What tulips, cryptocurrency, and bespoke home-delivered dog food can tell us about the resilience of audio and the madness of crowds
Over the past week I’ve seen a lot of hand-wringing over whether podcasting’s bubble has burst. If you are short on time, I can give you the answer right up front: no, it hasn’t.
The bubble hasn’t burst because there wasn’t a bubble in the first place.
If you care about the digital audio industry, you are probably well aware — if not completely tired of hearing about — some of the industry changes that have taken place over the past month or so. These developments include Panopoly’s move away from content creation, Buzzfeed laying off its entire in-house audio team, and my own team’s departure from Audible. The cumulative effect has been for some to start to wonder out loud if the end is near…or the party is over…or the bubble has burst.
And even if you think it has, the industry fundamentals have not changed, even though the recent news is quite dramatic. In fact, those fundamentals continue to improve…for now.
There are many myths about podcasting. Many of them seem to be rooted in the belief that podcasting is like a slot machine that pays off on every pull. Occasionally, when an aspiring podcaster pulls the lever and it doesn’t pay out for them, they complain that all slot machines suck and are doomed to be terrible failures.
That isn’t to say that there isn’t something significant happening in podcasting right now — and it’s likely there are more changes to come. But before we walk through all that, let’s take a step back.
A bubble is a bubble
When you couldn’t trade 1,000 pounds of cheese for a single tulip bulb, that’s when it was obvious that things were getting a bit weird. That was the first recorded “bubble,” back in the Dutch Republic during the 1620s. Times were great, tulips were beautiful, and people couldn’t get enough of them, causing a wild price hike that went completely bonkers, then crashed. But there are many more contemporary examples. There was that same general feeling last year when Bitcoin started to flirt with a $20,000 per coin price, up from just $973 eleven months earlier. Years before that, in the late 1990s, almost anyone with a slick PowerPoint deck and the right mix of buzzwords could become an instant paper millionaire based on an IPO for a new tech company with no path to profitability, no viable business plan, or even a clear sense of what it did. In all three cases, things were clearly fucked up and clearly out of control. But while each of these events was happening, nobody cared, because everyone was making such crazy fistfuls of money.
Those were bubbles. Real bubbles. Bubbles that burst and ended up nearly destroying the industries that let it happen (and in the case of Tulipmania, almost took down the entire Dutch economy in the process).
In its simplest terms, market bubbles happen when price exceeds intrinsic value. Another sign of bubbles? The presence of speculators: people buying something in order to sell it again at an ever-escalating price. During the 17th century Dutch run on tulip bulbs, many people bought bulbs just to re-sell them again, because it seemed that there was no ceiling to the price people were willing to pay. I have to admit, they sound like they were really amazing flowers, but was one bulb worth more than eight full-grown hogs? Probably not.
After awhile, Tulipmania devolved into speculators just selling to other speculators. Inherently, there is nothing wrong with that (that could fairly describe commodity markets today), as long as the price is somewhat tethered to what an actual tulip-loving gardener was willing to pay to plant it. That was the problem — it wasn’t. And, when speculators ran out of other speculators to sell up to, the price crashed.
Again, to re-cap: insane prices with no corresponding value, coupled with speculation, equals a bubble.
That, in no way, describes what is happening or has happened in podcasting. There is one minor exception to that statement. Remember the days of $100+ CPM ad sales in 2015? That was much more bubble-like. But a lot of those crazy ad rates had worked themselves out of the system by 2017. Today, pricing for podcasts is pretty stable and realistic to their value.
So if podcasting isn’t a bubble…
When people ponder if the podcasting bubble is bursting, I think they are asking the wrong question. To me, it feels more like a gold rush than a bubble. A “gold rush” (it’s worth noting there isn’t a technical definition for this, like there is for a bubble) is characterized by a mass of people rushing into an industry, some (often most) without any of the necessary skills or experience related to the task at hand. Oftentimes, people didn’t even know what they didn’t know. They just wanted to mine gold, heard it was easy, and jumped in.
We always think of the California gold rush, but there have been many throughout history, with one thing remaining consistent: some people did make huge profits, but most people walked away with little to nothing, often after putting in a lot of effort. But that didn’t stop people from trying. It was a “free for all” with everyone caught up in the dreams of wealth and success. The barrier to entry was low, and the lure seemed to be seizing an opportunity that would belong to those who got there and got there first.
That feels much more akin to what we’ve seen in podcasting over the past four years. Lots of people entering, rushing in, actually — all lured by dreams of easy success. Some did well, most didn’t. Remember, the only people who profit off a gold rush are those who sell the shovels and picks (I’m looking at you Sennheiser and Marantz).
What would be a real cause for concern
Despite continued momentum and potential, things aren’t guaranteed to always be cupcakes and sunshine forever. Podcasting would be in real trouble if one of two things happened: the audience went away or the money went away.
In podcasting, money flows from four basic sources: advertising dollars, derivative rights, listener sensitive revenue, and investment. To be clear, advertising dollars are paid for ads in podcasts; derivative rights are the various outlets for the IP (intellectual property) podcasters create (aka — making a book, movie, TV show, board game, etc. based on the podcast); listener sensitive income is all the money received directly from the audience, such as Patreon contributions, live shows, merch, and so on; and investment is when individuals or institutions invest money in a podcast company/network or an individual show in hopes of generating return down the road.
