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'Audio Podcasts And The Market For Podcasting' by Grant Goddard

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A market analysis of radio/audio podcasts and podcasting, written by Grant Goddard in April 2006.

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'Audio Podcasts And The Market For Podcasting' by Grant Goddard

  1. 1. AUDIO PODCASTS AND THE MARKET FOR PODCASTING by GRANT GODDARD www.grantgoddard.co.uk April 2006
  2. 2. 1. DEFINITION “Podcasting” is defined as “the distribution of audio or video files, such as radio programmes or music videos, over the internet…. for listening on mobile devices and personal computers”. “Podcast” is a term, like “radio”, that can refer to both the content and the means of delivery.1 The most notable differences between podcasting and terrestrial broadcasting, and between podcasting and streamed webcasting, are:2  A podcast is a “programme” of definite duration, produced as a complete work and encompassing a beginning, a middle and an end, that is delivered to the user in “archived” form  A podcast can be listened to or viewed by the user at a time of their convenience  A podcast can be listened to or viewed by the user at a place of their convenience, either on a mobile device or on a personal computer, without a simultaneous connection to the internet as a pre-requisite  The user has the ability to stipulate that regularly updated (often daily or weekly) editions of a podcast be downloaded automatically to a personal computer or mobile device, as a background activity without further intervention from the user, for later listening or viewing  Multiple podcasts can be downloaded simultaneously from the internet, for later listening or viewing, whereas only one streamed webcast or terrestrial broadcast station can be listened to or viewed at a time Although the term “podcasting” derives from a combination of the words “iPod” and “broadcasting”, the listening to or viewing of a podcast does not necessarily require the user to use a mobile player such as an iPod, since content can equally be accessed on a personal computer. Podcasting is the latest development of “push” technology whereby content is pushed through the worldwide web to the user, according to their stated preferences or subscriptions, without the user having to actively engage in individual file downloads. “Push” technology was initially developed in the early 1990s by nascent internet companies such as PointCast that offered users free subscriptions to their preferred newspaper stories, and then downloaded files to their computers automatically overnight. Podcasting has developed the idea from text files to audio and video content.3 1 Wikipedia, Podcasting, http://en.wikipedia.org/wiki/Podcasting Wikipedia, Podcasting, http://en.wikipedia.org/wiki/Podcasting 3 Wikipedia, Podcasting, http://en.wikipedia.org/wiki/Podcasting 2 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 2
  3. 3. 2. MARKET DEVELOPMENT The ability of the podcast to time-shift audio content has been compared to the improvement in operability that the VCR brought to television in the 1980s, while the ability to “push” podcast content through the internet to the user’s computer as a background activity has been compared to the more recent TiVo TV facility. “As a concept, I see [podcasting] as most closely equivalent to doing for internet audio content what TiVo does for TV,” said podcast producer Dave Slusher. Another producer, Carl Franklin, commented: “I think it’s a natural evolution of content consumption, because people are busy and they don’t always have time to catch their favourite show. So it’s very convenient to get notified when new content is available through some sort of aggregator and automatically download that content and have it put on a portable player and listened to at your convenience.”4 In October 2004, the user’s ability to locate podcasts of relevant content was improved by the launch of Podkey, the first phonetic search engine for podcasting. By November 2004, podcast networks started to emerge, including the GodCast Network, the Tech Podcasts Network and the Association of Music Podcasters, created as portals for podcast producers serving specific genres. In June 2005, the initial inclusion of 3,000 podcasts in Apple’s iTunes 4.9 online music store considerably broadened user access to podcasts through visibility within a single high-profile aggregator.5 In its first two days of existence, the iTunes podcast directory attracted one million subscriptions. “iTunes has done what possibly no one else could have accomplished, propelled podcasting into the mainstream,” said Will Lewis, management consultant for US radio station KCRW.6 One US report concluded that “the inclusion of a podcasting feature by iTunes is the single greatest step in helping podcasts reach a wider audience.”7 The growth in the number of podcasts available to users has increased tremendously since then. In November 2004, 212 podcasts were available at the web site of aggregator feedburner.com but, by January 2005, that number had increased to 1,090 and then, by August 2005, to 13,782.8 The diverse subject matter available within podcasts is illustrated by the ten most popular programme “tags” (descriptors added by the podcast producer) of podcasts available at another aggregator web site, podcast.net : music (2133 podcasts), comedy (975), podcast (830), news (810), radio (701), rock (673), technology (572), politics (531), Christian (444) and indie (436).9 It is this diversity of programme material that, according to one media report, “allows people to thumb through an exploding treasure trove of shows and find exactly the right one for them, no matter how off the wall it might be. That 4 Daniel Terdiman, Podcasts: New Twist On Audio, Wired News, 8 August 2004 Wikipedia, Podcasting, http://en.wikipedia.org/wiki/Podcasting Steve Friess, iTunes Mints Podcasting Stars, Wired News, 18 July 2005 6 Apple, iTunes Podcast Subscriptions Top One Million, Press Release, 30 June 2005 7 Sheri Crofts, Jon Dilley, Mark Fox, Andrew Retsema & Bob Williams, Podcasting: A New Technology In Search Of Viable Business Models, [undated] http://firstmonday.org/issues/issue10_9/crofts/ 8 Sheri Crofts, Jon Dilley, Mark Fox, Andrew Retsema & Bob Williams, Podcasting: A New Technology In Search Of Viable Business Models, [undated] http://firstmonday.org/issues/issue10_9/crofts/ 9 http://www.podcast.net/browsetags, accessed 18 April 2006 5 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 3
