How Do Podcasts Make Money?

What is a podcast? According to the latest studies about 64%
of Americans know the answer. And if you’re one of the 124 million Americans
that’s listened to one, you’ll know it’s basically just a fancy word for a pre-recorded
audio series distributed over the internet. The term itself was invented by a BBC reporter
by combining the words “iPod” and “broadcast”. And the first podcasting apps
came to smartphones in 2005. Later that same year, the most popular podcast was getting over 4.5 million downloads. And by 2014, the top podcast
would get the same amount of downloads in half the time.

And that kind of growth is pretty indicative
of the industry itself. It took podcasts 8 years to
reach 1 billion total downloads. And within 5 years, that
number has gone from 1, to 50 billion. There are over half a million podcasts out there. And the most lucrative among them can make $70,000
or more an episode off ads. But in reality only a small number of podcasts
are lucky enough to make any money at all. But who is making money in podcasting? The answer’s more complicated than it seems. Podcasts themselves make
money the same way all media does. They sell ads. Those ads are sold on a CPM
(or cost per thousand) basis.

And the industry average seems to be between
$20 and $50 per thousand listeners. Even at that relatively low cost, advertisers
still only put $316 million into podcasts in 2017. Which is tiny compared to the $17 billion
spent on radio or the $68 billion spent on T.V. But the figures are all relative. Because while broadcasting TV and radio is
expensive…distributing audio files on the internet is essentially free. Podcasts are free to host, free to post and, in most cases, they’re free to listen to. But they’re never free to make. Because regardless of what kind of podcast
you’re making – you’re going to need a microphone. And microphones aren’t cheap. That’s why there’s a bunch of pro-sumer
audio companies that popped up around the same time podcasting did. And they’ve done incredibly well for themselves.

Sales of the most popular
USB microphone, grew by 89% in the last three years making $55 million in 2017. And they aren’t the only ones taking advantage
of the trend. The microphone industry, as a whole, is expected
to reach $1.8 billion by 2020. And the cost of a microphone is just the minimum
buy-in for podcasters who want to produce their own show. But a lot of people getting
into podcasting don’t have the technical know-how to make one themselves. And that’s extremely beneficial to two other
kinds of businesses. First is recording studios – who usually rent
by the hour and allow you to produce a high quality podcast without the upfront cost of
buying all the equipment or hiring the engineers to pull it off. And that industry has seen an increase of
more than $100 million in the last three years. And then there’s companies that specialize
in podcast production. They’re dedicated entirely to making high
quality podcasts for other people or companies. And basically every big
name or branded podcast uses one.

Which has opened up a whole new avenue of
advertising, where a company can become the content instead of the ad. Which brings in money to both the company that pays for the podcast and
the company that makes it. There are a lot of podcasting apps that improve
the listening experience in different ways. And there are a lot of developers making money
from creating them. On the creator end there are a handful of
programs that allow users to easily monetize their podcasts with intuitive ad placements. Which makes it incredibly easy for podcasts
with an audience to start making money from ads. So podcasting is becoming a way to make a
living for both podcasters and their fans.

The world of podcasting and podcast platforms
is always expanding. Which is great because the more big companies
invest in these platforms the more opportunity there is for people to become career podcasters. And that matters. Because podcasting, at its core, is about sharing. Sharing passions and sharing skills, whether
that skill is making hardware, making software, making products, or making podcasts. And it’s about sharing conversations, ideas, and stories. And, in some small way, about sharing profits..

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