Will The Race For Podcasting's Profits Drive Our Dystopia?

I’m a fan of good dystopian fiction if only because it puts any troubles I’m experiencing in my very privileged life in perspective. I can’t leave the country, but at least we’re not being blasted by gamma rays, right? 

But what if the podcasting world is headed to a dystopian future brought on by podcasting’s savior and nemesis, advertising?

This Is Not About Libsyn’s Acquisition Of AdvertiseCast

Granted, it was the announcement yesterday that AdvertiseCast had been acquired by Libsyn that was the impetus for this episode. I’ve used both services and have friends that work in both places, so I need to assure you and them that this article is not an indictment of any sort. 

But maybe it’s a harbinger? 

I don’t have any insider info on their plans, and my contacts within both companies are understandably silent on the topic. But the intention is clear: making it dead-simple for any podcast hosted on Libsyn to monetize with ads, either programmatic and/or host-read. 

Libsyn/AdvertiseCast (Libertizecast? Libsycast?) will take a piece of the action for facilitating the campaigns—low-effort programmatic or high-effort host-read—and for supplying the infrastructure to make the ad-buy happen with as little friction as possible.

So… what if every podcast hosting company did something similar? Either by acquiring or building out their own infrastructure and team to capitalize on the ever-increasing flow of advertising dollars rushing into podcasting, passing a portion of the proceeds along to their hosted shows while keeping a piece for themselves for their trouble?

How could that be bad, you ask? Well… you may be sorry, but here goes.

“We’re Sponsored Today By Giant Asteroid…”

The future in that reality where every podcast hosting company has a well-working and robust monetization layer built-in and available to everyone could play out in a lot of ways, but here’s why I didn’t sleep very well last night.

At some point in the above future, the CFOs of the hosting companies will examine their books and realize that their company is making more money per show from retained ad revenues than they see from the hosting fees they collect from podcasters. 

What will they do about that? Raising hosting fees isn’t the answer. Lowering them is the answer. 

By lowering their hosting fees, they appeal to other podcasters using different hosting companies. And we all know it’s remarkably easy to switch podcasting providers, so many do.

And that kicks off a commoditization race, where hosting companies keep lowering their fees until they get to… free. 

Introducing Free+ podcast media hosting

Well, in this case, “free” means the podcaster has to accept advertising. It’s not a choice. Again, the money the hosting provider makes $20 at a time becomes peanuts in the larger scheme, so they’ll push you out if you won’t take the ads. Your $20 a month is more a speedbump than an attractive revenue source.

I think most (?) podcasters would take that deal. Not only would they get free hosting, but the podcasters would get money—either a little or a lot—every month. That’s the “plus”. And what’s not to love about that?

It gets better. Because every hosting provider does the same thing (and probably works with the same advertisers), hosting providers are going to have to compete with one another when it comes to the size of the cut they take from ad transactions. That spirals—up or down depending on which side of the equation you’re on—until each hosting company is working on razor-thin margins on programmatic ads, fighting as fiercely for loyalty as grocery stores and gas stations do today.

That, in turn, puts huge pressure on the direct sales teams at each of these ad-supported hosting companies. And since advertisers are free to work with any ad rep firm they want, advertisers will be less accepting of higher CPMs for what equates to the same service. This means the cushy 30% commission ad reps work on today will start to get eroded. Unless they start offering additional services beyond just getting a host-read ad inserted into a podcast episode.

Introducing Premium+ podcast media hosting

This shift in the landscape won’t have been unnoticed by the big and powerful shows who handle their own ad relationships because they’ve garnered millions of listeners. While some might happily give up the hassle of running their own ad sales, the biggest will be financially disincentivized to do that. 

That leaves open an opportunity for a new class of hosting providers. Either built from the ground up or occupied by existing providers with some pivoting, this new class will find creative ways to keep high CMPs on their ad deals. One way they might do this is by leveraging the full power of the big shows in a sort of full-service, concierge model that recognizing the value of a show extends beyond the audio file. This new class of hosting providers would negotiate complex campaigns that span audio files, websites, newsletters, social media properties, TV deals, and much more.

Shows that qualify for this level of service will pay a very high price for their privilege. But so long as they see more money flowing into their pockets, the publishers will happily pay it. And at the prices these premium hosts are charging, they’ll develop robust revenue projection models—and then hit those models—to keep the podcasters happy and not going anywhere.

Introducing Business Class podcast media hosting

Not every podcast wants or will accept advertising. There are hundreds of thousands of podcasts ran by businesses or business-minded people with different reasons for podcasting. They may use their show as a sales platform in and of itself, either like a branded podcast or with a direct revenue stream. Or perhaps they see podcasting as a cost-effective way of providing ongoing thought-leadership, something they don’t want to clutter with injected ads. Or perhaps their podcast is truly a service-worth-paying-for that they give to their customers for free.

