Listening Numbers Are Booming, But Even Spotify Doesn’t Know If It Will Make Money From Podcasts.

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I’m a bit old school. While podcasting occupies much of my time each day, a long-established habit of slowly leafing through the pages of newspapers continues to be a source pleasure. Print discoveries are made without digital nudges from algorithms.

Among my favorite finds last week was in the “C-Suite Strategies” section of The Wall Street Journal and a surprisingly revealing comment by Spotify CFO Barry McCarthy.

Asked by a reporter “why is podcasting an important medium for the company to expand into?”, McCarthy answered: “It remains to be seen whether or not it becomes an important medium.”

Huh?

His company spent approximately $400 million this year on three podcasting firms, in the expectation that these investments would increase Spotify’s growing subscriber base.

As more people discover the many rewards of podcast listening, many content producers and distributors are allocating a growing part of their media budget to podcasting. And for good reason.

“Frankly, if Spotify didn’t get into podcasts it would risk losing share of the audio listening market to other platforms,” said a recent post by the financial advice site, Motley Fool.

Despite soaring revenues from music subscriptions, the fast-growing streaming giant operated at a small loss during the first quarter of 2019 and for all of last year.

Podcasting is a big bet and McCarthy admits that “there’s a fair amount of uncertainty” about whether it will have a positive impact on profitability, “which is probably troubling to investors.”

Assuming that consumers will pay for podcasts that have, until now, been free may be a risky investment. While the most popular shows reach hundreds of thousands of listeners, most expensively-produced podcasts don’t make a profit. And compared to other media, podcasting’s share of the advertising pie is slim indeed.

One industry projection forecast that by 2020, U.S. podcast advertising would grow to $659 million, while in 2018, radio ad sales were $17.8 billion.

Overall digital advertising revenue last year surpassed $100 billion!

The numbers beg the question: How well-deserved are big podcast investments by venture capitalists and others? Will millions of listeners pay for monthly subscriptions to Spotify, Luminary, Pandora and other platforms?

While podcasters celebrate expanding opportunities, growing media coverage, dazzling new shows and a steady rise in consumer acceptance, the industry’s producers and investors must broaden their horizons.

“Some fear that podcasting has become a community talking to itself— a coastal thing like electric scooters and avocado toast,” wrote Gerry Smith in Bloomberg Businessweek.

Yes, the pod potential is huge. But competition is increasingly fierce. Obstacles remain. A little more caution and humility may be in order.

Richard Davies is a podcast consultant, media coach and former network radio journalist. His weekly solutions journalism podcast is “How Do We Fix It?

Why we listen to podcasts and what makes them different from radio and other forms of communication.

Podcasting is now mainstream and has just moved into a new phase. Let’s call it the 2nd Wave.

While most media content producers no longer need convincing that they should be doing podcasts, they’re also starting to realize that this medium is unique and that they don’t know how to make them.

Unique how?

– We’re the blue jeans medium: the most informal and intimate delivery system for compelling emotions and thought. Storytelling can take its natural course.

– Unlike video, ideas are delivered pure and without the distraction of a host’s unfortunate dress sense, wrinkles or bad teeth. There’s just that voice in your ear.

– Unlike radio and TV, which is often on in the background, podcast audiences aren’t usually distracted and don’t “tune in”. They’ve sought out your show, and are listening carefully at a time of their choosing. Parts of each episode may be replayed. Intimacy squared.

– Podcasts offer listeners more control. Episodes may be replayed. Many people listen on earbuds, encouraging a deeper connection than listening to the radio a speaker. The best podcasts are not passive and they often require listeners to bring something of themselves to the experience— their imagination and curiosity.

– Podcast hosts don’t have to “re-set” and remind the audience what they’re talking about. Listeners don’t tune in half-way through. They start each episode at the beginning, allowing for a more linear narrative.

– Unlike radio shows that have to conform to the clock (typically 25 or 50 minutes plus pledge breaks and newscasts), podcasts have no scheduling or timing restraints, and can vary in length. Episodes can be produced daily, weekly, monthly or in seasons.

– Podcasts can be made and distributed without the approval of an executive editor, radio program director, or some other gatekeeper. Many shows are produced at-home, without the need for expensive studio equipment. Creators have more freedom.

– While some podcasts are made with big budgets and are highly structured, with multiple layers of ambient sound or music, there is no single formula for success. This lack of established rules allows for a greater range of voices and subjects.

– Unlike broad-casts that must appeal to a broad audience, podcasts can target a much smaller slice of the population. With social media, hosts and producers have a direct dialog with listeners and can truly find what their audience wants to hear.

– Unlike radio, podcasting is rarely live. That may be a disadvantage, but many episodes are evergreen and have a long shelf life.

The requirements of doing a distinctive podcast require a different set of skills than its closest cousin. After decades in radio, I had to un-learn a great deal when we began podcasting during the 1st Wave in 2015.

“Serial” had just taken the world by storm, and the for the first time, many people had become dimly aware of online audio and were asking “what is a podcast?”

Over the next four years, as audience numbers zoomed steadily upward, almost everyone jumped into production— from individuals and celebrities to media giants, consumer brands and non-profit foundations. The result is a great big, glorious mess.

The 2nd Wave has arrived and to be successful at podcasting, producers must know why it is indeed like no other medium.

– Richard Davies is a podcast host, consultant and producer. DaviesContent designs podcast formats, edits and helps clients make excellent audio content.