Podcasts have always been an interesting alternative to radio. They have some key differences, all of which can act as advantages:

  • They’re cheap to produce and broadcast
  • Once downloaded, they can be listened to at any time on nearly any modern gadget
  • There are no content standards, save basic legality (e.g., copyrighted content; threats)

The growth of the podcast as a medium

I’ve been listening to podcasts for nearly a decade, and for most of that time the medium felt fringe. People didn’t understand the concept. Even if they could wrap their heads around “subscribing” to an RSS feed layered on top of an MP3 file, they didn’t see the point. It was a medium by and for enthusiasts.

This has changed lately. The change felt sudden. The longform investigative journalism show Serial launched in October 2014 and quickly became a water-cooler mainstay; a month earlier, the yet-to-be-named Gimlet Media released the first episode of Startup, a deeply meta podcast about the process of starting a for-profit podcast network. Trend pieces proliferated.

In truth, the mainstreaming of podcasts was more gradual. It was also closely tied to the increasing profit potential of podcast networks. When Edison Research started asking Americans about podcast listening habits in 2006, they concluded that just 11% of Americans had ever listened to a podcast; circa 2015, 17% have listened to at least one podcast episode in just the past month.

% of Americans who have listened to at least one podcast episode in the past 30 days. © 2015 Edison Research.

% of Americans who have listened to at least one podcast episode in the past 30 days. © 2015 Edison Research.

Early podcast listeners were richer and better-educated than the general public. The consensus is that this is still true, even as per-episode listener numbers for top shows have reached into the hundreds of thousands, then the millions. Little wonder that advertisers have taken notice. In June 2014, fast-growing podcast advertising middleman The Mid Roll merged with comedy podcast network Earwolf to become Midroll—the company responsible for those ubiquitous Squarespace and NatureBox ads. Slate, which was early to recognize the potential of podcasts, launched podcast and advertising network Panoply in February 2015.

Why am I linking the growth of the medium to profitability?

Great content can emerge from volunteer efforts, and “the podcast” would never have gained traction as a concept if that wasn’t true. On balance, however, professionals deliver professional work, and expect to be paid for it. Equipment, websites, logos and hosting cost money. Efforts to gain listeners cost money, unless you rely solely on word of mouth. Booking guests, writing scripts, doing research, mixing sound, editing—they all take time, or cost money. If you believe that these things correspond with quality, and that quality corresponds with listenership, then you realize that revenue drives listenership.

The mere presence of advertisers within the podcasting space may also drive overall audience growth. Advertisers want to reach the largest number of people to whom their product is relevant. Do some advertisers want to reach a niche audience? Sure, but even they would prefer larger niches. This creates pressure—whether direct (“Can you guys swear less?”) or indirect (“I bet this topic would be super popular”)—to create content that appeals to more people.

Revenue models for podcasts and podcast networks

Although best practices are developing, podcast business models remain weird and creative, and that makes them interesting.

The most common sources of income for podcasts are listed below. Different podcasts and podcast networks combine these approaches in different ways. Ad sales are by far the largest source of income for most major podcast networks.

Ad sales. Advertising was the primary revenue source driving many previous mass media formats, including newspapers, magazines, radio, and broadcast television.

Crowdfunding. Crowdfunding is a way for passionate listeners to directly support something they love. The obvious antecedent in radio is the pledge drive, which remains a funding mainstay for public radio stations in the U.S.

Crowdfunding can be structured in different ways:

  • Project-/product-based (KickstarterIndiegogo). This model solicits a one-off payment from “backers,” and promises a specific good or service in return. Video game podcast Idle Thumbs ran a Kickstarter to cover equipment, space and hosting after a long hiatus. Now Playing Podcast used Kickstarter to raise funds for a book of movie reviews.
  • Ongoing (Patreon). Patreon, the biggest player in this space, was conceived as a place for artists to find support from “patrons,” thus reviving a Renaissance model for the modern age. In business terms, Patreon provides funding on an operational basis, rather than project-based, basis.
  • Direct donation. Many podcasts have “tip jar” PayPal buttons on their websites. Fewer run organized, time-limited donation drives, but it does happen.

Sales. Some podcasts make money by selling things:

  • Ancillary products. Stuff tied to the podcast brand, like clothing. This is often the first thing people think to do to raise money, but I’d be surprised if it’s ever highly lucrative.
  • Premium content. People listen to podcasts because they find them useful or entertaining. Making premium content available for direct sale, or offering it as reward to crowdfunders, encourages people to put their money where their ears are. Premium content isn’t always distinct from the shows on the standard feed—some podcasts limit their public feeds to a few dozen recent shows, and move older content behind a paywall.
  • Ticket sales. Not all podcasts can work as live events. No one is likely to drop $20 on a ticket to a live taping of a couch to 5k running podcast. Shows that do work on stage tend to be based around storytelling or game show formats, often with a comedic bent.

