tl;dr: Someone is going to create the Netflix or HBO of podcasting, but it will take a legendary investor to put up $100 million to start a subscription-based network.
This post was originally published in the Inside Podcasting newsletter. Subscribe here for free!
Eight years ago I started a podcast called CalacanisCast. We quickly changed the name to This Week in Startups, and over the past seven years we’ve done over 700 episodes, twice a week, week after week.
This year we will hit $1m in revenue, 95% from loyal advertisers who are thrilled with the performance of their advertisements and my spectacularly heartfelt “reads.”
[ Note: We created something at the start called “white-listed advertising” which stated that I would never accept a sponsor unless I, or one of my team members, loved the product. We turned down things like LifeLock and e-cigarettes that would have been lucrative but that we personally didn’t use. ]
We have four full-time employees on the show, not including me, and we are doing not only audio but also video. We do a dozen live events a year on average and “the show” is often the professional highlight of my week.
The podcast was, in large part, the reason I signed a high-six figure deal for my first book, titled ANGEL, which is coming out on July 18th (pre-order from this link if you want to thank me for all the free content we’ve done live and on the show — I sure would appreciate it).
My podcast is the best reflection of who I am, probably even better than these email missives because they include me interacting with the startup founders who are trying to change the world.
The pod has also made me wicked smart, giving me the MBA and Psychology PhD I never had the time to complete.
2017: The year of the Podcast
I predict this year is the tipping point for podcasting, with “Serial” laying the groundwork two years ago for “Missing Richard Simmons,” as well as folks like Joe Rogan going supernova, podcasts which are taking the medium from the underground to the mainstream.
Add to that the fact that Bill Simmons’ TV show on HBO flopped (I liked it) but his podcast is surging, a testament to the fact that talk shows are often awkward and gimmicky — severely so when compared to the authenticity of podcasting.
I’m guessing Bill is way past $10 million a year in podcasting revenue, and my pal Leo Laporte (for whom I have had the privilege of sitting in as host from time to time) is also at that $10m mark after laying the groundwork for the rest of us.
Reading advertising isn’t horrible, in fact it’s enjoyable for the right partners. I love reading ads, and have had my listeners yell “ohhh Audible!” and “I love Squarespace! Tommy John! MailChimp!” at me when they meet me — which is hilarious.
Candidly, selling ads and living hand-to-mouth is hard, even for an established podcast like This Week in Startups, which sells out for three to six months in advance (thanks Luke!).
On top of all this, podcasts are still hard to measure — something that is a “soft” issue because all the ROI-driven marketers use codes to get directional info on how they are doing.
Most podcasters would jump at the chance to stop selling ads and start simply collecting a check from an HBO like Bill Maher and John Oliver do, or cash a check from Netflix to produce something pure and unadulterated.
Podcast fans are more than willing to pay, and we see many Patreons hitting thousands and tens of thousands of dollars per month. When we did our patronage effort (long before Patreon existed) we instantly hit $5,000 a month.
However it’s hard for a large group of folks to pay for five or ten different podcasts they love, and that’s where I think the opportunity lies: a group subscription for podcasting’s top talents.
This would remove the cognitive load on consumers looking to support their favorite shows, while allowing the talent to focus 100% of their effort building increasingly better content — not marketing or revenue.
Simple Math: 100 podcasters, five million subscribers
If you could grab 20% of the top 500 podcasts over the next two years for the “HBO of Podcasting” at a $4m payment each, you would be looking at a whopping $400 million content budget — or as Sirius XM would refer to it, “two Howard Sterns” and Netflix would call it four “House of Cards” or “three weeks” (of content).
That’s a ton of money, but for 50 to 250 episodes per year depending on the cadence of each podcast, it would be $16,000 to $80,000 per episode — a HUGE budget for content creators.
My guess is that every podcaster in the top 20% zone could deliver 10,000 to 100,000+ paid subscribers. Call it 50,000 on average, which means without overlap you would be looking at five million paid subs. With duplication call it three or four million people, each paying $10 a month.
In other words, you would break even if you could convert 1–2% of Americans into a subscription.
To put that in perspective take a look at this ranked list of paid subscribers:
- New York Times: About 3 million (digital + print combined)
- WSJ: 948,000 subscribers (digital only)
- HBO App/Direct: 1 million
- Pandora: 4.39 million (total)
- The Podcast Company: five million in five years (projected)
- Hulu: 12 million (launched in 2008)
- HBO: 49 million (US)
- SiriusXM: 31 million (US)
- Netflix: 49 million (US)
To execute on this business you would need to do a Series A investment of $100m for 1/3rd of the company, followed by three or four additional rounds of investment in the $100–200m range. After spending ~$600 million you would have a service that was self-sustaining and have a high-growth value of 10x top line revenue of $500m — or five billion. You would have an outside chance of becoming the next Spotify or Netflix, putting you in the decacorn club.
At scale, you would integrate some modest advertising back into the product without having the subscribers get upset — SiriusXM did just that, and it’s barely noticeable when Howard does a quick ad read every hour or so.
Venture capitalists don’t normally deal in this kind of $100m investment range, so it would take either a very bullish one or a later stage private equity fund to do this.
There have been dozens of attempts at a podcasting network, but none of them have had the nine figures of funding it takes to get a true subscription flywheel going. A ten or twenty million dollar round of funding won’t get you to first base in a media landscape with Netflix and SiriusXM.
Sure, SirisXM, Spotify, Audible or Netflix could take this on, but greats companies tend to be great at one thing — so it’s unlikely they would dip into podcasting.
So, in the words of Kanye West, “Now who’s gonna be the Medici family and stand up and let me create more; or do you wanna marginalize me ’til I’m out of my moment?”
PS — LAUNCH Festival is next week… join us: launchfestival.com/tickets // use code JASON10 for 10% off any ticket.
PPS — Angel Summit is on Wednesday: 40+ angels talk about what they are investing in and why.
PPPS — My book comes out July 18th and it’s called ANGEL. Will be doing two weeks of media in New York city from the 17th until the 30th of July. If you want to host a book party at your startup or in your city, please hit reply and let me know. We are forming “ANGEL Squads” in various cities to setup Q&A and pitch sessions and I could use your help getting 100 folks to each one.
PPPPS — We just finished our sixth syndicate at Jasonssyndicate.com (no longer on AngelList). If you want to see the deals I’m investing in, and possible join us in funding these companies, you can signup to get my deal memos.
PPPPPS — I’m having fun with jasonstxtlist.com, where I regularly share these emails BEFORE I publish them to get feedback. I send maybe five to ten txt messages a month. Nothing crazy, it’s just sort of a fun way to communicate with y’all.
PPPPPPS — My startup, Inside.com, publishes concise, compelling newsletters that round up everything you need to know in 20 different verticals.