‘The Capitalists Are Here!’

Are we in a podcast bubble?

Photo: Bobby Doherty/New York Magazine
Photo: Bobby Doherty/New York Magazine

One February morning, more than 160 people took their seats in the fashionably distressed brick-walled event space of Williamsburg’s Wythe Hotel. In the back was a bar, in the front a riser with couches and a large floating light box reading ON AIR in an angular block font. It was hour one of the Hot Pod Summit, a business-focused podcasting conference that had begun way back in 2014 with a gathering of around 30 people in a Silicon Valley conference room. That was the year of Serial, podcasting’s first blockbuster, which quickly spawned an army of imitators. It was also the year NPR refugee Alex Blumberg founded a start-up podcast company called Gimlet Media. Days before the 2019 summit, Spotify had acquired Gimlet for $230 million, a number that far exceeded its internal valuation of $75 million and, as anyone in this room would tell you, “validated the space.”

“It shows to a lot of people that this is a real business, there’s real opportunity here,” says Jacob Weisberg, the former Slate Group CEO who left last fall to launch his own podcast studio, Pushkin Industries, with Malcolm Gladwell. “What I’m worried about,” he adds, “is that if you start to get these exaggerated valuations that are not justified — and it’s not necessarily the case at Gimlet — you set yourselves up for a fall later.”

Four days after the summit, a start-up called Luminary, with $100 million in venture capital, announced a lineup of more than 40 shows hosted exclusively behind a paywall — an unprecedented effort to build a podcast empire on subscriptions rather than ads. Luminary aims to become “the Netflix of podcasting.” In other words, podcasting is suddenly more than a mission; it’s an industry.

At the Wythe, four talent agents were spotted huddling in a corner, presumably plotting. Pitches were flying in the hallways, along with fevered descriptions of “killer features” and sidelong glances at competitors angling for market share. An intellectual-property lawyer roamed the lobby. One podcasting rep could be seen and smelled in the vicinity of the bar, Bellini in hand, at 11 a.m., rhapsodizing about last night’s parties. He worked for a Chinese-backed start-up that was throwing $100 million into podcasting with no discernible business plan.

The story of podcasting’s journey so far would be a good fit for the secret-history genre: how a folksy art form with deep roots in public radio, built as almost an afterthought, became a medium that underwrites the passion projects of journalists, comics, and celebrities (never mind radio producers) and attracts the interest of billionaires. But the story explored at the summit was from a more speculative genre: What will this look like in five years? Will listeners be willing to dole out monthly payments as they do for streaming video? Will advertising rates, some of the highest in media, crash? Will the audience grow fast enough to lift all boats — not just Joe Rogan but also investigative journalism, fiction series, and some 660,000 others? Amid the excitement at the Wythe, a giddy hormonal cocktail of the anxiety and elation of an industry in the grip of puberty, one thing was clear: As a digital-audio executive put it, “The capitalists are here!”

What distinguishes a boom from a blip — the beginning of a golden age from a spike of irrational exuberance? In media, it depends on the audience. New investors are building podcast factories on the premise that the masses will soon come or that, by developing better technology or marketing or (last but not least) content, they can help pull them in. The fact is that podcasting has always done decent business. Even in its early years, the medium was punching well above its weight, thanks to a form of advertising that peaked 70 years ago during the golden age of radio.

Podcasting’s pioneers — the narrative storytellers of WBEZ Radio, This American Life’s Ira Glass, and 99% Invisible host Roman Mars, along with Jesse Thorn, who sold his Dodge Dart to afford a soundboard before founding his podcast network Maximum Fun — all relied on some form of fund-raising, but most quickly realized that direct advertising read by the host was tailor-made for the medium. “The reason they’ve been successful is their deep connection to listeners,” says David Raphael, president of Public Media Marketing and the main reason you’ve heard of Serial advertiser MailChimp. He likes to cite a focus group in which listeners were asked why they went to hotels.com. “They said, ‘Because Ira Glass told me to.’ ”

In 2010, Marshall Williams, the CEO of Ad Results, read in Fast Company that Adam Carolla was running a podcast out of his garage. Williams, who used to place ads on Carolla’s drive-time radio show, tracked down the host via a friend of the podcaster’s wife and gave him the hard sell.

“Proflowers.com, Mother’s Day 2010,” Williams told me proudly over a beer at the summit with the flush of a football star remembering his first touchdown. “$19.99 if you use my code, plus for $10 more I’ll double the order.” Williams found that direct-offer-code advertising worked 30 percent better on podcasts than radio. The magic of podcasting — the “intimacy” everyone mentions with the disclaimer “that old cliché” — was also its financial saving grace.