  4. 4. makes podcasting very different from mass radio, which needs to play the most broadly popular songs to attract the widest audience.”10 An analysis by podcast aggregator digitalpodcast.com of the 2,958 podcasts indexed on its web site showed “significant imbalances between supply and demand of different podcast categories.” In the third quarter of 2005, “music” podcasts comprised 22% of the total podcasts available at digitalpodcast.com, but accounted for only 6% of downloads. Conversely, “erotica” podcasts comprised only 1% of available podcasts, but accounted for 11% of downloads.11 The supply of podcasts is overwhelmingly concentrated on the US at present. An Australian survey of 366 randomly selected podcast producers found that 65% were based in the US, 88% produced podcasts in the English language, and most were produced by educated males in their mid-thirties.12 By February 2006, 42 million iPod portable players had been sold in the US, with 29% of owners having downloaded podcasts.13 Podcasts are now being extended to additional portable platforms with the launch in March 2006 by Pod2Mobile of software that allows consumers to download and listen to podcasts directly on their mobile phones.14 Finding podcasts is being made much easier for the user. In January 2006, a new podcast search engine named PodZinger was launched by BBN Technologies, based on speech recognition research to create a text index of the audio.15 Alongside its competitors such as blinkx and Podscope, these search engines help users locate their preferred content amongst the estimated 25,000 to 50,000 podcasts available on the internet in late 2005.16 At the moment, Apple’s iTunes web site remains the most prominent access point for podcasts. Stan Ng, Apple’s director of iPod marketing worldwide said: “Podcasting has really taken off now that Apple has brought it to the mainstream.”17 10 Heather Green, Radio Days For Everyman, Business Week Online, 3 March 2005 Alex Nesbitt, The Podcast Value Chain Report: 3Q 2005 Update: The Podcast Content Bubble, October 2005, http://www.digitalpodcast.com 12 Peter Chen, Podcasting And Videoblogging: A Production-Side Analysis, Monash University, Australia, November 2005 13 Katy Bachman, Podbridge Starts Podcast Ad Net, 16 February 2006 14 Mike Shields, Pod2Mobile Bows Ad Product, Adweek.com, 27 March 2006 15 BBN Technologies, PodZinger Makes Podcast Searching Fast, Easy And Accurate, Press Release, 11 January 2006 16 Kim Zetter, Podcast Chaos Be Gone, Wired News, 30 November 2005 17 Paul Durman, Will Podcasts Kill The Radio Ads?, The Times, 7 August 2005 11 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 4
  5. 5. 3. THE U.K. MARKET The BBC first experimented with podcasts in April 2004, when “The Reith Lectures” were made available on the BBC web site and were downloaded 50,000 times over a ten-week period. In October 2004, the BBC launched a higher-profile trial podcast of the Radio Four history series “In Our Time” hosted by Melvyn Bragg, which generated 170,000 downloads in three months. By January 2005, the trial was extended to include additional shows from the BBC’s Five Live station. In April 2005, a further twenty shows were made available as podcasts, including the first daily show – the 0810 interview on Radio Four’s “Today” programme. During the first four months of the podcast trial, three programmes generated 270,000 downloads between them. By February 2006, the BBC had added podcasts of many more programmes, including an hourly updated news summary from the BBC World Service, bringing its total portfolio to fifty podcasts.18 In March 2005, Virgin Radio began daily podcasts of its breakfast show that made it “one of the most popular podcasts in Britain”, registering 85,000 downloads per month on the iTunes web site.19 Its own research found that 41% of its online radio users owned a portable MP3 player (of which 32% owned iPods).20 In December 2005, London commercial talk radio station LBC claimed it was the first to offer a premium podcast service.21 For a subscription of £2.50 per month (discounted to £10 for six months), LBC provides users with a range of different podcasts, including full-length downloads of the latest editions of most of its shows, an archive of previous editions, and some non-broadcast shows specifically recorded for subscribers. Non-subscribers have free access to 15minute “best of” podcasts of ten of the station’s most popular shows.22 Also in December 2005, comedian Ricky Gervais launched a free podcast entitled “The Ricky Gervais Show”, twelve episodes of which were distributed by the website Positive Internet and marketed by The Guardian newspaper. The Guinness Book Of World Records has acclaimed it as the world’s most successful podcast to date, because each edition was downloaded an average 295,000 times by users. In February 2006, Gervais launched a second series of his podcast show and charged users £0.95 per download through the Audible internet site.23 Newspapers started producing podcasts and promoting them in-print and online. One newspaper commented that “this is an area where web distribution 18 BBC, BBC Radio MP3 Takes Off, Press Release, 17 December 2004 BBC, BBC Podcasting Sparks Fighting Talk, Press Release, 30 January 2005 BBC, BBC To Podcast Up To 20 More Programmes Including Today And Radio 1 Speech Highlights, Press Release, 14 April 2005 BBC, BBC To Podcast Hourly News, Woman’s Hour And Paxman In Trial Extension, Press Release, 14 February 2006 19 Paul Durman, Will Podcasts Kill The Radio Ads?, The Times, 7 August 2005 20 Jo Twist, Radio Has Its Eye On Podcasters, BBC News, 23 September 2005 21 [uncredited], LBC Claims First For Launch Of Paid-For Podcast Service, Marketing Week, 12 January 2006 22 http://podcast-audio.chrysalis.com/ 23 Wikipedia, Podcasting, http://en.wikipedia.org/wiki/Podcasting [uncredited], Gervais Charges For Podcast Show, BBC News, 21 February 2006 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 5
