The era of the podcast began with Apple’s original iPod and continues as smartphones have become ubiquitous accessories. However, while smartphone saturation has begun to peak, the popularity of podcasts continues to grow unabated. Take a look at some hard data on U.S. podcast audience size through 2017, with forecasts out to 2022:

(Source: Activate; Edison Research; PwC, via Statista)

As a new medium, part of the room for growth in podcasting is simple awareness. Many consumers have not even heard of podcasts. However, awareness is growing:

(Source: Edison Research; Triton Digital; All Access, via Statista)

It should be noted that the audience for podcasts skews young. Consider this demographic data on listenership:

(Source: Edison Research; Triton Digital, via Statista)

The takeaway here is that podcasting is a new and growing way to establish a subscription relationship with audiences, especially with the sought-after youth demographic. With a relatively low cost to launch, podcasts can become a way for existing subscription companies to deepen the subscription bond and build a stronger relationship with an audience. For podcast-primary companies, both free and paid podcast subscriptions can provide revenue and fuel for growth.

Before delving into paid podcasts, first consider the ease with which consumers subscribe to free podcasts. Through distributors such as Apple’s iTunes and the Google Play store, any podcast listener can subscribe with a click, offering future episodes as soon as they are uploaded. Other podcast apps allow access via an RSS feed; downloading episodes as they become available. Thus, consumers have the choice to subscribe or to listen to episodes one at a time. Here is some data on how that breaks down:

(Source: Statista)

That is, 54% of podcast listeners subscribe to at least some podcasts; 24% subscribe to all the podcasts they enjoy. A majority of podcast consumers are willing to subscribe, at least for free.

The primary business model supporting podcasting so far has been advertising. This typically takes the form of ad copy that is read by the podcast host, with value added by personal testimonials or commentary by the host (seemingly unscripted) talking about the product or service highlighted.

This model has achieved a fair degree of success, and indeed, podcast advertising revenue is growing. Take a look at this data and forecast for U.S. podcasts:

(Source: IAB; PwC, via Statista)

This steady growth in podcast ad revenue speaks to the viability of a free-subscription model that is subsidized through advertising. Per this data, that’s an average predicted growth rate of 28% annually. Of course, that will slow as the industry matures. Still, podcast advertising enjoys advantages over traditional banner ads and even over video preroll, since the power of a host endorsement, or just of an ad read by the host, is powerful, and not easy to skip past.

Certain companies and industries have taken a committed dive into the medium, with the result that those who listen to several podcasts hear pitches for similar products over and over. Tech humor comic XKCD recently lampooned this trend:

(Source: XKCD)

Although most listeners are content with the free-with-advertising bargain, a significant number of podcast subscribers are willing to pay a subscription fee for an ad-free experience. Here are the results of a poll of 661 adult podcast listeners, asked if they would be willing to pay to remove the ads from their podcasts:

(Source: Statista)

Look at the same survey, sliced into segments by age. The audience we learned are most likely to be podcast listeners — young people — are also the ones most likely to be willing to pay for an ad-free subscription:

(Source: Statista)

So having established the potential in podcasts as well as the audience willing to pay for subscriptions, how has the marketplace moved to satisfy demand? First and foremost, a number of individual podcasts or indie podcast companies have managed to create paid offerings on their own. For example, Dan Savage’s “Savage Lovecast” offering, a relationship and sex advice podcast, offers “micro” and a “magnum” versions — the magnum has no ads and includes extra, subscriber-only audio. For another example, consider the “BenGreenfieldFitness” podcast vault, which offers paying customers premium audio, insider interviews, secret videos, and hidden episodes.

However, these podcasters face a problem: It is easy to subscribe for free via a service such as iTunes or Google Play or Spotify, but these distribution platforms only accept free casts. To offer a paid cast, the podcaster cannot use these services, and must push users to a custom app or a special RSS feed or to a web page with links to downloadable audio files. Frankly, it’s a pain in the ass, says Digiday’s Max Willens.

A service that is harder for paid subscribers to use than the free option tends to discourage users, who are thus more likely to fail to resubscribe. A number of solutions have popped up through third-party providers to make paid subscriptions easy: Patreon, Podbean, and Libsyn all offer help running monetized premium podcasts. Recently, new premium options from CastBox and Stitcher have raised the ante. These moves have prompted Fast Company to ask, “Is the ‘Netflix of podcasts’ moment finally here?” Writer Scott Porch says that streaming video is the future of streaming audio:

• For podcast creators, the notion of premium content carrying a price tag is appealing. … And maybe premium models will take podcasts past ad-free listens and bonus features into some completely new direction. “Once you move out of the ad-driven world, the possibilities really open up because you’re no longer gambling on the reach of the show and whether it appeals to advertisers,” Stitcher’s Diehn says. “With premium audio, you can take that consistent, monthly revenue and make content for your most engaged listeners. It’s why Netflix has such a massive audience.”

Nicolas Quah is a podcast media insider who writes Hot Pod, an analytical newsletter that’s also published at Nieman Labs. In his fascinating 2019 podcast industry look-ahead, he asks, “Will non-advertising business models take firm root across the ecosystem?” He is sceptical that big concatenators and Netflix wannabes will fly, even with oodles of venture capital. But he does have an open mind about non-advertising monetizations, whether through subscription or merchandise or live events. In his July 2018 column, “The Subscription Problem,” he looks at the issue like this:

• “Let’s consider the Promise and Problem of Premium Subscription in Podcasting. … I think it’s really important to separate the idea of a genuine subscription-first model – that is, a business truly in the vein of Netflix – from other support constructions that selectively deploy paywalls: memberships, direct support donations, listener-plus services, Patreon, etc. To state the obvious, those latter models are built on a completely different value proposition, one where publishers are working to be paid after delivering value to listeners, and it’s already been proven to be effective many times over as revenue solutions for podcast publishers big and small, independent and otherwise. … Conversely, an actual “Netflix for Podcasting” venture is built on the premise that it’s able to build a product strong enough for listeners to cough up cash before they are delivered value. It’s a more classically transactional relationship, and within the context of the current podcast ecosystem, I’d argue such a venture is basically in the business of extending the promise that it can consistently and perpetually beat the entire universe of free alternatives.”

The “selective paywalls for premium content” subscription model is currently a success for many podcasts (although the pain-in-the-ass-ness of delivering premium content is a continuing challenge). These are the podcasts that make a connection with subscribers, form a community, and build loyalty — all hallmarks of a successful subscription relationship, as I have said in this space repeatedly. The other mode, the trendy mode with venture money behind it, is the “large platforms that bring together many casts” subscription model, in the same way that Netflix brings together many TV series.

Perhaps this distinction is a bit of inside baseball — to me, the important point is not that one mode of podcast subscription will win out over another, but that consumer willingness to pay for podcast subscriptions is a decent bet.

Insider Take

From humble origins and a small user base, podcasting has shown consistent growth. First through advertising, and now through premium subscription, there is real money trickling through the podcast ecosystem, and that’s changing the way listeners, podcasters, and investors are looking at monetization.