The demonstrably strong connections drove up rates. Podcasts can charge anything from $15 per thousand impressions to five times that; the most successful shows earn well over $50,000 for a single host-read ad. Those high returns effectively provided podcasting with its first round of seed funding, but the fledgling medium kept growing and there’s only so much disintermediated underwear you can sell. The Great Recession helped push along the next funding phase, albeit indirectly: It inspired Blumberg to co-create the NPR show Planet Money, which helped explain the subprime crisis. He soon grew frustrated with NPR’s limitations — its slow decision-making, its strict rules around advertising. “We should be making more; people want more,” he remembers thinking. “There should be the Planet Money of technology! Of cars!”

So he became, like his sources, an entrepreneur. In the grand tradition of podcast logrolling, he decided to promote his new podcast company with a podcast. “It was my best marketing stunt,” he says. Startup became Gimlet’s flagship show. Funded by $20 million in venture capital, Gimlet exceeded expectations, and within four years it became something like a factory of precision content (some of it sponsored).

The best thing that happened to Gimlet was Serial, the spinoff of This American Life that shattered the audience ceiling. After Sarah Koenig’s murder reinvestigation became SNL-parody famous, it was suddenly not only conceivable but expected that a popular podcast would draw well over a million listeners. “It was the first time you went to the watercooler and asked if people had heard a podcast and someone said, ‘Yes,’ ” says Bryan Moffett, the COO of National Public Media. Listeners and advertisers alike wanted the next addictive binge-listen. Longform Podcast producers Jenna Weiss-Berman and Max Linsky started Pineapple Street Media, a boutique studio whose first big hit was Dan Taberski’s Missing Richard Simmons.

In 2016, Hernan Lopez, former head of Fox International Channels, launched podcast studio Wondery, which struck gold with the true-crime shows Dirty John and Dr. Death. Those shows piqued the interest of Hollywood. Now a sizable portion of Wondery’s revenue comes from TV and movie deals, according to Lopez. Adam Sachs, COO for Conan O’Brien’s Team Coco, calls podcasts “profitable pilots,” adding, “You could do the whole thing for what it would cost to option it. You have proof of concept.”

Yet the whole medium still felt like a concept — an experiment — until Spotify put down its stake. “All of a sudden, VCs are like, ‘Okay, now we get it,’ ” says Leah Culver, the young and very enthusiastic co-founder of a platform named Breaker. Two years ago, she pitched potential investors on starting up “the Netflix of podcasts” and had few takers. Today funders are finally returning Breaker’s calls. “In the past two weeks, everything has changed.”

At Hot Pod’s Spotify-Gimlet panel, Courtney Holt, the generously bearded man in charge of Spotify’s podcast push, argued that “the golden age of audio is happening” and he just wants to help. He touted a recent study showing that the growth in Spotify’s podcast audience last year was mainly from new listeners — particularly in the podcast-averse middle of the country. That is to say, it didn’t take away from other platforms.

The next panel starred Luminary CEO Matt Sacks. Lean, boyish, and preternaturally confident, Sacks, who was about to turn 28, described Luminary in simple terms. It would roll out premium content behind a paywall, offering creators up-front production costs and customers a curated experience for $8 a month. Four days after the talk, Luminary announced its opening lineup, which includes podcasts by Lena Dunham, Trevor Noah, and Russell Brand; hits poached from other networks, like Fiasco (a new show by the creators of Slow Burn)* and Love + Radio; journalistic series in collaboration with Alex Gibney and others (including New York); and new shows by established talents like Planet Money’s Adam Davidson. The first podcast wouldn’t debut until late spring, allowing time for marketing campaigns in major metro areas. In an article announcing the lineup, the New York Times reported that Luminary had so far raised nearly $100 million.

If Spotify’s acquisition showed the industry that an established service was willing to make an informed bet, Luminary showed that it could be a springboard for gravity-defying gambles. Last year, with money from several venture-capital and private-equity firms and a chunk from Sacks’s father, financier Michael Sacks, Luminary went on a buying spree. It has made multiple seven-figure offers, which the creators won’t divulge but rivals were eager to share: Two people told me the comedy duo behind the raunchy feminist podcast Guys We Fucked got more than $4 million to leave Stitcher despite fewer than 300,000 subscribers. Asked about it by phone, hosts Krystyna Hutchinson and Corinne Fisher let out a raucous laugh and an “I wish!” (They added that they had well over a million listeners on all platforms.) In the early stages, Sacks went out to 160 podcasters, sometimes offering even more (and eventually making deals with 54). Last spring, according to Glass, Luminary floated a proposal via his agents to pay up to $45 million in return for three years of keeping This American Life.