Brand sponsorship. Podcasts that focus on a specific brand, franchise or other intellectual property are sometimes paid for (or produced by) the owner of that brand. Roddenberry Entertainment sponsors Mission Log, a podcast about Star Trek. Marvel produces its own podcasts, as does parent company Disney.

Patreon strategy for podcasts

Two factors govern how much money a show brings in via Patreon:

  1. Number of patrons
  2. Average pledge amount

You (the person with the Patreon) cannot manipulate these variables directly, but you can influence them indirectly.

The number of patrons is almost certainly determined largely by:

  • Your overall number of listeners. Lever: grow your audience.
  • Their level of enthusiasm. Lever: make great content, and establish a relationship with listeners.
  • How you direct listeners from your show and website to your Patreon. Lever: talk about your Patreon regularly, and feature it prominently on your website. Experiment with different calls to action, track their effectiveness, and tailor your approach.
  • How compelling a case you make for becoming a patron. Lever: be clear, open and honest about why you’re asking for money, and what difference it will make to you (and to your show). Entertain while begging.

Average pledge amount depends on… well, I’m not sure. Limited investigation suggests that it isn’t highly correlated with number of patrons.

Average pledge vs. number of Patrons, selected podcasts. Data circa April 2015.

Average pledge vs. number of Patrons, selected podcasts. Data circa April 2015.

Factors that we might assume influence pledge amounts include audience disposable income, audience enthusiasm for the show/network, and the desirability of higher-value pledge tier rewards.

These last two are complex and hard to quantify, but I believe them to be important. Joshua Sheats, host of the daily Radical Personal Finance podcast, is able to convert unusual numbers of listeners to patrons (~5% of listeners)—patrons who donate in high amounts (~$10 average monthly pledge). He credits his daily show schedule with creating a “closer bond” between host and audience, and I think there’s something to that. The fact that the show is dedicated to helping listeners achieve financial goals also makes it easier to assign specific monetary value to Joshua’s content.

Example podcast network revenue models

There’s a surprising amount of information available about profitable podcast networks, but it tends to be scattered. Relatively few businesses of any type are totally open with their books or strategies.

The information below was mostly gathered from a single Fast Company article. My revenue estimates are all on the conservative side. Where inputs were given as a range (of dollar values, audience numbers, etc.), I used the low number. In calculating advertising income, I assumed relatively few spots per episode.

MaximumFun.org

Maximum Fun is an entertainment podcast network with about two dozen ongoing shows. Most show hosts are comedians or Internet personalities who were already well known before joining the network. Some shows are distributed on traditional radio via Public Radio International. The network sells tickets to live shows and holds an annual convention.

Revenue streams:

  • Ads/underwriting — Strong knowledge of audience demographics probably drives higher prices.
  • Live events and convention ticket sales
  • Merchandise sales
  • Radio distribution contract with PRI
  • Donations — Direct through their own membership system, so no Patreon cut. There are superpremium tiers of $100-200/month.

5by5

5by5 is a mixed technology interest/entertainment podcast network with about three dozen ongoing shows. Most shows are hosted or co-hosted by network founder Dan Benjamin. Other hosts are experts in the fields covered by the show, and include journalists, entertainers, technology industry professionals, etc. Benjamin appears to run the network full time, while other hosts may be compensated at lesser rates and maintain other jobs.

Revenue streams:

  • Advertising — 5by5 has a large enough aggregate audience that it runs its own ad network.
  •  Donations — Patreon campaign brings in gross of >$30,000 annually.

Gimlet Media

Gimlet Media is a new podcast network founded by former This American Life producer Alex Blumberg. They have so far launched two shows, each of which has remained near the top of the iTunes charts. Based on public statements, I’d estimate upwards of 150,000 regular listeners to each show. Their shows are set apart from most other podcasts by high production values, and the budgets (and personnel) to develop stories over time rather than within the week or two between episodes.

Gimlet is currently entirely funded by ads. They run up to 6 per episode. They will likely branch out into other creative revenue sources, including selling products and selling tickets to live events. 

Welcome to Night Vale

Welcome to Night Vale is a serial horror-comedy podcast that appeals to the apparently large audience for Lovecraftian Twin Peaks-meets-NPR content.

Revenue streams:

  • Live events represent 57% of revenue
    • 800 tickets x 76 performances x ~$25 = $1,520,000
    • Probably take 50% or more off for venues, marketing, etc.
  • Online merchandise represents 27% of revenue
    • Estimated $720,000
    • Variety of products, very in-jokey
    • Launching a novel in October 2015
  • Donations presumably represent the remaining 16%
    • Estimated $425,000

WTF with Marc Maron

WTF is an entertainment show that features interviews by comedian and former radio host Marc Maron. Maron’s guest are often well-known entertainment figures, and he successfully leverages their own followings to grow his audience.

Revenue streams:

  • Ad sales
    • 104 episodes x $8,125/spot = ~$850,000
  • Subscriptions to back catalog ($2/mo to $9/year)
    • ~35,800 subscribers
    • Assuming that’s a steady number, and depending on duration of average subscription, that could represent revenue of anywhere from $322,200 to $859,200/year.