This is Part 2 of a two part article about podcasting and the music industry. To read Part 1, click here.
The Solution – Making Money and the Future of Music in Podcasting
Successful podcasters in the music industry will take advantage of a variety of revenue opportunities while minimizing unnecessary expenditures. The podcast’s content itself will determine the selection and success of any economic model.
So what are these "revenue opportunities"?
There is money to be made from those seeking to be affiliated with the podcast (advertisers and sponsors), as well as those seeking to listen to the podcast (consumers). Deals with those seeking to use or re-purpose the podcast (radio stations, cell phone companies, aggregators) also have money-making potential. Even the demographic information generated by consumers downloading podcasts is valuable.
Content
Exclusive, wholly owned music content may be a significant means to making money from podcasting in the music business. As previously mentioned, podcasting music owned by others implicates reproduction and perhaps even performance rights, which means licensing fees.
While podcasting music wholly owned by the podcaster would eliminate the licensing fees, it may also be redundant in a marketplace where the very portable digital audio players playing the podcasts also act as enormous digital music warehouses. If the wholly owned musical content is already widely spread in the marketplace and if consumers already have the music on their iPod, the incentive to download podcasts containing the same music may be lower.
On the other hand, podcasting wholly owned, exclusive content requires no licensing fees and fills an empty void in the market place. Examples include live concert tracks, live in-studio performances, and previously recorded but unreleased tracks. All of these examples may be coupled with variations on the traditional radio show format featuring entertaining radio personalities or may take the more informal, diary approach popularized by blogs.
There are scenarios where including music in podcasts would not require licenses, or at least not prohibitively expensive licenses. Podcasters playing music already in the public domain; by local, unsigned musicians; by musicians signed to small labels and publishing companies; or by musicians with permissive Creative Commons licenses do not face as difficult an obstacle as podcasters wishing to include music by acts signed to major recording and publishing agreements. In any scenario, however, the future of podcasting could bode well for the owners of musical content.
As the owners of music catalogs, labels and publishers are poised to benefit from podcasting in a different way than they have benefited from other mass transmissions of their music, such as radio. For the past several decades, radio has served content owners well as a promotional platform and will continue to be an impressive tool in the music content owner’s promotional toolbox.
However, the relationship between radio and content owners does not necessarily need to translate wholesale to the brave new world of podcasting. Radio has much to gain from podcasting, but content owners who podcast independently have the power to write radio out of the podcasting equation.
Furthermore, because podcasting is a relatively cheap and simple method of reaching niche groups, content owners have some incentive to retain the rights to podcast their music. This will be especially true if podcasting achieves its potential to become a major player alongside radio as a means of marketing and promotion for labels and publishers.
Other content owners, the unsigned independent musicians, also have a great deal to gain from podcasting. Blogging has been an enormous boon for independent artists promoting their music, and for a generation of MySpace music networkers, podcasting can be yet another way to create a close relationship with fans.
Podcasts, however, can fill a market sector that blogging and networking services cannot – commuters. Furthermore, the audio content can be anything, including songs (new, old, live), interviews, and tour journals. Currently musicians can start creating podcasts for as little as $200, and no doubt the price will drop in the next few years.
Advertising and Subscriptions
Economic models based on advertising and sponsorship sales may also fuel the podcast business. The advertising model has been successful for other forms of media, and it is logical to conclude that it may translate to podcasting as well. In fact, advertisers affiliated with podcasts have access to comprehensive and valuable demographic information about the make-up of the listener base.
However, there are advertising considerations specific to podcasting. At the moment and for the immediate future, the consumer audience for podcasts is relatively small compared to other forms of mass media. Podcasting advertisers must specifically identify their audience and tailor their ads to this audience.
Because other forms of media have much larger audiences, advertisers have tended to cast a wide net to appeal to as many consumers as possible. Podcasting, however, is an outgrowth of a larger trend toward more personalized media designed to be adaptable to the specific needs, patterns and interests of individual consumers.
With podcasting, consumers have the ability to subscribe to a wide variety of niche programming far outside the main stream. From an advertiser’s perspective, these niche podcast listeners are likely to have other needs, patterns and interests in common and thus represent a consumer base waiting to be tapped into.
However, the traditional “scattergun” approach to advertising may be less effective than a more direct approach to consumers already seeking more personalized media. A focused model of advertising may even create more bang for the advertising buck.
