Can Podcasts Make a Profit?
WHY YOU SHOULD CARE
Because AM/FM radio could get a surprising upgrade.
By Sanjena Sathian
Happy Holidays from OZY! Over the next few days, we’re bringing you some of our best ideas, profiles and trends from 2014. We’ll see you back, live and kicking, on New Year’s Day!
Despite his status as radio celebrité and my status as radiophile, I am not really starstruck to hear the voice of Alex Blumberg coming out of my phone. His is a familiar one, like all those NPR guys: soothing, explanatory, a little geeky, friendly. It must be in the water.
Blumberg is an erstwhile producer at the popular storytelling show This American Life and a co-creator of the podcast “Planet Money” — an econ-101-type show whose genesis was a 2008 TAL episode explaining the financial crisis. He’s a little harried when we speak. It’s understandable. He’s a public radio guy — a former teacher and social worker, a liberal arts grad — who’s caught startup fever. And he doesn’t entirely know what he’s doing.
This fall, along with another former radio reporter, Matthew Lieber, Blumberg launched Gimlet Media, a for-profit digital podcasting company that’s trying to bring old-school radio storytelling into the high-tech age. The first show is a podcast, downloadable for free but supported by advertising, called, felicitously, “Start-Up.” It’s a quirky, meta concept — like a reality TV show without the drunken sobs and confessionals, the show is tracking Lieber and Blumberg’s own progress as a growing startup. Episode 1: The 47-year-old, bumbling Blumberg fails to pitch a billionaire.
Often what I want as a radio producer … and what I want as a guy starting a business are a little bit different.
If you’re wondering why it’s called Gimlet, see episode 5, where, in a tidy 25 minutes, they relay — with recordings of actual conversations — their struggles to name their new company, and instead rely on a naming firm. The odd solution: a 1950s cocktail.
“Every time I’m about to start a meeting or something, I’m like — oh crap, I should be recording this,” Blumberg says. How very Big Brother.
This story was originally published on Nov. 10, 2014; Gimlet has since launched a second show, called “Reply All,” which is “about the Internet.”
Lieber got his start freelancing in New York and worked in radio for a decade before hitting business school and the consulting world. When the 35-year-old met Blumberg through friends, they immediately clicked (see episode 3); Blumberg was already en route to making the podcasting company happen, but (per episode 1) he had no idea how to raise money, write a business plan or pitch.
As for Blumberg? Though, today, his voice is one of the most recognizable on the radio, Blumberg got his first gig as a 30-year-old administrative assistant at the then-startup This American Life. Switching careers after a decade of teaching and social work, the Ohio native learned from fly-on-the-wall observation. After two years, he left to freelance, borrowing $10,000 from his parents — which he refers to as “startup capital.” When he returned to This American Life at age 33, he did so as a producer — one of the most desirable jobs in journalism.
Based in New York, the Gimlet guys — who present like your average skinny hipster journos — say they’ll produce about six shows on a variety of topics on money, lifestyle, culture and more in the first year. On November 10, as of noon EST, there was a twist. The seventh episode** of the podcast (which they finished editing on hustled deadline the Friday before) … asked their fans for money. Which sounds not unlike those frustrating public radio pledge campaigns. But this time, they’ve gone high tech. They’re trying something called equity crowdfunding. On standard crowdfunding platforms like Kickstarter or Indiegogo, anyone with means and desire can give money and get something back. In this case, unlike those other crowdfunding platforms, what they get back isn’t a T-shirt or a pair of glasses or a share in a nebulous potato salad campaign. Rather, buyers get a piece of the stock.
More on equity crowdfunding:
- Its genesis: the 2012 JOBS Act (Jumpstart Our Business Startups). It upped the number of investors a single company could have and made the equity strategy possible.
- The goal: to democratize fundraising. Investors have to be accredited in the U.S., which generally limits the pool of possible investors to the top 1 percent. Now? About the top 5 percent to 10 percent of the population can buy their way in, estimates NYU Stern School of Business professor Anindya Ghose.