  6. 6. has smashed the linear broadcasting model… and it would be completely wrong for newspapers to ignore it.”24 In November 2005, The Daily Telegraph launched a daily podcast offering three articles from each day’s print edition; and New Scientist magazine started a nine-week pilot of podcasts that included news and interviews.25 In January 2006, The Telegraph newspaper appointed its own podcast editor, Guy Ruddle, to produce daily podcasts of content from the newspaper.26 In March 2006, The Guardian newspaper also started producing a daily news show, a weekly politics show, a media talk show, a science/technology show, an arts/entertainment show and a music show.27 24 Emily Bell, Daily Podcasts Will Set New Challenges For Journalists And Readers, The Guardian, 25 March 2006 Ofcom, The Communications Market: Interim Report, February 2006, p.16 26 Torin Douglas, Podcasts Spread Their Wings, BBC News, 23 January 2006 27 Emily Bell, Daily Podcasts Will Set New Challenges For Journalists And Readers, The Guardian, 25 March 2006 25 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 6
  7. 7. 4. REGULATION Ofcom has no regulatory responsibility for podcasting, which is why this new medium is, according to one commentator, “circumventing the restrictions imposed on traditional broadcasting by industry and government.”28 Apple’s iTunes web site labels its available podcasts “explicit” or “clean”, according to the content. Violet Blue, erotica author, said that podcasting is the perfect medium for people like her who want to distribute popular content that would be illegal to broadcast. “Podcasts are private, anonymous, available and archive-able,” Blue said. “And people don’t have to sit by the radio to listen.”29 Ofcom’s own market research predicted that “once podcasting, with its convenience and potential portability, takes off, it seems reasonable to expect [radio] listening to move away from the home.”30 Ofcom has contrasted the BBC’s ability to forge ahead and develop podcast opportunities for users with current hurdles faced by the commercial radio sector in clearing music rights: “The rate at which broadcasters release content in this [podcast] form may be determined by how successful they are in negotiating distribution rights for this medium. While new technologies are providing listeners with more flexibility and control over their radio listening, the developments could pose potential concerns for rights owners. As users becoming increasingly able to transfer radio programming freely between digital devices, rights holders will be keen to ensure copyright infringement is minimised. For example, commercial radio stations who are already offering podcasts of live shows have to edit out music tracks to meet copyright requirements.”31 28 Annalee Newitz, Adam Curry Wants To Make You An iPod Radio Star, Wired Magazine, issue 13.03, March 2005 Annalee Newitz, Adam Curry Wants To Make You An iPod Radio Star, Wired Magazine, issue 13.03, March 2005 30 Ofcom, The Communications Market: Interim Report, February 2006, pp.16 & 27 31 Ofcom, The Communications Market 2005, July 2005, p.88 29 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 7
  8. 8. 5 BUSINESS MODELS In March 2005, almost all podcasts were still being made available on the internet for free. The evangelisers of the medium, such as former MTV DJ Adam Curry, were adamant that podcasting would attract considerable advertising revenue. “It is totally going to kill the business model of radio,” Curry said. “I just did a tour of Madison Avenue, where all the big brands and advertising agencies of the world are, and they are scared to death of the next generation – like my daughter who is fourteen – who doesn’t listen to radio.” On the other hand, sceptics such as Dave Winer, inventor of the RSS script [Really Simple Syndication] that podcasting utilises, saw the medium purely as a supplement to existing delivery systems. “No matter how you look at it, commercialising this medium isn’t going to make very much money,” Winer said. “Podcasting is going to be a medium of niches, with audiences in the single digits, like e-mail or blogs. Maybe in a few years, maybe six or seven digits, but it will have to sustain interest beyond the hype balloon.”32 Some press reports have been eager to portray podcasting as the new “goldrush”.33 Business Week magazine noted that “a trend is afoot that could transform the $21 billion radio industry. Consider the basics: with no licences, no frequencies and no towers, ordinary people are busy creating audio programming for thousands of others. They’re bypassing an entire industry.”34 Marc Freedman, analyst with The Diffusion Group, said that “podcasting’s noncommercial status is changing as more businesses begin to find creative ways to use this new delivery medium to push audio content.”35 Adrian Smith of venture capital firm Ignition Partners said: “We think there’s a huge market that will allow podcasting to be extended to the two billion wireless phones across the world today. In a