In the podcast industry, and especially among outside observers, most of the light and heat focuses only on advertising and investment dollars. And, as of this writing, neither of those show signs of weakening. However, I would argue that there is cause for concern that many podcasters are taking on too much investment, and certainly the wrong kind of investment. And podcast advertising…is still expected to double in the next two years.
Many of the “sky is falling” talking heads point to podcast CPM rates, which some believe are unsustainable. Again, a lot of that crazy money has worked itself out of the podcast system. But more importantly, CPM prices are not based on speculation, they are based on results. The reason that podcasts have high CPMs is largely tied to the fact that the ads work. Not only do they work, but they reach an audience who are largely unreachable by traditional advertising. These results are so compelling that they overcome the reservations of those concerned about the historical lack of consistent measurement and data that comes with an open ecosystem like podcasting. And again, ask an ad agency if their podcast budgets are going up or down next year. Almost universally, you’ll find they are going up.
Sure, there is a lot of inventory out there — a ton of podcasts each with many open ads slots. Many go unfilled, and those are the people who have been grumbling lately.
Audience demand hasn’t declined. As of now, looking at surveys and tools that track numbers, there are no signs that things are slowing down. More and more people are listening to podcasts, and even if it plateaus in the next year or two (which many, including myself, have expected to see for awhile now), there are still a sizeable number of people (roughly 67 million every month) consuming billions of episodes of podcasts.
Everything flows from demand, so as long as people are listening — and doing a lot of listening — it’s hard to argue that anything has burst. As long as the ads work, and the audience is there, so will the money.
So…what is happening?
A maturing. A realignment. A recalibration. The end of a gold rush. Whatever you want to call it, what did happen was a huge helping of reality dulled the shine of the gold rush lure.
And I, for one, think it is largely a good and positive thing.
In today’s “move fast and break things” digital media culture it isn’t surprising that companies and talent can find themselves off course, and need to back up and change tack. When you move quickly, you have to accept that the risk will increase and you’ll make some decisions that you will later wish you could change. Out of all the companies who have recognized the opportunity in digital audio and podcasting, it isn’t surprising that these pivots are happening. If anything, it would be weird and shocking if everyone made the correct maneuvers every time. It would be depressing if no one was willing to admit some things weren’t working.
When I see the moves away from podcast content creation lately, that’s what I see. I see companies who started off with all good intentions, but ran up against the reality of what it would take to succeed. They may have been foolish, or overly bullish, or simply have only so much time and attention to do a limited number of things well.
Additionally, I think anyone who looks at the podcasting revolution with a clear eye will have to acknowledge that there will be many more such pivots, recalibrations, and course corrections to come. Frankly, I’m betting the next ones will be more seismic than these.
But there is one more important point to make in order to understand the fortunes of the podcast industry…
Never bet against audio
While digital disruption has certain affected legacy media companies, including legacy audio companies (read: broadcasters), there is something very important to remember about audio. It’s something that makes it different than any other digital platform.
Audio is historically very resilient.
Radio was the first truly egalitarian mass medium and has seen more disruption than most people realize. Cataclysmic disruption. Yet it persists.
Audio even survived the invention of video.
Many people speculated radio’s days were numbered when television became widely available in the 1940s. Audience — and talent — all rushed to the exciting new medium. But not only did radio survive, it reinvented itself, and, in the process, accidentally invented rock-n-roll, for Pete’s sake. That is pretty badass.
People have been predicting the death of radio for my entire two-plus-decades career in radio. The final nail in the coffin was supposed to be, ironically enough, podcasting. But even when faced with the exciting explosion of podcasting, radio, in its supposed “demise,” still managed to drum up $19 BILLION in revenue last year. That, too, is pretty badass.
So if one thing is clear, when someone tells you that any audio platform is done for, ignore them. They are probably wrong.
So where does that leave us
One thing that I’ve held onto since my departure from Amazon is a bit of Bezos-wisdom that can be really useful at times like this: focus on what doesn’t change. He says customers want three basic things from Amazon: great selection, great prices, and great customer service (which includes fast shipping). So, as the world has changed over the past twenty years, Amazon has kept its attention on how to advance those three things. As technology and opportunities present themselves, Amazon leaned towards those that advanced improving selection, price, and service. It’s a great guiding principle and can help someone vet and process every unexpected thing that presents itself.
From the evolution of radio through to the current podcast revolution, the winners focus on what doesn’t change: namely, making great listens that people love.
So despite all the news of the past few weeks, nothing much has really changed. People still want to listen to great stuff. As long as that remains the case, podcasting will be fine.
This little dose of reality should reinforce what others have long known: there are no shortcuts.
The best way to achieve goals, to build an audience, and to earn the revenue to make it possible: simply be relentless in making your work as incredible as possible. Nothing beats great stories and conversations. No marketing plan, no network effect, no tricks or tips is ever a better investment than simply trying a bit harder to be a bit better than your last episode.
Ignore the naysayers, and let’s get back to work.