We’ve stayed out of the fray on this, excepting our initial reaction on Podcast Business Journal a few days after it happened, but I think we’re ready to share our thoughts on what Spotify’s acquisition of Gimlet Media and Anchor means for the future of podcasting. This will be a long read, and it will take some time getting to the point, but I implore you to take the time.

But First: The Truisms of Podcasting for Career

Podcasting success is a numbers game and it always has been. Success has always been determined by listenership, but the utility of listenership has always been split into two camps.

Camp A: Paid Subscribers.

Subscriber Support

Podcast listeners convert from free listeners to paid listeners (Patreon, Ko-Fi, Bandcamp, et cetera) at a rate of between 1% and 3% for most podcasts. The larger your listenership, the more dollars contained in that 1–3%.

Support Through Sponsorship and Advertisements

Podcasters rely on advertiser dollars much more than they rely on elective, philanthropic donations from their listeners. To successfully monetize your podcast on subscriber dollars alone is a damn near impossible task if you’re not an elite creator (see here). Advertisers pay (in a perfect world) $35 per 1,000 listens (that’s the $35CPM we all dream about**).

Amass a listenership of 100,000 and you’re making, hypothetically and using a 2% listener conversion to $3 Patreon* supporter and that $35CMP, nearly $20K a month. $10K for 50,000 listeners. $5K for 25,000 listeners. Roughly $2K for 10,000 listeners.

If you’re a podcast in this camp, you need an audience of at least 10,000, you need advertiser buy-in, you need to create extra content for supporters, and you need to have great content that people want to listen to.

Camp B: Selling Out

I use the phrase playfully but I mean it seriously: while monetization is the goal of many podcasters, the most ambitious among us are looking for something bigger, we’re looking to be picked up by someone who can pay us a lot of money for our content.

Aaron Mahnke, a towering success standing almost entirely alone in the vastness of the still-young landscape that is big media buy ups of exquisitely produced podcasts, is a good example, if not a necessary one.

Aaron didn’t set out, I don’t think, to sell to Amazon or become a millionaire. He started out to make a phenomenal show and transition from his career as a designer and creator of, if you can even believe it, stationary products for planning and organization (a company called Frictionless Tools), to someone who could make a living of some sort doing what he really loved: writing and telling stories about the decidedly dark and unnerving.

So he didn’t set out to do it but he did it, and this proved two things:

It proved to podcasters that big media could be convinced of a podcast’s value to the extent that they would buy it or engage its creator(s) to create a tv series (or some larger production) out of it. It proved to other big media companies that Amazon was making a move and that they had better keep to avoid being left behind. It drew the attention of big media.

And so starting in 2017 we began to see a steep rise in the creation of really skillfully produced podcasts, I mean these podcasts were swinging for the fences. They were produced, mostly, by popup media companies like Gimlet — and it’s worth noting here that Gimlet is just 5-years old. It’s actually worth more than noting, it’s worth shouting at you in bold letters:

Gimlet is a 5-year old media company that makes podcasts and it sold to Spotify for just shy of $340 Million.

Aaron was lucky in his timing. That’s not a criticism, it’s a fact. Aaron was heads and shoulders above most other independent podcasters in 2015 when HuffPost wrote a piece about him and brought him more formally into the spotlight. But Aaron couldn’t do today what he did then — the bar is way too high now and there are a lot of Mahnke-quality creators out there. And that’s in part because of him, he blazed a trail.

But I’m getting ahead of myself. Let’s regroup.

If podcasting is a numbers game then the most critical task in seeking that success is growing your audience, right?

Podcasting Truism #1: Audience size matters.

But how is this done?

I’ll tell you how it’s not done. It’s not done by asking people to share your podcast with their friends. Nobody shares podcasts with their friends, ever, unless there’s a solid value proposition for doing so. When is the last time a friend came up to you and said,

“Jeff/Jessica, I know you’re in the middle of something but I’ve got to tell you about this podcast I was just listening to. You should listen to it.”

Never. That has never happened anywhere. People talk about the podcasts they’re listening to when the topic of podcasts come up (or the topic of their podcast comes up) and that’s not often. All by itself, word-of-mouth is a crap marketing strategy unless you’re a roofer.

What about reviews?