pretty short number of years, ringtones have become a huge, multi-billion dollar market, and that suggests podcasting could be a very large market indeed.”36 Dave Winer believed that traditional radio broadcasting business models do not apply equally to podcasting. “The assumption is [that podcasting] must be exactly like every other medium that has come before,” Winer said. “It’s different. It has different economics. Why invent something new if it has to be like everything else that came before?”37 On the other hand, Cameron Reilly, co-founder of the Podcast Network, saw podcasting as a direct descendent of terrestrial radio. “We don’t see podcasting as ‘revolution’, but simply as an ‘evolution’,” Reilly said. “Podcasting is a viable commercial medium because it has the same characteristics of more traditional mediums such as radio, but with the added benefits of time-shifting, portability, user control and global coverage.”38 A 2005 survey of 366 podcast producers found that 61% had no commercial motivation for their podcasts. Of the remainder that adopted some kind of 32 Jo Twist, Podcasters Look To Net Money, BBC News, 25 March 2005 Steve Friess, Podcasting Gold Rush Is On, Wired News, 28 September 2005 34 Heather Green, Tom Lowry & Catherine Yang, The New Radio Revolution, Business Week Online, 3 March 2005 35 The Diffusion Group, Podcasting Users To Approach 60 Million US Consumers By 2010, 15 June 2005 36 Chris Vallance, Podcasts Send Mixed Signals To Radio, BBC News, 13 November 2005 37 Scott Kirsner, Podcasting Faces Growing Pains, Boston Globe, 28 February 2005 38 Thomas Claburn, New iPods Debut And A Marketing Medium Too, Information Week, 23 February 2005 33 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 8
  9. 9. commercial motivation, less than 2% used a subscription business model, while around a third used an advertising model of some type. A substantial proportion was experimenting with non-specific business models, which the report concluded was a reflection of the “uncertainty” of commercial viability in the emerging podcast market.39 5.1 Value Chain The value chain for the podcast business has been defined as:40 CONTENT: original content of podcast show ▼ ADVERTISING: advertising to be included as part of the show ▼ PRODUCTION: pre-production set-up, recording & post-production editing ▼ PUBLISHING: development show notes and publishing via RSS ▼ HOSTING/BANDWIDTH: website hosting & bandwidth to transmit podcast ▼ PROMOTION: marketing of podcast to listeners ▼ SEARCHING: search tools (directories, user communities) for listener use ▼ CATCHING: client-side software to catch podcasts ▼ LISTENING: end user listening devices such as MP3 players 5.2 Costs The cost base for podcasting is:41 Production Equipment – fixed cost estimated to range from $225 to $2,500 Marketing – variable cost from $0 to unlimited Hosting & Bandwidth – variable cost from $0 to $4,000 per month Grant Mason, producer of the “Three From Leith” podcast, explained his costs: “I started with my old PC and a fairly dodgy microphone. You can get free software over the internet that helps you to record and mix the sound, but aside from a broadband connection, that’s really all you need. Obviously, you can buy more expensive equipment when you become more proficient…..”42 39 Peter Chen, Podcasting And Videoblogging: A Production-Side Analysis, Monash University, Australia, November 2005 40 Alex Nesbitt, The Podcast Value Chain Report, June 2005, http://www.digitalpodcast.com 41 Alex Nesbitt, The Podcast Value Chain Report, June 2005, http://www.digitalpodcast.com 42 Adrian Mather, In Pod We Trust As New Breed Of DJ Joins Cast List, The Scotsman, 24 January 2006 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 9
  10. 10. 5.3 Revenues Podcasters have adopted a variety of business models:43 5.3.1 Sponsorship Based on its success in traditional radio, sponsorship is seen as “a throwback to the Golden Age of radio,” according to Steve Rubel, vice president of New York public relations firm CooperKatz & Company. “It’s possible a podcast sponsor might be able to embed a full audio news release right into a programme, provided it is consistent with a show’s content.”44 For example, when Durex sponsored the “Dawn & Drew Show” podcast, it was reported that internet traffic to the sponsor’s web site increased threefold.45 In the US, Virgin Mobile has sponsored podcasts of New York City radio station Z-100’s morning show, Verizon Online has sponsored podcasts of ABC News’ Nightline show, and Chrysler has sponsored Slate’s daily podcast.46 5.3.2 Advertising Opinions vary as to whether advertising is a viable proposition within podcasts. Former IBM media consultant Griffith Jones said: “For radio, people are used to advertising but, when it comes to podcasting, and they have to go through the trouble of downloading it and uploading it into their mobile device, I tend to think people will be less tolerant.”47 The global nature of podcasts requires that advertisers be global, as the producers of podcast “Cinecast” found out when they took sponsorship from local company ChicagoMixer.com. “Twenty per cent of our listeners are from 59 other countries,” said producer Adam Kempenaar, “so something specific to one location didn’t turn out to be the best sponsor for us.”48 The first Portable Media Expo & Podcasting Conference, held in California in November 2005 (described as “the Woodstock of podcasting”), was a watershed event for the commercialisation of podcasting.49 While podcast evangelist Adam Curry was extolling the virtues of advertising in podcasts (“People enjoy hearing about products that they’re interested in”), some participants suggested that advertising content was inappropriate for the medium. “I’m not anti-money or anti-commercials, but people who listen [to] and do podcasts walked away from commercial