The Economics of Podcasting

First off, this post defines podcasting is an effective way to deliver highly niche audio to a very enthusiastic audience (the World English Bible translated into Klingon or Tips for Triathletes in the Southwestern US for example).

Secondly, the numbers used here are rough and make for easy math.

Let’s say you’re making one show a week for a year. Here’s a quick pass at some costs:

Monthly Server & Bandwidth costs ($40 * 12 months): $480
Production and editing effort per show ($200 * 52 shows): $10,400
Equipment Costs (mics, software, etc): $500

  • Beer, coffee, and other production/editing necessities per show ($20 * 52 shows): $1,040
  • Monthly Server & Bandwidth costs ($150 * 12 months): $1,800
  • Equipment Costs -mics, software, etc ($500 amoritized over 5 years): $100

Let’s say we’d like to gross $40,000 for the year (a fair amount for doing only one show a week).

Adding all this up puts your annual costs at $42,940.

For the sake of easy math, let’s say you have 1,000 listeners – the circulation of a small town Nebraskan newspaper like the Bayard Transcript. Frankly, the worldwide audience for a Klingon version of the Bible is probably a thousand.

Dividing the annual cost ($42,940) by the number of listeners (1,000) and the number of shows (52) makes the cost per listener: $0.8258

That’s less than a $1 per show per listener (iTunes – 99 cents, WalMart – 88 cents, coincidence?). One Dollar. $4 a month. $42.94 a year. Kris over at the Croncast settled on nearly the same numbers.

With numbers as small as these, I don’t see advertisers beating down the doors of podcasters. In the broadcast world, millions of dollars are sunk into spectrum, hardware, and talent. This gives advertisers the upper hand.

Early on, Heineken realized it was easier to start their own podcast than enter into an advertising agreement with the Rock ‘n Roll Geek Show. I agree. The economics of podcasting make it far more attractive to start your own thing than shoehorn in an awkward ad subsidized model.

If we go back to the original podcasting is best with niche audio assumption, there’s a point where the “ad message” is as valuable to the listener as the “show message”. One degreee further and the podcast is produced by the “advertiser” as part of their marketing campaign.

That’s far more interesting.

If your favorite podcaster has a tip jar (Croncast, IT Conversations, Evil Genius Chronicles) I encourage you to give them a dollar for every show you’ve enjoyed.

Micropayment pioneer Scott McCloud digs into this same issue in his I Can’t Stop Thinking comic.

17 Replies to “The Economics of Podcasting”

  1. um… gotta push back a little on your analysis (i’m a CxO type guy – been a CEO, CFO, COO and CIO at various times).

    first number – $200/show of editing. where’s that coming from? if you’re paying yourself an hourly wage, you’re double-counting your time (presuming that you’re also getting the “gross” number). it’s hard to know how much you’re paying yourself in that number because you don’t include the number of hours you’re assuming it will take to edit a show. it takes me about a half an hour to edit one of mine. $400/hour is a lot.

    second number – bandwidth is running between $50-100/month per megabit in the wholesale market — that’s a continuous, always on, always pumping 1 mBit stream for a whole month. it’s hard to go much further than that because you don’t declare your underlying assumptions about the size of your podcasts, but i’ll build a straw man in a minute. my first take is that this number is low.

    yep – $500 for gear sounds about right, but you should amortize it over more than one year (i’d say 3 – 5 at a minimum) so it’s really more like $100/year.

    the $40,000 gross number is about what low to mid-level DJs on commercial stations make — so if you’re producing one show a week, you’re a lot less productive than they are, and thus getting paid a lot more. DJs produce 4-6 hours of radio a day, sell ads and produce spots the rest of the time. so what are you doing with the rest of your week in your analysis?

    you’re leaving out the non-monetary compensation for your podcast — the enjoyment of producing the show, the credibility you gain with your audience, the PR exposure, the knowledge, the people you meet, the skills you learn, etc.

    Straw man;

    production and editing – 10 hours per show at $20/hour (pretty good pay for a rookie, you get more if you are a seasoned pro) – $10,400 cash IN to you, not an expense — or are you assuming you’re contracting out the production?

    bandwidth – 1000 listeners download it a week, assume the show is 40 mBytes, which yields 40gBytes of downloads a week, or 160 gBytes a month. $100/month buys an always on 1 mBIT stream, 125k Bytes/second, 7.5 mBytes/minute, 450 mBytes/hour, 10.8 gBytes a day, 324 gBytes/month. so if you could buy your bandwidth wholesale, your 160 gig is about half of an always-on 1 mBit stream or about $50/month. but you can’t buy bandwidth at that rate, only ISPs can, so i’d say you’re light on the bandwidth side — i’d be happier with $150-200/month for bandwidth

    gross – what else are you doing with your time besides the actual production? research? finding sponsors? selling ads? writing scripts? interviewing? if the answer is “nothing” then you’re definitely on to a Good Thing, if you can get it.

    i did a podcast about “money and podcasting” a while back that you might enjoy — my premise is that most of us small-time podcasters won’t make any money — ever. we’ll do it for other reasons, and the people who will make the money in this early era are the people who sell bluejeans to the pioneers.

    here’s the link to my little 5 minute rant if you’re interested.