Nope. Reviews don’t help to any large degree either. They may convince someone who has happened upon your show on iTunes (or wherever), and who wasn’t entirely sure about giving you a shot, to click that play button but, let’s be real, how many people do you think are discovering you through podcast directories? It’s not a lot, friends. It’s barely any. Although, and it should be said, a less than 4-star rating will absolutely repel would-be listeners so reviews are important in that sense. If you run an ad on Facebook and a potential new subscriber comes through that ad to your iTunes listing and see’s you’ve got a two-star average rating, they’ll abandon the funnel instantly.

I could dive into why negative reviews trump positive ones but this isn’t a psychology blog so let’s move on.

So then how do I grow my audience?

By working your butt off and spending money on ad platforms. It’s no longer 2010, the podcast market is more developed — it has grown up and there is a lot of good content out there. If you want your podcast in front of other peoples’ eyeballs (earballs?), you’ve got to:

Master social media on at least FB, IG, and Twitter. Write a blog with regularity. Appear on other podcasts. Have attractive branding and marketing. Go live with some regularity and engage genuinely Advertise Advertise Advertise

Work a 40-hour a week job? Cool. Now you work another 30-hour a week job. Saving money for something? No you’re not, you’ve got equipment to buy and an advertising budget to develop. Friends going out on Friday night? Neat. You’re not. You’re editing, you’re writing, you’re putting in the work.

Podcasting Truism #2: Growing an audience large enough to monetize into a full-time wage is difficult beyond measure.

But I’m sure I have what it takes, even knowing the tremendous odds overcome by those who have succeeded before me.

You thought those odds were tremendous? Double them, because here’s truism number three.

Podcasting Truism #3: Making money podcasting is about to get, at least, 2x more difficult than it already is.

The Usurping of the Direct-CPM by Content Platforms

In 2014, when a podcaster approached an advertiser and convinced that advertiser to buy-in and become a sponsor, it was a beautiful moment. That podcaster was about to get $35 for every 1,000 subscribers they had and, for the sake of an easy example, if they had 10,000 subscribers, they’d be making $350 per podcast episode — not bad.

But those were the old days, Spotify has changed that entirely because Spotify is the first media platform to have all five of these things at the same time:

Global reach Access to big data A 99.9% positive image X Y

What are X and Y?

You already know, but maybe you haven’t put it together yet. Before I define them, let’s ponder what would happen to independent podcasters if that $35 CPM dropped to a $7CPM.

That would mean a podcaster with 100,000 subscribers would make $700 an episode. 50,000 subscribers would yield $350 an episode. 25,000 would yield $175 an episode. And 10,000? A podcast with 10,000 subscribers would yield just $70 per episode. Do you know how hard it is to grow a 10,000 subscriber podcast? It’s a full-time job.

Here’s another question:

An advertiser’s goal is always a lower conversion rate. The less money an advertiser spends for the most conversions possible, the better. This means the more qualified the audience being advertised to, the better. This, in turn, means that the podcast creators who best understand their audience and are able to provide the most assurance to advertisers that the members of that audience are interested in their advertisements, are preferred over those who don’t and cannot.

In short: The better you understand your data, the more comfortable advertises will feel buying in.

And therein lies the rub: who do you think has more data on their audience, you or Spotify? And who do you think understands that data better, you or Spotify? So who can make advertisers feel safer, you or Spotify?

Okay so what ARE x and y?

X = A Podcast Farm

Anchor is the #1 platform on which new podcasters create their shows (40% of new shows are on Anchor) and it is doing to podcasting what Weebly did to website design — making it easy for people who don’t know how to podcast to start a podcast. While I applaud Anchor for doing this, because it lowers the barrier to entry, the end result should be obvious: just as there are droves of amateur websites on Weebly, there are now droves of equally amateur podcasts on Anchor.

But that’s okay. No one said you had to be a professional podcaster in order to enjoy podcasting. My point isn’t to criticize amateurs or discourage people from starting just-for-fun podcasts, my point is only this: Anchor “owns” a LOT of podcasts, more than anyone anywhere (by far).

Not all Weebly websites are terrible and neither are all Anchor podcasts. And when I say “terrible” I mean “likely to be profitable” — which brings me to our Y.

Y= A Podcast Incubator

Gimlet Media is comprised of some of the most talented brains in the podcasting and marketing industry — I would go so far as to say that they are the indisputable best.

If you had a podcasting farm which you were cultivating for talent, who would you trust to take the talent you found and groom it into a world class Podcast capable of growing substantial listenership?

But why would Spotify do this? Are they trying to ruin the hopes and dreams of independent podcasters everywhere?