radio for a reason,” said Aaron Bates, producer of The Big Show podcast. So why are people so eager to return to that failed model?”50 The Conference spawned the first advertising networks in the US specifically for podcasts. In November 2005, Podtrac launched the first such network and signed up 1000 podcast producers in its first two months.51 In January 2006, 43 Sheri Crofts, Jon Dilley, Mark Fox, Andrew Retsema & Bob Williams, Podcasting: A New Technology In Search Of Viable Business Models, [undated] http://firstmonday.org/issues/issue10_9/crofts/ 44 Steve Rubel, Pondering Podvertising Possibilities, ImediaConnection, 8 December 2004, http://www.imediaconnection.com/content/4735.asp 45 Kevin Restivo, Durex Finds New Way To Stretch Advertising Dollars, National Post, 19 May 2005 46 Steve Friess, Podcasting Gold Rush Is On, Wired News, 28 September 2005 47 Michael Logan, Radio Catches The Next Wave, South China Morning Post, 19 April 2005 48 Steve Friess, Podcasting Gold Rush Is On, Wired News, 28 September 2005 49 Steve Friess, Curry In Podcast Convention Clash, Wired News, 8 November 2005 50 Steve Friess, Profits May Rock Podcasting World, Wired News, 14 November 2005 51 http://www.podtrac.com Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 10
  11. 11. Kiptronic offered a competing advertising network, having tested its technology with 200 podcast producers the previous year.52 In March 2006, Podbridge launched an advertising network that it had been testing with clients such as the BBC and Clear Channel since October 2005.53 Podbridge believes that a cost per thousand of between $25 and $40 is justified for advertising in podcast programmes.54 Andy Lipset, co-founder of Ronning Lipset Radio, a partner of Podbridge in its podcast network, said: “Advertisers have become increasingly interested in podcasting but, until now, there hasn’t been a viable solution for them.” Murgesh Navar, Podbridge founder and CEO, said: “For podcasting to become a mainstream media, it needs a business model to encourage content providers.”55 5.3.3 Listener donations Several podcast producers solicit monetary tips from their users and provide facilities for them to pay by PayPal to help defray their costs. 5.3.4 Brand extension Existing broadcasters, such as the BBC in the UK and National Public Radio in the US, have provided podcasts as a way to exploit content generated for their existing delivery platforms. The webmaster of Los Angeles station KCRW explained that the marginal costs of podcasting are minimal: “The money involved in producing the podcasts is no more than the money we spend on our existing online budget for bandwidth and staffing.”56 Simon Nelson, controller of BBC Music Interactive, said: “These technologies can transform the value we deliver to audiences and make our programmes more accessible for both new and existing audiences.”57 BBC director general Mark Thompson explained: “It provides a different way for our licence-payers to access content which they have already paid for and which they could already watch or listen to with existing receiving equipment in their homes.”58 The US Bravo TV channel produces podcasts of its most popular shows because, according to Frances Berwick, senior VP programming & production, “it’s an informational tool that extends our brand and our reach.”59 In the UK, Ofcom noted that “commercial radio stations are experimenting with releasing programming via podcast, thereby extending the reach of their brands and advertising impacts.”60 Virgin Radio’s head of new media James Cridland admitted that revenues from its podcasts of the station’s breakfast show were “still modest”, but that the costs were “almost nil.” Cridland said that 52 Mike Shields, Kiptronic Launches Podcast Ad Network, Adweek.com, 23 January 2006 Katy Bachman, Podbridge Starts Podcast Ad Net, 16 February 2006 Podbridge, Podbridge Launches Podcast Ad Network Utilizing Sophisticated New Audience Measurement And Ad Placement Techniques, Press Release, 16 February 2006 54 Rachel Rosmarin, Who’s Paying For Podcasts?, Forbes.com, 6 March 2006 55 Podbridge, Podbridge Launches Podcast Ad Network Utilizing Sophisticated New Audience Measurement And Ad Placement Techniques, Press Release, 16 February 2006 56 Pat Nason, Is Podcasting The New Radio?, Washington Times, 7 April 2005 57 BBC, BBC To Podcast Up To 20 More Programmes Including Today And Radio 1 Speech Highlights, Press Release, 14 April 2005 58 Mark Thompson, BBC 2.0: Why On Demand Changes Everything, Speech At The Royal Television Society Baird Lecture, 22 March 2006 59 Steve Friess, Podcasting Gold Rush Is On, Wired News, 28 September 2005 60 Ofcom, The Communications Market 2005, July 2005, p.88 53 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 11
  12. 12. the podcast “can reach new audiences for our advertisers that we otherwise couldn’t,” with Mastercard and Orange amongst the first to purchase podcast airtime.61 5.3.5 Paid subscription The majority of podcasts (including all those available on the iTunes web site) are available free, although a few podcast producers have started to implement a subscription model. Brian Glicklich of Premiere Radio Networks, which offers podcasts of the popular Rush Limbaugh show for $50 per year in the US, said: “We chose podcasting as one of our top priorities for 2005, and we are confident it will successfully drive new subscriptions and revenue, making us even more competitive with internet and satellite [radio] services.”62 But Forrester Research analyst Ted Schadler has said that “subscriptions are a non-starter” and predicts that podcasting will eventually diverge into two types of content: mass-market programming that uses podcasting to attract listeners and advertisers; and niche programming produced noncommercially.63 5.4 Future implications The development of podcasting will undoubtedly