  2. Mike,

    Thanks for the revised straw man. You’re correct, my original figures do not take into account the non-monetary compensation for podcasting. I also assume the podcast producer isn’t doing anything else with their week – just making that one show. On bandwidth, the First Crack podcast is averaging around 15mB/show, a bit less than your example of 40mB. That being said, I’ve updated the original numbers based on your comments.

    I’ve listened to your ‘money and podcasting show’ a handful of times – and I agree. Like weblogging, money made ‘because of’ not ‘with’ podcasting. The numbers we’re tossing around reinforce this. Outside of making it more attractive to create their own, I don’t see anything in these numbers that would attract advertisers. Unlike the broadcast world – podcasters don’t need advertisers to stay afloat.

  3. Garrick,

    Great subject and timely for me as I have been thinking about how to cover my costs for Winecast. I think that both you and Mike are correct, but my economics are a bit different. I do on average 5 shows per month that are about 12.5 MB in size. Each show is downloaded about 1,600 times, so I am consuming 100GB of bandwidth each month. This costs me $6.95 per month at Bluehost. If I assume Mike’s $20 per hour rate and it takes on average 3 hours to write and produce each episode, then I should be “paid” $300 a month for my time. All my gear is considered a sunk cost, as I had most of the stuff to begin with. So if my total production costs are about $307 per month, then each listener should contribute 19 cents per month. I am a big believer in Pareto, so let’s assume only 20% do the right thing and contribute (I wonder what MPR’s conversion rate is?); that makes each share 96 cents per month. Interestingly, Leo Laporte is suggesting a monthly donation of $2 for his new TWiT show (great geek show BTW). So the net-net for me is to try Leo’s commercial-free option for my show first and see what the uptake is… then I could always try to get a sponsor later on if this doesn’t work.

    I am only considering this as after 100GB my costs start to climb fairly quickly at 50 cents per GB (although I could always get an unlimited account at Libsyn). I really like to do the show, so I am not that concerned about getting paid for my time, so an average of $50 per month of income would be more than enough for me.

    Thanks for teeing this one up; this will be a great topic for our meetup next weekend,

    Tim

  4. ah. good observation — here’s a build. once upon a time “desktop publishing” was expensive and complicated. so “desktop publishers” emerged to do it (much cheaper) for people who wouldn’t otherwise have been able. the next phase, as the prices came down and it got easier, was to make money training other people how to do desktop publishing on their own gear. now, everybody just does it — it’s part of the mainstream and there’s no extraordinary money to be made as a desktop publishing expert.

    same kinda curve is likely to happen in podcasting. so selling bluejeans (and treasure maps) to the pioneers will work for a while but don’t count on it in the long term. podcasting will simply become another tool in the communications portfolio of corporations and another channel for the big-media players. but it will also be another great hobby for the rest of us, and another means for people to communicate their “personal brand”…

  5. Well, I do not have an Ipod and I do not plan to get one. However, I am on bloglines constantly. Podcasting is “cute” but not permanent. I would be nervous about building up a format that is so dependent on the hardware involved…hardware changes but good content is always good content.

  6. I was asked to expand on my short note regarding podcasting, so hear it goes.

    I think that the idea of podcasting is interesting, but not interesting enough to make it a sustainable idea. I do not want to burst anyone’s bubble, but this technology is great for the early adopters out there who love trying out new things. The “geeks” (I am one, btw) in the world often think new technology, media, stuff has more appeal to the broader market then it really does.

    I have listened to a few podcasts, and most of the ones I have heard are just boring, ramblings. They have often been unorganized diatribes on obscure subjects. The problem with a podcast is that you can not skim through the content. You are forced to listen to it in a linear fashion. With a RSS feed reeder you can skim through hundreds of blog posts to find out if there are any that really grab your interest. Then you can skim that post to find the little nugget of information that makes it worth reading…can’t do this with a podcast.

    Blogs are portable…podcasts think they are because your device is portable, but the content is not as portable as Blog content. I can grab a RSS feed on my Treo handheld from anywhere because the feeds themselves are compact files that can be downloaded quickly. Podcast’s are generally around 3-4mb, which makes them less practical for mobile access.

    Podcasting goes against everything the Web stands for. It demands that the user take things exactly as the podcaster presents it. By the way…that does not help if you are deaf. Of course the blind can “read” a typical blog with a text reader.

    While about 65% of North America has Internet access, only about 40% has broadband access. A fraction of those people have portable digital music players which are the de facto device for listening to podcasts. That really shrinks (and, demographically speaking, narrows) the potential audience. Elitist?

    My opinion may not be the popular one hear, but I am not alone..

    http://nanopublishing.weblogsinc.com/entry/3510628861773606/
    http://blog.holtz.com/index.php/weblog/is_podcasting_for_real/
    http://www.gadgetophile.com/podcasting-my-take/
    http://www.darrenbarefoot.com/archives/002534.html

    This list goes on…

    In short, I think that this is a great example of people getting caught up in the “latest and greatest” thing, which will pass with time. I realize that the idea of broadcasting a self produced audio stream to the world is interesting, but the real world is not a Christian Slater movie (obscure reference) and even if it was, things do not work out for him that well either..in the movie that is.

