Podcasting: An Emerging Industry? (Part 5)

The past few weeks, I’ve been looking at the genesis of “podcasting” through an economic lens. This week, I’m turning to look at the current state of the podcast market. At a first glance, the podcast industry seems to follow the “public good” paradigm. Economists define a public good as “A product that one individual can consume without reducing its availability to another individual and from which no one is excluded.”. Although there is some marginal cost associated with digitally distributing the sound files to a listener, this cost is very small. Except for the largest operations (Ira Glass claimed in 2011 that WBEZ spent $120,000 on digital distribution), most podcasts can rely on free or low-cost hosting solutions.

When you think of media, particularly of the audio format, that exists in the “public good” economic space, you probably think of public radio. George Bailey published an article in the Journal of Broadcasting and Electronic Media in 2004 examining trends in listener support of public radio stations in context of public radio as a “public good.” It turns out that the “public good” model describes public radio very well. He pulls together empirical evidence to support that claim.

Brunner (1998) also sought to empirically test the public good theory with reference to public radio. He explained: “Economic theory hypothesizes that when a pure public good is voluntarily provided, incentives to free ride increase with the number of individuals consuming the good” (p. 587). He suggested that since we cannot prevent anyone from listening, public radio would be an ideal test case of the free rider hypothesis. In his study, Brunner found that the proportion of listeners who contribute to a public radio station decreases as the size of audience increases, supporting the hypothesis.

Although, to my knowledge, similar metrics supporting classification of podcasts as a pure public good have not been tabulated, we have established that the marginal cost of podcast distribution is basically negligible. Therefore, its not terribly surprising that podcasts are (almost universally) free to download for listeners. The “cultural” norms of the medium and the currently existing distribution systems (particularly Apple, the elephant in the room) are very resistant to direct monetization of podcasts. Like public radio,  many shows depend on a combination of underwriting funding (i.e. advertising) and many also solicit donations from their listeners.

I think that one interesting observation from Bailey’s article sheds particular light on the podcast industry. As part of his analysis of the interplay between the financial infrastructure behind public radio and its programming choices, Bailey posits that increasing reliance on donations created a need to generate “public support” (i.e. a generous donor pool), which was pursued through programming adjustments.

Focused programming means a coherent format that is designed for the needs of a particular target audience, rather than a crazy-quilt of various programs—each aimed at a different audience. Back in the 1970s, the crazy-quilt schedule was common, making listening difficult even for dedicated listeners. Listener-sensitive schedules began to appear in the 1980s. Based on a survey of program directors, Giovannoni (1992) predicted that the typical public radio station would offer fewer formats, a process that he called format focusing. That term was picked up by Stavitsky (1994), who noted that consistency of appeal had become the motto of public radio program directors.

Although, of course, there are a few exceptions, most podcasts (especially the most popular/successful) have an almost singular subject matter and audience. In a way, podcasting can be viewed as a logical extreme of the movement against the “crazy-quilt” model. Although a great diversity of podcast programming exists, each individual podcast must maintain strict discipline in its format to directly “meet the needs of a particular target audience” and bring in donations. Perhaps the pick-and-choose distribution model of podcasting that allows for greater audience targeting is an important reason why the medium is condusive to a donor-based model.

Next week, we’ll continue the conversation on podcasts, likely looking at specific strategies used to appeal for donations. In the meantime, I would recommend taking a look at the article on public radio as a public good I linked to. There’s a lot of interesting stuff in there that I wasn’t able to discuss in this article.

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