have an impact on terrestrial broadcasters, though the extent is as yet unknown. National Public Radio VP Maria Thomas said that 18 million downloads of NPR programmes have been made since its podcasting began in August 2005, but admits: “The question we’re asking ourselves is: is the business model of public radio prepared for a future where geographic boundaries don’t exist?... I don’t have a silver-bullet magic answer.”64 An unresolved issue for advertisers is that the user’s complete control over their listening to a podcast could lead to deliberate avoidance of commercials. Roger Parry, chairman of Clear Channel International, said: “You have exactly the same sort of issues that you have with a Sky Plus box. The conventional thirty-second spot is threatened. The more power you have to listen to something under your control, the less likely you are to sit through [an advertisement].”65 Although there is presently no easy way for podcast producers to monetise their content, it is expected that a supporting value chain will emerge from primary drivers such as advertising and subscriptions. As with other internet models, monetisation and a new business model will likely follow increased uptake of hardware and greater usage of software related to podcasts. The supporting value chain could become:66 61 Paul Durman, Will Podcasts Kill The Radio Ads?, The Times, 7 August 2005 Maven Networks, Premiere Radio Network Partners With Maven Networks And Akami Technologies To Deliver Podcasts Of “The Rush Limbaugh Show”, Press Release, 6 June 2005 Randy Dotinga, Radio Sets Eyes On Podcast Profit, Wired News, 11 June 2005 63 Charlene Li, Getting Real About Podcast Adoption, online blog, 25 August 2005 64 Steve Friess, Podcasting Rolls NPR Fund Raising, Wired News, 5 April 2006 65 Paul Durman, Will Podcasts Kill The Radio Ads?, The Times, 7 August 2005 66 iPODCASTle, Demystifying Podcasting: A Market Analysis For The Businessperson, July 2005 62 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 12
  13. 13. ADVERTISERS – create advertising content, decide on target strategy ▼ AD BROKERING & ACCOUNTING – connect advertisers with podcast producers, price advertisements, handle accounting & billing ▼ AD TRACKING + SUBSCRIPTION MANAGEMENT – track impressions in sponsored podcasts, track subscriptions in paid-for podcasts Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 13
  14. 14. 6 AUDIENCE MEASUREMENT There is great uncertainty as to the size of the audience for podcasts, and considerable differences of opinion about how quickly the market will develop, with US estimates varying between 20m and 80m podcast users by 2010.67 Charlene Li of Forrester Research said that “measurement is still really hard to do” and that “counting podcast downloads is a dubious way to measure usage” because not all downloads are listened to.68 Sarah Prag, a senior project manager for the BBC podcast trial, said: “One of the challenges with podcasting is that there are no audited or reliable reporting mechanisms.”69 A research report by eMarketer acknowledged that volatile growth in podcasting had made it difficult to predict where the figures for podcasting will end up.70 The conflicting evidence is itemised below. 6.1 U.S. Research Research by the Pew Internet & American Life Project in April 2005 found that:71  In 2005, 29% of owners of MP3 players (6m) had downloaded podcasts Research by The Diffusion Group in June 2005 found that:72  In 2004, 15% of owners of MP3 player (0.8m) had listened to podcasts  By 2010, 75% of owners of MP3 players (56.8m) are predicted to use podcasts Research by Jupiter Research in August 2005 found that:73  In 2005, 7% of internet users had downloaded or listened to a podcast regularly during the previous year Research by CLX in August 2005 found that:74  In 2005, 15% of respondents listened to podcasts Research by Bridge Ratings in November 2005 found that:75  In 2005, 4.8m adults (1.6% of adults) had downloaded a podcast (up from 0.8m in 2004)  Less than 20% of users listened to podcasts on MP3 players  By 2010, 45m users will have downloaded a podcast Research commissioned by Podtrac in December 2005 found that:76  11% of the population had ever listened to a podcast 67 eMarketer, Podcasting: Who’s Tuning In?, March 2006 Jonathan Fildes, Podcast Numbers Cut Through Hype, BBC News, 10 April 2006 Jonathan Fildes, Podcast Numbers Cut Through Hype, BBC News, 10 April 2006 70 Mike Shields, Study: Podcasting To Grow Ads, Adweek.com, 28 February 2006 71 Pew Internet & American Life Project, Data Memo: Podcasting, April 2005 72 The Diffusion Group, Podcasting Users To Approach 60 Million US Consumers By 2010, Press Release, 15 June 2005 73 Lisa Vaas, What Blogs, Podcasts, Feeds Mean To Bottom Line, eWeek.com, 25 August 2005 74 CLX, Podcasting Popularity More Hype Than Reality, Press Release, 16 August 2005 75 Bridge Ratings, Podcasting To Hit Critical Mass In 2010, Press Release & Presentation, 12 November 2005 76 Podtrac, Men Are Listening To Podcasts But Women Are Getting Hooked Too, Press Release, 27 December 2005 68 69 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 14