    One final thought. It took me about 15 minutes to write this and I probably could read it in about four minutes, but aren’t you glad that you could just skim it and get the point in 30 seconds instead of listening to my allergy affected voice ramble on. 🙂

  7. Stephen, I’m glad you brought up the “it’s not text” perspective. You’re correct, when compared to the internet and existing weblogs, podcasting isn’t that interesting.

    When compared to existing radio – podcasting is not only interesting, but a compelling alternative. When compared to radio, the ‘obscure subjects’ you consider a weakness is the greatest strength.

    Podcasting gives everyone access ‘drive-time’ radio without a transmitter – rather than listening to the same overplayed hits from the 80s and 90s, I now listen to any number of real people talking about topics so niche no one program director would put on the air during the day. This is where podcasting will flourish, in the same way weblogs have flourished as an alternative to traditional newspapers.

  8. I agree partially. However, I do not know if I think that the medium can “flourish”. People may be willing to do it as a hobby, but in the long run I do not think you are going to see the mainstream acceptance that some expect. Remember, when all is said and done we are talking about downloading homemade audio files. Re-branding it and calling it podcasting does not change things that much. In the 80’s we could all record cassette’s with dialogs on them and then share the tapes with our friends who probably shared the same obscure interests, but did anyone really do it?

  9. Right now, podcasting defines both a a distribution method and a media form. With more media companies distributing their existing shows via podcasting (WNYC, KCRW, ABC, BBC) the separation between the two will become more distinct – and podcasting as a unique media form will mature. This is a huge win for public broadcasters, they now have a more effective world reach – and therefore – the potential for a worldwide membership base.

    For the aspiring audio personality, podcasting is an effective way to; build an audience, find your voice, and experiment. As I mentioned in my If You’re a Guru, You Need a Podcast post, podcasting is an extremely intimate and inexpensive marketing channel for all professionals.

    In the end, mainstream acceptance doesn’t really matter. Podcasting is about the producer and listener connecting more directly on their own terms. Critics, analysts, and mainstream acceptanace aren’t required for it flourish. Just ask Ron Popeil.

    I echo Dave Slusher’s sentiment: “Being able to have 50 different ordinary yet compelling people to listen to whenever they choose to publish a file is what excites me. This part is inarguably novel because it wasn’t happening and now it is.”

    He sums up the typical “podcasting isn’t interesting” arguments (some of which were in this comment thread) well with, “What you say is entirely correct, entirely factual and entirely irrelevant to me.”

  10. Garrick,

    Actually I was using that quote to the “podcasting isn’t really new” crowd, not the kind like Stephen. Stephen’s is a different but equally fallacious thread – the “I don’t like it therefore there is no market.” You know, I personally don’t like coconut or cherries, therefore I extrapolate that there is no market for coconut or cherry pies. He says “I have listened to a few podcasts, and most of the ones I have heard are just boring, ramblings.” So what? I turned on the TV and the first few shows I tuned in weren’t to my taste. Does this invalidate TV as a medium? There’s 5000 and climbing shows out there, all of them are of interest to someone. His problem isn’t that the medium sucks, just that he needs a better way to find what matters to him.

    As for the economics, I think it doesn’t matter to the pricing what you need to live. I don’t think dividing your costs by the listeners is a reasonable way of pricing. Better is to arrive at a price that is reasonable via the value of your show to the listeners, divide by what you need to live and use that to arrive at the number of paying listeners you need for this to become your day job. If your listenership gets cut in half, do you plan on charging twice as much?

    More and more, I’m thinking that directly charging for podcasts in anyway is a dead end. That Leo was able to acheive it is probably not replicable because he’s got a karma bank to draw on that few others have. That’s why all my efforts to monetize are orthogonal to that. Yes anyone can create a podcast, but only you can create yours. The key to making it of value to a sponsor is to make it something they couldn’t do and is of value to them.

  11. Thanks Dave. I really appreciate your thoughts on this.

    The per listener monetization shows how really inexpensive it is to do a podcast. It permits more experimentation from individuals and companies. Small money in television is huge money on the internet, from that perspective, a podcast is a very low-risk experimental marketing tool.

    At the same time, the economics of podcasting are so small, anyone can use it for the same purpose. $1/listener/show is an easy way to describe how approachable podcasting is. Can the majority of podcasters get their listeners to support them directly? I don’t think we have the tools yet to find out.

    In the race to the niche, there’s an inverse relationship between value and number of listeners. Thereby making individual listener support far more feasible with the right tools.

  12. I think the most immediate profit for podcasters is (or can be) infinite, if you put it in terms of the intangibles, or what is called “egoboo”.

    I’ve had feedback from around the world, been mentioned in a newspaper in California, and exchanged promos with a number of like-minded podcasters – it’s terrific fun! As has been pointed out, this is a great way to extend one’s skill set – but few aside from Adam Curry are likely to make serious money at it, and you’d be silly to expect it. But profit? I can’t complain.

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