“I said to the agent, ‘But what do I get out of it?’ ” Glass recalls. “He said, ‘Well, money.’ But I don’t want the same thing to happen to me that happened to Howard Stern” — who famously signed with Sirius XM — “where he made a lot of money and his work was just not out there for as many people.” (A spokesperson for Luminary says the company never made or prepared an offer.)

For podcasters like Glass who hope to keep their content free, the biggest worry is that advertising rates might collapse. “Everyone assumes that rates will go down, and how will people make their payrolls?” asks Glass. “People assume that at some point the big aggregators, Apple and Amazon and others, will basically start putting their own ads on.” In light of those fears, the recent infusion of cash from paywall platforms looks more like a hedge than a crazy bet. “I think what’s going on is kind of a land grab,” says Glass. “Building life rafts and getting ready to set up walls.”

February’s cash bonanza tends to divide podcasters according to their biggest concerns: Purists worry that the medium will become mechanized and corrupted, while pragmatists worry it won’t be profitable enough to justify the investments. In fact, those two fears are intertwined. Podcasting is outgrowing the direct-ad era but still hasn’t gained enough listeners (or developed enough data tracking) to sell to huge brands. And even if it does, that shift might devalue the very intimacy — that monetizable magic — that fed its impressive growth in the first place. The premium model might be the best alternative they’ve got if listeners are willing to go there.

When nine-figure bets are placed on a market worth roughly $500 million in annual revenue, people start using the word bubble. “My sense is there’s a content bubble,” says Roman Mars. There’s a glut of content, but that doesn’t mean every Wiccan D&D podcast is making money. “The reason why I don’t think it’s an economic bubble is that a million people download an episode of my show every week,” he says. “That’s more than most cable-TV shows, and I don’t make cable-TV money.”

But what is proper compensation in a field with no exact parallels or benchmarks, which no one believes has reached its full potential? The simple fact, obscured by all the very new money, is that podcasting is barely even a household word, much less a mass medium. That came into focus on the afternoon of the summit, when Tom Webster took the stage to offer a sneak preview of Edison Research’s 2019 “Infinite Dial” report. Webster displayed pie charts showing hours of listening time among Americans 12 and older. Between 2014 and 2018, the share devoted to podcasts increased 122 percent. The less-good news: That trend was from 1.7 percent to 3.9 percent of total time. Even today, Americans spend as much time listening to music channels at the end of the cable-TV spectrum as they do to podcasts. Webster said it was all gravy. “Imagine I had all the moneys,” he explained, “and I said you can have 1.7 percent of all the moneys. That’s a lot of moneys.”

The “Infinite Dial” report came out a week after the summit, showing that, for the first time ever, more than 50 percent of Americans report having listened to a podcast. Webster called it “a true milestone.” The rate of Americans listening monthly was 32 percent, more than twice what it was in the Serial year of 2014. Overall, 70 percent of Americans are familiar with the term podcast. Of course, you need more than familiarity to make money, and you need people listening to a lot more than one show.

“It’s never been hockey-stick growth,” Webster explained, and there are several reasons for that. The largest barrier is simple inconvenience, especially for older, less adaptive listeners. (The audience listening to a show on NPR is 20 years older than the one downloading it as a podcast.) New cars increasingly come preloaded with podcasts, but cars turn over slowly. “When we get in cars, man, that is the killer,” says Andy Bowers, co-founder of the podcast platform Megaphone (formerly known as Panoply). Smart speakers have yet to be fully integrated. “People dipping their toe in at the edge, they’re confused,” says Blumberg, referencing focus groups in which people think “subscribing” means paying for podcasts. “There is this insider image.”

True crime aside, no one has nailed down what makes a hit. That’s part of what’s so exciting about podcasts; they haven’t been reduced to green-light-ready formulas. But it’s also frustrating when you know there’s a vast audience out there, doing chores and driving cars, all their senses occupied except for their ears. Podcasting doesn’t need to steal their time from HBO; it can borrow it from all those moments in the day that bore us to death. One executive told me he kept a sign above his desk: DRUG DEALER STRATEGY. Meaning: Just get them to try one, and they’re hooked.

*This article has been corrected to reflect that Jenna Weiss-Berman was a co-founder of Pineapple Street Studios, and that Slow Burn and Fiasco are distinct shows.

*This article appears in the March 18, 2019, issue of New York Magazine. Subscribe Now!

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