  15. 15. Research by eMarketer in March 2006 found that:77  In 2006, 10m US adults had ever downloaded a podcast  By 2010, 50m US adults would have ever downloaded a podcast Research by Forrester Research in April 2006 found that:78  In 2006, 700,000 households (3%) in the US used podcasts  By 2010, 12.3m households would use podcasts The Forrester research also found that only 1% of online households in North America regularly downloaded and listened to podcasts.79 These figures were considerably lower than other estimates. Analyst Charlene Li explained: “It doesn’t diminish how powerful or interesting it is, but people need to be realistic about how many people are listening.” Forrester believed that only about a third of MP3 Player owners will listen to podcasts on those devices by 2010. Its report cast doubts on whether podcasting creates a level playing field between corporate media companies on one hand, and amateur content on the other. The research found that most users were selecting podcasts of existing content, such as broadcast radio programmes, rather than unfamiliar content. 80 In the most recently published market research in April 2006, Arbitron found that:81  27m people aged 12+ (11%) had listened to a podcast  21% of persons aged 12 to 17 years old had listened to a podcast 6.2 European research In the European market, Forrester Research found that in March 2006:82  2% of online users had listened to podcasts during the past three months In the UK, market research by BMRB in February 2006 showed that:83  10% of the adult population have downloaded a podcast in the last six months  17% of adult internet users have downloaded a podcast during the last six months (28% of owners of MP3 players)  24% of adult internet users intend to download a podcast during the next six months (38% of owners of MP3 players)  23% of all adults (10.8m) own an MP3 player  9% of all adults (4.2m) own an Apple iPod  a further 4.3m adults are likely to buy an MP3 player in the next six months 77 eMarketer, Podcasting: Who’s Tuning In?, March 2006 eMarketer, Podcasts: Is Anyone Listening?, 11 April 2006 Charlene Li, Forrester Podcasting Report: Just 1% Use Podcasts, online blog, 5 April 2006, http://blogs.forrester.com/charleneli/2006/04/forrester_podca_1.html 80 Brian Morrissey, Podcast Listeners Still Few, Adweek.com, 6 April 2006 81 Arbitron, The Infinite Dial: Radio’s Digital Platforms, Report, 2006 82 Forrester Research, The European Podcast Consumer, 2 March 2006 83 BMRB, Podcast Data, press release & accompanying presentation, 15 March 2006 78 79 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 15
  16. 16. BMRB marketing director Steve Cooke said that the findings “suggest that up to 7.9 million adults could be downloading podcasts in the next six months, which represents a massive opportunity for advertisers and media owners alike.” 6.3 Audience issues Two issues have clouded the measurement of audiences for podcasts:  Downloading does not equal listening. In March 2006, research by Bridge Ratings showed that 80% of podcast downloads are not transferred to a portable media player, but are either consumed directly on a personal computer or simply discarded without listening.84 The tendency of users not to listen to podcast downloads was confirmed by research by US public radio station WTMD-FM that found that only 21% of users listened to every podcast they downloaded, while only 37% listened to most of the podcasts they downloaded.85  The term “podcast” is not completely understood by the public. Arbitron found that “the public’s understanding of podcasting is still somewhat mixed” with considerable confusion existing “about the differences among podcasting, internet broadcasting and downloadable music” as well as “streaming, real-time programming or MP3 music”.86 Noting some of the widely disparate estimates of podcast listening, London communications agency Audacious has argued that podcasting is “all about the niche, not the numbers” and “provides a fantastic opportunity to provide niche content to highly focused groups or individuals.”87 One report argues that the assumption that there exists a linear correlation between the uptake of MP3 player ownership and the growth of podcasting audiences may be flawed. It expects to see a lag in the growth of audiences for podcasts, unless there are deliberate efforts to recruit new audiences from outside the existing user base.88 84 Colin Dixon & Michael Greeson, Recasting The Concept Of Podcasting: Part 1, 23 March 2006, http://news.designtchnica.com/talkback109.html 85 Stephen Yasko, Stephen Yasko On Podcasting, 16 November 2005, http://heartsofspace.typepad.com/spatialrelations/2005/11/stephen_yasko_o.html 86 Arbitron, The Infinite Dial: Radio’s Digital Platforms, Report, 2006 87 Audacious Communications, Podcasting: The Niche Not The Numbers, 10 April 2006, http://www.audaciousonline.com/blog/ 88 Peter Chen, Podcasting And Videoblogging: A Production-Side Analysis, Monash University, Australia, November 2005 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 16
  17. 17. 7 VALUE OF THE MARKET One report estimated that, in the US market, podcast producers have spent between $140m and $7.2bn on software, hardware, hosting fees and marketing, while podcast users had spent between $224m and $11.2bn on hardware that enabled them to listen to podcasts ($200m to $10bn) and on subscriptions to podcasts ($24m to $1.2bn).89 PQ Media found that podcast advertising in the US was valued at $3.1m in 2005 and was projected to grow to $327m by 2010.90 eMarketer predicted that the US podcast advertising market was worth $80m in 2006, would be worth $150m in 2008, reaching $300m by 2010. The report’s author said that advertising in podcasts “is in its infancy, to put it mildly” and that “podcasting is not set to become a new mass-market venue, at least for the next half-decade”.91 89 iPODCASTle, Demystifying Podcasting: A Market Analysis For The Businessperson, July 2005 PQ Media, New PQ Media Report: Blog, Podcast, RSS Advertising Grow Fastest Among Alternative Media, Surging 198% In 2005 And Forecast To Grow 145% in 2006, Press Release, 11 April 2006 91 Mike Shields, Study: Podcasting To Grow Ads, Adweek.com, 28 February 2006 Rachel Rosmarin, Who’s Paying For Podcasts?, Forbes.com, 6 June 2006 90 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 17