- The trouble ahead: The Securities and Exchange Commission has yet to get out of the way of the law. “It hasn’t really taken off the way it should have,” says Ghose. He guesses just a “handful” of companies have tried it out.
- And another wrinkle: There’s stigma in crowdfunding. Many bigwig investors won’t “touch with a barge pole any entrepreneur who’s been funded by the masses,” Ghose says. Blame snobbery.
- What lit a fire: Oculus Rift, the virtual reality company, began as a Kickstarter campaign. When Facebook bought it for $2 billion, original Kickstarter supporters weren’t too happy.
If I were a cynical sort, I’d say the show might be just about the best PR kit anyone’s ever created.
We don’t know if any of this hype is working yet, though. The company started with a self-defined $10 million valuation (see episode 6), which one investor, Blumberg says on the podcast, called “aggressive bordering on egregious.” But today? A few accomplishments: They’ve created a quirky style of advertising (Blumberg does his ads in comically “transparent” style, interviewing his sponsors and even revealing how much they’re paying him per episode) and wooed high profile investors like Marco Arment — former CTO of Tumblr — and Chris Sacca, an early Twitter buy-in. They quickly neared 200,000 listens per episode.
Did the equity crowdfund help? Maybe — though it wasn’t revolutionary, “it’s a natural next step” beyond the familiar Kickstarter model, says Robert Hendershott, an associate professor of entrepreneurial finance at Santa Clara University. And one can’t help but think it sounds a bit like what Blumberg did at his last show, “Planet Money.” They called it the T-shirt project, and it explained the “life cycle” of a T-shirt. Listeners who kicked in $25 could get one of the tees that the show saw made.
Business acumen aside, “Start-Up” is a hugely fun listen. Probably because Blumberg is actually doing what he does best: not starting a business, but rather explaining basic economic or financial principles — even if he’s new to them. While he tries to teach listeners about starting up, Blumberg takes the audience into some intimate spaces: In the third episode, he and Lieber have an uncomfortable conversation when Lieber’s considering coming on as co-founder. Lieber’s spent months doing friendly consulting pro bono for Blumberg — and is insulted when Blumberg offers him just a 10 percent stake in the company. Blumberg himself thinks the number is low, but it’s what smart financial friends tell him to say, and he’s afraid of seeming a dunce. The two leave things awkwardly, and yet they still agree to each take home a recorder, leaving it running while they speak to their wives about the disagreement.
It’s unclear to me how anyone sees great returns in the public radio space. But if somebody did figure it out, we’d be thrilled.
John Rose, senior partner, Boston Consulting Group
“Often what I want as a radio producer … and what I want as a guy starting a business are a little bit different,” Blumberg, who spends episode 6 grappling with the artist vs. entrepreneur labels, reflects. “You need drama, and you need tension — which means that you need some failure for a good story.”
Despite the ups and downs, it’s a good time to be a media company — or at least as good as it may get. There’s been a digital boom, but plenty of media companies are probably overvalued; John Rose, a senior partner focused on media with the Boston Consulting Group,* says “somebody’s wrong somewhere” when it comes to the value of the whole industry.
If a podcasting company is to have success, Rose — who is also on the board of WNYC, an NPR affiliate — says it’ll lie in creating an ad network to help everyone in the space. He adds: “It’s unclear to me how anyone sees great returns in the public radio space. But if somebody did figure it out, we’d be thrilled.”
Gimlet’s far from figuring it all out. As of December, Lieber says they’ve raised just $1.5 million in seed funding. The equity crowdfund reaped them $275,000; Hendershott estimated they’d need to make at least half a million for the attempt to be worthwhile. One investor even wonders aloud on the podcast whether Blumberg’s hungry enough to succeed. He doesn’t seem to know himself.
Ultimately, Gimlet and “Start-Up” are experiments — just like much of this tech boom itself — that may end up more as cocktail party anecdote than as a successful business. But there’s only one way to find out: Stay tuned.
* Lieber used to work at BCG and WNYC. Rose has never advised Lieber or Blumberg on Gimlet Media.
** Correction: The original version of this story misstated which episode of “Start-Up” aired on Nov. 10; it was the seventh.