Free Podcasts Are Good for Me But Bad for Business

Free Podcasts Are Good for Me But Bad for Business

I’ve been a podcast listener for years, ripping through episode after episode as I battle traffic, play handyman or exercise. Wondery Inc. podcast network’s“Business Wars,”Guy Raz’s“How I Built This”and Phoebe Judge’s“Criminal”top my playlist.

The podcast’s greatest virtue is that it is free. I’ve spent thousands of hours listening and dished out all of $7.99 on my habit. (I signed up for, then canceled Luminary Media LLC’ssubscription servicebecause free content flows like water.) I don’t recall ever buying a service or product based on the many, many ads that show hosts have served me over the years. In fact, I’m a serial ad-skipper thanks to the15-second advance buttonon



’s podcasting app.

For me, that’s a darn good return on investment, but it makes me wonder if podcasting has found a sustainable business model. As the medium pivots from niche to mainstream, it needs to figure out how to lessen its reliance on advertising, particularly as the audience for podcasts may not grow fast enough to make marketers happy.

Can podcasting become more like Netflix Inc. or

’s Prime? Or should all the big media companies simply gobble up all the great podcasts and make them part of their broader offering?

One thing is for sure: Status quo ain’t gonna cut it. If the decline of thenewspaper business taught us anything, heavy reliance on advertisers is great until those guys decide there’s a better way to spend their money. Paradigm shifts are sometimes as abrupt as they are unforeseen.

At first glance, this ad-dependance gripe seems like tomorrow’s problem. U.S. ad revenue from podcasts is expected to more than double from the $478 million spent in 2018 to $1 billion in 2021, according to the Interactive Advertising Bureau and PricewaterhouseCoopers LLP.

The sums are modest compared with traditional media, but projected growth rates are impressive and probably underestimating the potential. The heavyweights, after all, are just starting to pay attention. After years of soliciting interest primarily from smaller marketers (think Blue Apron food delivery, Tommy John underwear and Casper mattresses),deals with bigger companies(think Ford, Geico and GE) are becoming commonplace.

Earlier this year,


bought three episodes of journalist Malcolm Gladwell’s popular “Revisionist History” to tout its investments in 5G internet technology. AT&T Business President and Chief marketing OfficerMo Katibehtold me that the deal is a way to build its brand with business-minded decision makers, who represent a solid portion of the 1 million people downloading Mr. Gladwell’s podcast.

Dan Granger, chief executive of advertising agency Oxford Road, said new shows “keep coming out of the woodwork.” A couple of years ago “we were at 400,000 podcasts on the Apple iTunes list; now we’re at 750,000. Apple indicates 200,000 new shows have popped up in the past year alone, although few hold a candle to the ones that top the charts.

Consider the rates at which new users are signing on, and what user growth really means. Edison Research, among the only organizations compiling podcast user data, says 27 million people tuned into a podcast once a week in 2015; that number grew to 48 million in 2018 and is projected to eclipse 60 million this year.

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If Edison is right, the podcast business is posting a tidy 18% compound annual growth rate for weekly listeners. The troubling news is that rate is far below the 45% growth rate in podcast advertising revenue, a disparity that has many questioning whether we’ve reached peak podcast.

But keep in mind, nearly every podcast is free. I shell out $5 a month to listen to

Sirius XM Holdings

’sHoward Stern; $13 a month to binge a season of“Ozark”on Netflix; and $10 to maintain an uninterruptedEminemplaylist on my

Spotify Technology


Sirius XM has clocked 4.5% compound annual subscriber growth over the past several years, and is within shouting distance of Netflix’s 20.7% and Spotify’s 22%. Meanwhile, there is no reliable data on how many subscriptions podcasts companies have been able to sell.

Mr. Granger says that while advertising money and new podcasts currently appear to be an infinite resource, it’s unclear how many more people will tune in.

“The volume of content is increasing rapidly; the volume of advertising is increasing rapidly; but the volume of available listening hours can’t keep up with this pace,” he said. “The demand from advertisers is going to eclipse the growth rate of the expansion of new audiences.”

At some point, advertisers will start looking for the next big trend.

Carly Migliori, an operations director for Mr. Gladwell’sPushkin Industriespodcasting company, said the industry’s pioneers aren’t sticking their heads in the sand. Pushkin, for instance, has put some programming on Luminary—meaning it is behind a paywall. It has also relied on grants (reflecting the National Public Radio model) and is still doing deals with so-called performance marketers, which measure effectiveness by how many people visit asitelike and sign up.

But this evolving model will force podcast listeners to change habits. Mr. Gladwell’s AT&T ads consume nearly 5 minutes of a 42-minute episode, or nearly double what is typical for a standard podcast. The long AT&T spot, which includes Messrs. Gladwell and Katibeh talking about connected toothbrushes and robotic surgeries, is a far more involved listening experience than your standard ad.

The good news for AT&T? Roughly 80-90% of listeners didn’t skip through its Gladwell ads. Wondery founderHernan Lopeztold me that 90% non-skip number is considered the sign of a successful ad, and not all that uncommon. Some advertisers, however, say those numbers are hard to verify.

The Pushkin-AT&T strategy could represent an unwelcome change over the long haul. Podcast listeners are more accustomed to undiscovered companies using podcasts for an immediate call to action. These are the “performance marketers” like ZipRecruiter Inc. that Ms. Migliori and others said made the podcast industry viable but might find podcasts too expensive in the future.

Tom Patterson, founder of the Tommy John underwear company, said he looks for hosts who really believe in the product. Even though it’s unclear how many people actually listen to the ads, Mr. Patterson said, it’s pretty easy to measure a return thanks to unique promo codes and website links.

Because podcasters generally have a very targeted audience, tracking advertising through podcast promotions is actually easier than advertising through broader retail channels.

Mr. Granger, the ad agency founder who has worked with several companies on podcast-advertising strategies, said that bigger advertisers don’t always follow the short-and-sweet formula podcast listeners like. “They’ll push it until they start to see such degradation that it doesn’t work.”

At some point, he says, listeners will tune out.

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