There is an idea floating around the internet that podcasts are on the precipice of a monetization revolution. In fact, my co-host, Jay, was asked about this on his recent appearance on No Agenda with David Sherry. The common trend in podcast journalism is to compare the monetization successes of the Chinese to the innovation occurring in the podcast space in the United States. Let’s dive a little deeper into this theory through examining the underlying assumptions of the forthcoming monetization deluge.
Assumption 1: growth equals revenue
I think this is the biggest assumption being made about the inevitability of podcast monetization. But, as we have seen through Twitter, sometimes the existence of something is better for the public than it is for the something. The public captures significantly more value from Twitter than Twitter does from the public. I believe podcasts will be the same. Regardless of how fast they grow, podcasts will never recognize an outsized monetary benefit as compared to their listener base’s value gained.
Assumption 2: it’s happening in China, it will happen here
First, this is a ridiculous assumption. China puts up buildings in a weekend and Hudson Yards has been “in progress” since 2009. China and United States are on completely different wavelengths when it comes to almost anything except the thirst for each to be the world’s superpower.
Having lived in China before the payments revolution and hearing from multiple people who have been there since, it is clear that the pace of advancement of apps like WeChat (“Wēixìn”) has drastically changed the micropayments landscape making the process of paying frictionless. If you found a podcast you did want to pay for in the United States, the closest we have is Apple / Google Pay.
Secondly, China sees podcasts as education. In the United States, the three top categories of Apple podcasts are Christianity, Music, and Comedy. You could say all three are non-educational, but I won’t go so far in this blog post. Clearly, two of three are for entertainment purposes as opposed to educational. So, in the United States we are paying for interesting content with our attention in the traditional media route; while in China they are paying for educational content with money in the traditional private scholar route.
Assumption 3: people will pay for podcasts
If surveys are to be trusted (they’re not) than the March 2018 Edison Research survey of 2,000 individuals which took place in February 2018 resulted in a finding that 26% of Americans have listened to a podcast in the last month. In January 2017, Edison conducted another survey of 2,000 individuals which resulted in the finding that 45% of monthly podcast consumers 18+ made over $75,000. According to the Wall Street Journal, approximately 14% of Americans make over $75,000.
Let’s take those values and do a little math. To get to the percentage of $75k-making consumers who listen to podcasts, we would take (45% * 26%) / 14%, or approximately 84%. Said another way, according to the figures presented in the preceding sources, 84 out of every 100 individuals over 18 in the United States who make over $75,000 listen to podcasts monthly. The corollary is that 17 out of every 100 individuals in the United States who make under $75,000 listens to podcasts every month.
The default state is an interesting thing because people are sensitive to change. The anchor cost of a podcast in the United States is zero, just like social media. Unlike social media, and most other technological evolutions in the last 20 years, the youth are not driving the podcast charge. It appears to be the 25–54 cohort which has provided a bulk of the growth to date. This is problematic as podcasts, as an industry, have already captured their core, affluent consumer and significant monetization will come from the changes of preferences not the acquisition of consumers.
In short, I think the unique structure of the podcast ecosystem in the United States and legacy pricing model will make it difficult for podcasts to monetize in any significant fashion without the complete overhaul of the Apple podcast app, which drives 55% of all podcast listens. Podcasters will be hesitant to commit to a single non-Apple podcast player, hosts are not developed enough to command market power, and listeners are comfortable with not having to find the marginally better player.
Here’s the beautiful part. While some people start podcasts to make money, I believe — and I am an example of this with upside — that most don’t. Most start a podcast for the additional, non-monetary benefits of running a podcast: the networking, the pride it creates, the opportunities that arise, etc. Those that do start podcasts with the hope of capitalizing need to have 50,000 downloads per month to talk to a broker. And, in a world where 350 new podcasts are uploaded to Apple every day and algorithms favor legacy podcast, that task is getting harder and harder.