The Podcast Business Model

Joshua Gans
5 min readApr 26, 2019

This week saw the launch of a new podcast startup, Luminary. With $100 million in the bank and podcasters like Trevor Noah and Adam Davidson signed up, they are hoping to become the Netflix of Podcasts. To access that content costs $7.99 but the content is ad-free. They had a post on Twitter proclaiming that “podcasts don’t need ads.”

This is a natural evolution of the podcast model. Podcasts began as free content for, you guessed it, iPods. The idea is that the content could be ‘cast’ to the ‘pod.’ In fact, today, podcasts may be the only linguistic use of the ‘pod’ term left (well if you don’t count Tide). Those podcasts then got ads and then it turned out that the ads were effective which was great news for startups like Gimlet that had built themselves off a long tradition in audio content, including innovative ads, brought about by This American Life. (Gimlet was recently acquired by Spotify for a purported $200m).

But what is a podcast? As John Gruber points out, they are just audio shows to most people. It is just that shows used to be platform specific. They were on a particular radio station and, in the Internet era, Sirius XM, Audible and, more recently, Spotify. But there was a key technological choice that Apple made when it launched podcasts for the iPod. Podcasts were not platform specific. They were more like blogs. They were published to the Internet and hosted by their providers. They were then identified by RSS feeds. If you had a podcast player, you wouldn’t notice this stuff but the point was you could get a podcast player from anyone. In other words, what Apple had done really was created an open web for audio content. And with that, they created all of the challenges of developing a business model to fund that content on the open web.

Luminary is a response to all of that. On the plus side, they have a ton of unique content that may well justify a monthly subscription for some people. On the negative side, everything else they are doing is a hot mess. Their podcast player allows you to listen to ‘most’ podcasts available on the open web. (I say most because some important ones opted not to be made available for Luminary — ironically, self-destroying the open claims of podcasters). But those podcasts all have ads. Their podcast player is bare bones. No features and you have to trigger things to have podcasts downloaded which I discovered when wanting to listen to one on the subway. My spouse who listens to at least 6 hours of podcasts a day while coding and other stuff, summed it up: “I would put up with their shitty app if I could listen without ads but I am darned sure not going to pay for Trevor Noah’s most marginal content.”

What is Luminary’s problem? The answer is that their strategy is not well thought out. They give all of the appearances of starting with the notion ‘Netflix for Podcasts’ and then jumping to the later Netflix model to start that (where Netflix spends $$ on its own content) rather than where Netflix started which was streaming older ad-free content.

Where should they have started? They should have started with an idea — “we are going to bring expensive to produce audio content to the Internet” — and then asked who their customers would be, what technology choices they would make, what is the core of their business and who precisely will they compete against?

We don’t know who Luminary’s customers are. You might think it is heavy podcast users but, in that case, you want to double down on ‘ad-free’ because if those people have to listen to another Squarespace ad …. Is it a broad new audience who was just waiting for that premium content? Maybe. But in that case, was it really worth placing other podcasts that would compete for attention on the app? Was it to show them how bad ads are? Was it to grow the overall podcast market? If you want other content on the app, maybe innovate there too and eliminate ads and pay some share of revenue back to those podcasters who permitted that route. That is precisely what Netflix does for content that has ads elsewhere.

On the technology front, Luminary has to decide whether they are part of the open web of podcasting or not. They are trying to have it both ways and this is confusing and has caused them to get attention for the podcasters who aren’t on their app. American Express never advertised “Use American Express unless you want to shop at Sears!”

The core of their business — the internal stuff — should all be about content. But they have 40 engineers working on — what exactly?

Finally, they have to decide — are they allowing certain content producers to compete against other podcasts or are they trying to allow podcasts to compete against other content. There is a big difference. But the biggest problem is that Luminary hasn’t made a choice — they are trying to have everything every which way.

Let me contrast that with another podcast venture which has been around a little longer and goes by the name — and I am not making this up — Luminari. You will see that they don’t appear at first glance to be a podcasting company. They are “The Career Management Platform for CPAs.” If Trevor Noah is the sexy end of podcasting, this is positioned … differently. But Luminari is supplying podcasts. Its podcasts are business related but here is the key, they are designed to count towards the continuing training that CPAs must all do. Their app is designed to monitor listening so that credit can be given. In other words, they allow CPAs to train with far more control than having to find conferences and courses and take full days off work. If Luminary is a hot mess, Luminari is focus.

Personally, I hope Luminary get their act together. I don’t think ads are the only way to fund content and, moreover, the content they fund is of a certain sort. There is ample room to do more and do better. But unless Luminary can get their strategy right, there is lots of opportunity for others to come in and do it properly.

Joshua Gans

Skoll Chair in Innovation & Entrepreneurship at the Rotman School of Management, University of Toronto and Chief Economist, Creative Destruction Lab.