The Classic Podcast Revenue Model Is Broken

When considering podcast revenue, picture this. Imagine if every new business owners started a business with the same goal as podcasters. For every 1,000 people that came into contact with their business they would earn $20.00. How many of these businesses would you expect to thrive, or even survive? Not many, right? It’s estimated that

podcast revenue model

When considering podcast revenue, picture this. Imagine if every new business owners started a business with the same goal as podcasters. For every 1,000 people that came into contact with their business they would earn $20.00. How many of these businesses would you expect to thrive, or even survive? Not many, right?

It’s estimated that approx. 90% of podcasters have trouble generating podcast revenue, and lose money producing their podcast. That’s a terrible metric; one that needs to be improved.

Podcasting is growing in both listeners and podcasters, so competition is getting fierce. One thing we know about is competition. When it goes up, prices go down. In fact recently the CPM (cost per thousand downloads) dropped to $20, making it even harder for podcasters to earn a living.

To run a successful podcast,  you will need to take a more strategic approach. You need to plan and design a better strategy than the rest of your competitors.

Sponsorship Myth

Have a look at The Johnny Lee Dumas Entrepreneur On Fire case study. As the proverb says, “one swallow doesn’t make a summer”. This cliché illustrates an important point. Just because something worked for others, don’t assume it’s the norm or a general base line. In fact, it might be the outlier.

I’ve listened to Johnny’s show for several years now. It’s fun and interesting. He’s refreshingly transparent about his earnings from podcast sponsorship revenue. But, the devil is in the detail. What tends to get overlooked or glossed over are two critical facts.

First, he did something that almost nobody else was doing. He broadcast seven episodes a week, which gave him a huge multiplier.  Each subscriber was multiplied by seven. So if he had 1,000 subscribers, he would earn 7 x $20pcm, or $140 per adroll. That’s a game-changing strategy.

Second, he “invested in loss”. He deliberately set aside all other kind of work or revenue generating activity. This way, he could dedicate everything into the success of his show. This strategy worked because of the large number of episodes per week, and the 100% focus. How many other podcast hosts have the time, energy or resources to replicate this formula?

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A recent case study about the content platform Spreaker illustrates this point beautifully. Mike Russell gives a demo on how this works. You can watch how he makes $0.20 from his audience. The math of 200 listeners a day equates to $3 per day. You can also watch how these guys fumble their way through attempting to create an anchor adroll.

It’s Just Pizza Money

For the vast majority of podcasters, working on the $20 per 1,000 subscribers, the end result will be pizza money. It's not a viable business model; kinda like making a business plan written on a napkin.

Sure, we’ve all heard the famous stories of writing out a business model on a paper napkin over a few drinks in a bar. It worked for Groupon (kind of). But the idea of starting a venture that will cost significant time and money without being strategic, is dumb. Even if the cost is low, your time is valuable. Would doing another activity help you to get customers in the door?

Making podcast revenue might mean a lost opportunity elsewhere. You’ll need to think more strategically. Following the herd and making assumptions stops people from thinking differently. It keeps people from finding alternative ways to leverage their podcast, or ensuring that it becomes a business asset, not a drain on their resources.

Alternative methods

A great podcaster has two goals.

  1. serve their audience.
  2. serve their business/brand.

In that order.

Podcasters usually have a passion, almost an obsession for their niche. A podcast is a vehicle to share their expertise (or guests) and their unique experiences, which helps educate their audience, building authority and trust.

The natural progression for a business podcast is to offer the audience the chance to work closer with you, in some form. You offer the ability to add context to the content, to take them deeper using your knowledge and industry insights. You're presenting them with a short-cut for their learning curve.

The audience want knowledge. It’s why they listen. So package up your most valuable knowledge, and offer this to your fans.

Test Your Assumptions

To see if you can create the podcast revenue you want, you should work out the following.

  • How long did it take me to get my existing number of subscribers?
  • What is the projected growth rate of my audience?
  • What is it costing me in time and money? (Be honest with yourself.)
  • Based on this information, when will I reach my BEP – breakeven point? Reaching at least a BEP is like the gamblers prayer – “Lord just let me break even tonight”

If these numbers don’t stack up, then ask yourself, “have I considered all the alternatives?”

Lets face it: the number of subscribers is the wrong metric for many podcasters. You have to decide if you are going to worry about chasing subscribers, or creating a service to offer. It doesn’t matter which, but trying to do both will kill your profitability. Chasing download numbers won't help your podcast revenue.

If you decide to service your audience, work out what they really need and deliver more of this is with some kind of paid offer. Done well, that will get you a far better ROI. Not just a return on investment, but a better Return On Intellect.™

Ronan Leonard helps service employed service professionals leverage their expertise to create a higher Return On Intellect™. He specialises in helping you finding your audiences biggest pain points and teaches people how to monetize their services.