Podcasts are special. Intimate and unique, podcasts help us learn, laugh, and grow. Podcasts are creative freedom unbounded. If you ask podcast creators, industry participants, or the 62 million Americans who listen to podcasts weekly about the medium, you will hear praise and passion.
Over the past 18 months, our team at Luminary has been working hard to build a new model for podcasting. Today we are excited to introduce that model.
Luminary was born out of our team’s love for podcasts. As true podcast fans — fans passionate enough to dedicate our careers to the medium — we saw opportunities to support podcasting in a sustainable way. To do this we developed a unique model that marries a premium podcast network funded by subscriptions with a free app anchored in open feed ad-supported podcasting, the bedrock upon which podcasting sits.
So, what exactly is Luminary? Luminary is a free podcast app that anyone can use to listen to hundreds of thousands of publicly available podcasts. Podcasters whose content is accessible on the free app receive standard data and 100% of advertising revenue. Luminary is also a subscription service offering subscribers access to over 40 premium shows, ad-free, and available only on Luminary.
To some these two models may seem at odds. We don’t think they are. In fact, we believe that by living together they enable podcasting to thrive. Every step we have taken is intended to help improve podcasting for listeners and creators alike, whether it is through the premium content on our subscription service or ad-supported content on our free app.
Subscription is a proven model to successfully fund content
Subscription funding models for content are not new. Newspapers and magazines have utilized subscription models forever. Cable TV, satellite, and streaming video have been stalwarts of the subscription model. And in audio, satellite radio and digital music streaming services have driven the industry’s growth. In every content medium there is work that you or someone you know loves that was enabled by a subscription model.
While podcasters are passionate and love their craft, and many work only for that love, they deserve and are entitled to fair and proper resources and compensation. A subscription model can help podcasting achieve that.
If we want podcasters to have budgets for research and writing and production, if we want content that does not require massive audience size for economic viability, if we want variety in show format and frequency, and if we want the podcasters we love to receive fair and just compensation that can sustain them and the work they do, then we need subscription models to coexist with ad-supported podcasting.
The subscription model and podcast content
The subscription funding model is particularly well suited for enabling quality podcast content.
An important benefit of a subscription model relates to audience size. When audiences are large advertising works well. But in podcasting there is amazing and important content that doesn’t aspire to millions in audience size. Today there are approximately 50 podcasts with over 1 million listeners. It is much more common for a successful podcast to attract between 50,000 and 250,000 listeners. A subscription model is well suited for funding content with more modest audience sizes like the podcast content so many of us love.
A subscription model also helps to protect the quality of the listening experience for podcast fans. Today podcast listeners enjoy amazing content with remarkably low ad loads. The average hour of podcast content includes 3 to 4 minutes of advertising per hour, as compared to 18 minutes per hour for radio.
The relatively modest ad loads are, at least in part, why we are able to lose ourselves in the quality of podcast content, and even enjoy the advertising. However, the cost of podcast advertising is already high, much higher than it is for radio or other digital mediums. With ad rate growth limited, creators cannot increase their resources without increasing ad loads. Increased ad loads can erode the intimacy of podcasts that listeners have come to love. While we fully support open ad-based podcasting, we worry that increased ad loads could diminish the listening experience.
The subscription model and podcast creators
While helping to preserve breadth of content and the listener experience, a subscription model is an alternative choice that can also enable fair funding for podcast creators.
Examining “the math” of a successful podcast with 100,000 listeners per episode and 40 episodes per year makes this clear. That podcast, with three advertisements per episode, a $25 cost per thousand impressions (CPM), and a 75% sell through rate for ad inventory, would generate annual revenue of $225,000 — an incredible accomplishment. However, after deducting 30% of the gross revenue for the ad sales firm, paying staff for research, writing, and production, and covering other operating costs, the economics for the creators are thin. Compounding this, in today’s ad-supported model, very little of the creator economics are guaranteed. Any reduction to CPMs or sell through rates hurts the creator’s compensation.
If the same advertising and sell through rates were applied to a 10 episode podcast like an audio documentary or drama, the audience size would have to be 400,000 to deliver those same thin and uncertain economics. At 200,000 in audience the creators would see their income cut in half.
A subscription model allows podcast creators to receive revenue commitments up front, ensuring ample resources for podcast development and production. There are many creators across the Luminary network, both existing podcasters and new entrants to podcasting, who were not able to sustain their podcasts or create new work in light of the economics and uncertainty of the ad market. By funding those shows through a subscription model we are able to keep shows on air and bring new shows to listeners.
The subscription model and podcast technology
As we have seen in numerous other content categories, whether it be music, video, or print, subscription models also help fund technology development to support the consumer experience. As a subscription service, the more time users spend on our app, and the more joy users derive from the products we build, the more we can invest in building better listening experiences for both our free and paid users.
That is not the case for podcast distributors who today do not generate any revenue from distribution. Consequently, new models must emerge to sustain technology investment.
Building a platform that is purely for podcast listeners
Having a subscription model provides the framework for Luminary to invest significantly in technology. By being singularly focused on developing technology for podcast listeners, we hope to help lead the market in that area.
Enhanced ease of use, the constant introduction of new features, improvements to search technology, content curation, and a truly personalized experience can enable podcasting to grow. Those innovations will help the right listener find the right podcast at the right time. And that will help deepen engagement for existing podcast fans and introduce new listeners to the medium.
In sharing the technology investments made in support of a subscription model for free, without ever requiring engagement with the subscription service, a subscription model can drive technology for the whole of podcasting, including free open ad-supported podcasting. That is Luminary’s model.
Podcasting is big and growing. There is room for multiple models and multiple companies pursuing those models. In fact, there is no other content form that has only one model for funding content and driving technology.
We believe the model that Luminary has adopted, which combines a free app that provides a great listener experience and can be used without ever paying Luminary a dollar, with a subscription service that can sustain fair funding for creators and support great content, will lead to a virtuous cycle that elevates the whole of podcasting. That is what Luminary was created to do.
Luminary is committed to supporting the whole of podcasting for listeners and creators alike. We believe we have the requisite skill, passion, and respect for podcasting to do so. We hope that you will give us a try. We think you will like what you find.