  18. 18. 8 BENEFITS 8.1 Consumer Benefits The user derives the following benefits from a podcast:92  The ability to time-shift an audio or video programme  Space independence in determining where the programme is consumed  An alternative source of programming that does not contain as much advertising content as commercial terrestrial radio  Relief from perceived frustrations with the homogenous programme content of terrestrial radio stations  Personalised media content that meets personal needs more directly than traditional media through substantial fragmentation of available options Edison Media Research noted that podcasts can offer “choosier listeners” what they want, when they want it without, for example, having to wait for the 11pm Sunday show that is the traditional slot for marginalised minority interests on terrestrial radio.93 8.2 Industry Benefits In the public sector, BBC podcasts are rights-protected and time-limited, allowing users to listen to a podcast an unlimited number of times during the one-week period following its download. The BBC argues that the ability of podcasts to provide users with a “catch-up service” for programmes they missed helps them “to offer even greater public value to licence fee payers”.94 In the commercial sector, existing broadcasters see podcasts as a way to extend their content to new audiences. “Bumping into us on a non-traditional platform is very important to us,” said Virgin Radio’s James Cridland. “That audience is maybe people who don’t [usually] listen to Virgin Radio.”95 Benefits for standalone podcast producers are more difficult to determine because the business model is, as yet, relatively underdeveloped. 92 Sheri Crofts, Jon Dilley, Mark Fox, Andrew Retsema & Bob Williams, Podcasting: A New Technology In Search Of Viable Business Models, [undated] http://firstmonday.org/issues/issue10_9/crofts/ 93 Marc Fisher, Podcasting: A Made-To-Order Change For Listeners, And Perhaps Stations Too, Washington Post, 10 Apriul 2005 94 BBC, BBC To Podcast Up To 20 More Programmes Including Today And Radio 1 Speech Highlights, Press Release, 14 April 2005 95 Jo Twist, Radio Has Its Eye On Podcasters, BBC News, 23 September 2005 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 18
  19. 19. 9 CONCLUSIONS In early 2005, even before podcasting achieved improved public visibility through its inclusion within the iTunes online music store, one commentator said: “When I look at the radio on my kitchen counter these days, all I can think about is change – how much radio hasn’t changed, and how much it needs to.” He noted that young people “are getting conditioned to consuming any media they want, whenever and however they want it” and suggested that “what podcasting represents is that consumers want internet-based radio so they can listen when and how they want.” He predicted that podcasting would: 96  “reach far beyond the boundaries of a single geographic region that will broaden the appeal to advertisers”  produce “specialised programming that might not work on a traditional broadcast station”  “cater to narrow interests that would not make commercial sense as traditional broadcast shows”  “reach wider audiences [globally] and attract the attention of niche advertisers” Podcasting can be seen as the starting-point of an enhanced content delivery system to a wider range of mobile devices. One report said that “it’s possible to imagine paying monthly fees to hear programming on-demand on the phone, PC, or in the car. Listeners could buy a song they hear on the radio with the click of a button. Companies could sell subscriptions and place ads inside customised traffic information, weather reports, or sports tickers.”97 In the UK market, the BBC has dominated the distribution of podcasts because it “spends ten of millions making ‘real’ programmes that can have a considerable shelf-life”, according to media commentator Ray Snoddy. He said that “commercial radio will have to give far more thought to making sure it offers more excitement than an iPod selection of the latest tunes” if it wants to attract interest in its podcasts.98 The trend away from traditional radio and towards internet-delivered content streams or podcasts is already emerging in the US. Research by Bridge Ratings found that 54% of 12 to 24 year olds preferred to listen to music delivered over the internet, compared to 30% who preferred music from terrestrial radio.99 Podcasting is making an important contribution to these changing preferences. Podcast activity on the internet continues to expand at an exponential rate. Aggregator Feedburner.com announced in April 2006 that subscriptions to podcasts available from its web site had doubled within the previous six months to 1.6 million. It estimated that as many as 149,000 podcasts now existed on the worldwide web.100 96 Arik Hesseldahl, Radio Must Change. Here’s How, Forbes, 27 May 2005 Heather Green, Tom Lowry & Catherine Yang, The New Radio Revolution, Business Week Online, 3 March 2005 98 Raymond Snoddy, Raymond Snoddy On Media: Pod People Will Decide Radio’s Future, Marketing, 17 August 2005 99 Bridge Ratings, How To Make Music Radio More Appealing To The Next Generation, Press Release, 2 December 2005 100 FeedBurner.com, Podcasts Outnumber Radio Stations Worldwide, Press Release, 21 April 2006 97 Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 19
  20. 20. The measurement of podcast audiences remains the biggest challenge to the medium. The Telegraph’s podcast editor Guy Ruddle said: “…..without proper measurement, how are we ever going to get people to buy into this in a big way?”101 Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of experience in the broadcasting industry, having held senior management and consultancy roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at http://www.grantgoddard.co.uk 101 Jemima Kiss, Telegraph’s New Podcast Editor Mulls Over Audio Challenges, 2 February 2006, http://www.journalism.co.uk Audio Podcasts And The Market For Podcasting ©2006 Grant Goddard page 20

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