Those podcasters will need a different hosting model. One they pay for, perhaps on a per-user basis like today’s premium feed facilitators. Or maybe they charge a fee based on bandwidth usage, a model businesses are already used to. 

Many of these types of podcasters would still want their podcasts distributed everywhere for free, but some may restrict access. Not necessarily by requiring payment, though that’s possible. More likely it’ll be some sort of registration so they make sure their content—content that now costs real money to distribute—is reaching only the right people, much like trade magazines are only distributed to a proper type of business.

Introducing a 3-way split of the creative class 

What will the creative class do? Think about the serialized podcasts, either fiction or documentary. Think about those who see podcasting as an artistic expression. Or those who just want to podcast because they want their story to be told and/or voice to be heard.

Some of them (most, I’d wager) will embrace the free-but-I-get-paid model with open arms and happily take the ads, either programmatic or host-read. Much like cheese, never underestimate the power of a paycheck. And the bigger the audience they can attract, the better that deal is going to seem. To many podcasters, at least.

But not all. Some of those creative podcasts with a big audience will eschew ads altogether and have little option but to put their high-quality productions behind a paywall. Apple and Spotify have made their intentions of offering paid podcasting of some sort pretty clear. The existing paywalled providers become attractive to creative podcasters who—rightly—expect to be paid for their efforts.

But (again) not all. A certain percentage of the “just for fun” podcasters will continue to work with the few remaining $20 a month podcast media hosting providers that have managed to weather the storm. For as long as they can.

Re-introducing $20-a-month legacy podcast media hosting

In this dystopian future, I fully expect to see some stubborn hangers-on continuing to offer $20 monthly plans—or whatever the standard cost adjusts to—like exist today. No ads. Few features beyond media hosting, RSS feed generation, and an embeddable player.

They’ll have to be leaner and meaner to survive. With the vast majority switching to any of the above options, they no longer will be able to rely on a bunch of cheap-to-host shows supporting the expensive-to-host shows. So if they can’t spread the costs, they’ll have to control them, enacting tight restrictions on bandwidth, storage, support, or other aspects that cost real money. As soon as a show starts toeing the profitability line, the legacy hosting provider will step in and look for compensation. They’ll have to if they want to survive in this dystopian podcast world.

Introducing Saas+ podcast media hosting

But there’s another ad-free podcast media hosting option that may grow out of these hypothetical and heretical ashes. One that comes from software as a service (SaaS) providers that more and more podcasters are relying on. There are already a few all-in-one tools on the market that take a lot of the technical podcasting work and other PITA processes out of the podcasters hand in exchange for a reasonable monthly fee. 

Any of those SaaS companies could turn on podcast media hosting in a jiffy and just make it part of their offering. No ads required to play. No charge to the podcaster. 

Well, no extra charge. Those SaaS companies would be absolutely incentivized to sell podcasters more services, so they’d keep offering more and more services, increasing their monthly fees but giving much more value, which many podcasters would happily agree to. 

In this model, the podcaster is actually the customer. A customer that can be upsold and delighted. A customer who would actually face high switching costs were they to leave. That’s a different world, isn’t it?

May The Dystopian Podcast Hosting Options Ever Be In Your Favor

So where are we left in this dystopian world? A world I remind you again that I’m not predicting will come to pass. (Or am I?) Here’s a recap of the types of podcast hosting companies that will survive:

• Free media hosting providers that require ads - Think YouTube, only more distributed and potentially more or less annoying.
• Cost-prohibitive luxury hosting providers catering to a select few - Think big book publishing or enterprise-class services.
• A fractured system of paywall providers - Think today’s streaming TV providers today, only more of them.
• Paywall aggregators - They work with all (or some) of the paywall providers, but take their own pound of flesh.
• Software as a service-specific media hosting bundled together - Think Adobe Cloud.
• Scrappy hangers-on who find a way to make the legacy $20 a month hosting model work in a vastly different future.

Part of my job as a digital strategist is picturing the bad along with the good. Sorry if you find this potentially frightening. Welcome to my brain.

But you appreciated the early warning, I'll take a virtual coffee from you. Head to BuyMeACoffee.com/evoterra to take care of that. And do it before your money is no good and we’re back to the barter system!

Kidding. (Or am I?)

Enjoy your weekend and happy egg-hunting if you celebrate. I shall be back on Monday with yet another Podcast Pontifications. 

Cheers!