was always going to be a big year for audio. With the introduction of the subscription model to podcasting, it became even bigger.
Two Media Companies Switching Up the Podcast Revenue Model
From the early days, when you had to make your episode selection with a click wheel, podcasts have primarily been supported in two ways: advertising within each podcast episode and fan support through platforms like Patreon.
But early in 2019, two different media companies set their sights on challenging the underlying model. One with a platform for podcasters, the other with premium content for consumers.
Slate has produced podcasts as part of their content offerings for years. Now, they’ve added a new layer to the media group: a premium subscription platform designed to let podcasters open up new sources of revenue. It’s called Supporting Cast, and it promises to let podcast brands “shine” while “handling payments, private feed delivery, analytics, and customer support so you don’t have to.” This is in addition to Slate Plus, which offers ad-free Slate content (including podcasts) to readers and listeners for a fee.
In contrast, Luminary is a new podcast app that offers access to both the “thousands of shows you already love” and “access to 40+ new podcasts” billed as premium content. The new content features big names like Conan O’Brien and Trevor Noah, and was sure to make a splash.
“We want to become synonymous with podcasting in the same way Netflix has become synonymous with streaming,” Matt Sacks, Luminary’s co-founder, told The New York Times. “I know how ambitious that sounds. We think it can be done.”
Lofty ambitions aside, the question for both podcasters and advertisers alike is less about whether it can be done and more whether the subscription model will prove viable for the industry on the whole.
The subscription model is unlikely to completely replace ad-supported podcasts, just as broadcast television remains highly relevant as the streaming wars rage on. But the model could be poised for massive growth.
The Promise of Premium Podcasting
Ahead of 2019, What’s New in Publishing wrote that the year would see more publishers “pivot to paid” by “prioritizing direct reader revenues over advertising or other revenue streams.”
Around the time Supporting Cast went live, and months before Luminary launched, Mary-Katharine Phillips at WNIP expanded on this potential: “The pivot to paid is more than just direct reader revenues, it also includes listener revenues. We know how important habit formation is in any retention strategy, and this holds true for audio as well. Until recently, it has been very difficult for publishers to offer premium audio while still allowing listeners to keep the habits they had already formed around audio.”
But then Slate introduced Supporting Cast, which made the shift to premium audio more realistic for publishers hoping to retain habit-forming listeners. Instead of having to switch apps or limit their listening hours, the platform allows consumers to simply pay for what they see as valuable.
To become completely viable, the platform will have to introduce self-service for publishers and clarify a few hangups on the consumer side.
But what about pure-play premium podcasts? It may be the next stage in revenue growth as podcast audiences continue to grow. A recent study from IAB found that ad revenue for podcasts was $479 million for 2018, with the potential to grow to over $1 billion by 2021. But the revenue growth doesn’t match the audience growth. “The numbers show that growth has peaked and is slowing down,” writes Bill Rosenblatt at Forbes. “The numbers show that podcasting will need to find other sources of revenue if its commercial viability is ever going to be proportional to its growing listenership.”
Premium audio — a la Luminary — may be one promising way to grow that revenue. The ‘star-studded’ lineup comes with an $8/month price tag. The next year will prove whether or not listeners are willing to pay.
The bigger question for publishers (and advertisers) is the role that Luminary will play in the podcast ecosystem. Once it became clear that the app would offer a free tier with your normal podcast RSS feed, many publishers — including Spotify and The New York Times — pulled their content from the app. After all, they didn’t want the free version to compete with their ad-supported content.
For his part, Mike Raab (a venture capitalist with Sinai Ventures, which is invested in Luminary) makes an impassioned defense of both the model and the app. “Although some are upset at the potential disruption (and disaggregation) that Luminary will likely ignite in the podcast community, both creators and listeners are likely to be beneficiaries,” writes Raab.
“Creators will have the opportunity to experiment and invest in high-quality content they want to create and be more fairly compensated for their talent, while consumers will benefit from a better podcasting experience, with ad-free, high-quality content.”
The sustained growth of podcasts, Raab argues, makes the subscription model both inevitable and profitable. The consumer will decide if it’s popular.