Of course not. Spotify isn’t evil, it’s just a business. Businesses need revenue to survive and grow.

We have it on authority that Spotify is struggling to grow to the extent they need and desire to because the amount of money they bring in for subscriptions, or for ads delivered to their free accounts, doesn’t have a large enough profit margin once licensing fees are paid for the music they’re streaming.

Spotify needed to do this, it’s a smart move on their part, and I’m happy to see them beat Amazon and Google to the punch (though I’m not sure Amazon and Google were even prioritizing such a move).

But when success comes to corporate media enterprises, independent media creators generally do not come out the better for it. To make matters worse, Spotify is quickly becoming the #1 place to listen to podcasts and I predict they will be #1 by late 2020.

“That seems pretty fast, Tanner!”

Sure does, but Spotify is cross-platform, more accessible and understandable for the older generation, hugely popular with Millennials and Generation Z, and has, as a music listening platform, as well-known a brand as Apple. And for actually listening to music? It’s the best option out there, hands down, no competition.

What does this mean for independent podcasters?

Spotify will roll out an ad revenue sharing program to podcasters soon enough, but that program will fail most podcasters because of Spotify being the middleman between the the Advertiser and the Podcaster. The $35CMP paid to Spotify will become the $7CPM paid to you (and folks, I’m being real generous with that $7CPM).

For those of you with the talent, drive, and passion necessary to grow a 100,000 listener audience to net a $50K a year salary, you can still play the long game of audience monetization via listener support and low ad CPMs.

For those of you with Gimlet money and skill, you can still play the long game for getting picked up “by the network”, but for the rest of us? Ultimately? We’re going to have to evolve and change the way we think about podcasting.

The Unavoidable Tyranny of Spotify (or any centralized platform)

I think it’s a reasonable fear to have that Spotify will, soon enough, find a way to disallow non-Spotify ads on podcasts on their platform. The technical reason for doing this would be: if you manually place an ad within your programming, Spotify can’t remove it for paying subscribers. The business reason for this is that Spotify isn’t going to gift you the exposure their platform provides so that you can generate revenue that they won’t get a cut of — that’s foolish business.

Here’s the situation that will arise: You will need to submit your podcast to Spotify — because it will be the primary podcast-listening platform — but you won’t be able to place your own ads on it. This means you cannot approach smaller local advertisers for income unless you refuse to list on Spotify.

But I could create two version of my podcast! One with local ads, and one without!

That’s true. Doing so would necessitate two RSS feeds, one specifically submitted to Spotify and one for everywhere else, but you could absolutely do this. Though, how do you think your local advertiser is going to feel when he/she finds out they’re paying to advertise on your podcast but are only reaching <50% of your total listenership? Even if they’re local, most locals would be listening on Spotify and not elsewhere.

This is the death of the value proposition podcast advertising once provided. The independent creator no longer has the clout necessary to approach would-be advertisers and/or sponsors***.

Okay, well, damn. What the hell do we do then?

If you’re not talented enough, patient enough, or wealthy enough to play the long games? You’re going to need to realize something very painful and defeating:

You need to create something of value which your podcast can lead people to, instead of believing your podcast has intrinsic monetary value.

Whoosh

Wind right out of your sails, I know.

That’s the reality we now live in and, truthfully, it’s not much different than the one we’ve been living in up to now, we were just in a podcasting bubble that hadn’t popped yet.

If you want to make money in podcasting beyond 2020, here’s what I suggest

If you’re an individual: Identify the value you are uniquely qualified to bring to the world and build a community around it. Create a podcast which serves that community and don’t worry about monetizing it. Take the time to figure out what you’re positioned to do, now that you’re serving this community, to further serve your community and package whatever that is into a product or service. Maybe it’s life coaching, maybe it’s writing services, maybe it’s graphic design, or music, or plumbing, or IT work, or javascript programming — if you’re good at it, serve your community with it and build a business around it.

Your podcast isn’t a product, it’s a sales funnel.

If you’re a business: Create a podcast as soon as you’re able, and begin utilizing it to provide free value to your target market. Use it also to listen to your target market and to learn from it. For your business, a podcast is your most useful marketing tool and you’re missing out on a lot of opportunity by not having one.

If you’re dead set on making money from podcasting only: objectively consider your odds of success — not THE odds, YOUR odds — and if you truly believe you can pull it off, take the plunge. It’s still possible, but only the best can make it happen. If you believe that’s you, buckle up and go for it.