This consumer freedom to discover and organize podcast programming gives advertisers a fresh way to connect with consumers. However, the flip side of the new consumer love affair with personalized media is that it also gives consumers a fresh way to disconnect from advertisers.
As with other pre-recorded, time-shiftable media such as TiVo, podcast listeners can avoid unwanted advertisements by simply fast-forwarding past them. This underscores the need for personalized ads that speak directly to the intended audience.
A current trend for podcasters is to charge advertisers flat monthly rates, but such rates are risky for both parties because audience numbers tend to fluctuate in these early days of this new media. A more graduated approach of charging a flat rate per 1,000 subscribers may take root.
In many instances, all of the ad revenue flows back to the creator or producer of the podcast, but in 2005 Podcast guru Adam Curry received $9.8 million in venture capital to move forward with his concept of an entire network of podcast shows that would split ad revenue. Podcasters teaming together with advertisers and social networking sites may become a popular model of bringing order into this currently chaotic media.
Where ad revenue is used as a method of offering podcasts free of charge to listeners, podcasts seem more akin to other ad-sponsored, free services such as radio. Ad-sponsored podcasts offered for a fee, however, seem more akin to other subscription media services such as magazines or cable television.
“Paying per listen” and subscription fees are alternative or supplementary models to advertising. Viewed as an ad revenue alternative, subscription or “pay per listen” models allow podcasts to be uninterrupted by advertisements, and many consumers will happily pay for this convenience.
Viewed as an ad revenue supplement, podcasters may try to make money from both advertisers and listeners. A middle ground has also been forged in the form of a subscription/advertisement hybrid model where listeners have the choice of downloading free podcasts laden with advertisements or paying a fee for the same podcasts without ads.
Third Party Deals
In addition to content, advertising and subscriptions, another factor in the viability of a podcast business model is the podcaster’s relationship with other parties in the podcast industry.
These parties include:
- companies creating and selling podcast aggregator programs,
- search engines hosting podcast aggregations,
- manufacturers of content management (audio editing) software,
- terrestrial, online and digital radio stations, and
- podcasting equipment manufacturers (manufacturers of computers, microphones, portable digital audio players, and even cell phones with portable digital audio components).
Licensing agreements with these parties may be yet another way to turn podcasting into revenue. Such licenses may take the form of individual podcast producers licensing their podcasts to radio stations, aggregators and cell phone companies.
Furthermore, the sale of podcast consumer demographic information may also prove to be an effective source of revenue. Those offering podcast content potentially have access to a vast array of data about the niche group downloading podcasts, including age, gender, geographic location, time of download, economic status, payment method and purchase patterns. This data is extremely valuable to advertisers and sponsors affiliated with the podcast, and podcasters may be able to ask a premium for it.
Conclusion
As podcasting continues to grow and develop as a media outlet for large and small podcasters, content owners, advertisers, aggregators and other beneficiaries, the number of intersection points with other areas of media, technology and culture will also grow.
The lines between various forms of media blur with integration; thus, the essence of podcasting as it is currently known will change. Whether the nature of the podcast lies in the way it is created, the way it is transmitted, or the way it is ultimately used is an issue that has yet to unfold.
Regardless, podcasting is here for good, with vast potential for conveying music, news and ideas to the public. Referring back to my introduction, music mavens like Ben the college student can podcast audio versions of their blogs, with the latest in music news and reviews. Record labels like Andrew’s and unsigned musicians like Kate can podcast interviews, tour journals, show dates as well as an array of musical content.
However, in order to successfully integrate podcasting into the music industry, podcasters need a reliable financial model upon which to base development. For those who do not own musical content, such as radio stations, licensing fees loom large and create an obstacle to successful growth for small entrepreneurs.
For content owners, especially exclusive content owners, the future is brighter but financial success will depend on the development of business models through advertising, subscriptions or both and of relationships and third party contracts with other entrepreneurs in the field.
By creating and seizing opportunities to turn podcasting into revenue, the popularity and financial base of this fledgling media can grow and develop. Only in this way can podcasting mature into a compelling marketing and promotional force in the music industry.
Great work. With over 50,000 downloads in just a few months, we're very interested in knowing about this.
We'll mention it at the July 13-14, 2007 PODAPALOOZA conference.
Thax!
Posted by: BlackPressRadio.com | June 16, 2007 at 07:29 PM
Glad you enjoyed it! We'll be posting 4 or 5 articles a month on similar entertainment & technology law topics, so check back for updates....
Posted by: Howie | June 17, 2007 at 05:16 PM