Chris Peterson says the good money remains on podcasting.
The podcast executive, who in recent years has been working with investors looking to capitalize on the rapid growth of the industry, makes the case in a new analysis that the time is right for more investment in podcasting, not less, despite some negative headlines in the business press. Peterson currently leads Dwnload Media, which is focused on building a portfolio of podcast content companies by taking majority stakes.
“Yes, there are problems. A market correction is happening, which is good for the overall space. It’s painful but necessary,” Peterson writes. But he says the data doesn’t lie. “Podcasting audience and revenue are growing exponentially, while sectors like gaming are contracting, which is why Dwnload Media believes podcasting, while perhaps a bit frothy in the past, is extremely undervalued now.”
Peterson formed Dwnload Media last May, backed by investors, including Red Seat Ventures. Their mission is to buy a controlling position in podcast content companies, turn them profitable, reinvest those profits into IP, and create new business opportunities and revenue off the back of great audio. During the past several months of meeting with venture capital and private equity funds, he remains convinced that “now is the time to invest in the podcast space.”
His analysis portrays the shifts seen during the past 18 months as a correction of the “frothy” deals that were signed, as unprofitable companies were acquired for 10-times multiples and celebrities and royals received “insane” minimum guarantees.
“The land grab did result in things getting a bit out of whack,” Peterson writes. “Not only did companies exit on potentially inflated valuations, but we also had companies raising money with business models that never made sense. Podcasts were stuck in the growth-at-all-costs mentality, but there was no justification for how they’d achieve this growth or create a sustainable business. Yes, podcast audiences and revenues are growing, but stupid money was pouring into the space like a digital ape with sunglasses.”
Today, Peterson says the real growing-up moment is occurring for the industry, saying it appears even Spotify – after spending $1 billion on acquisitions – has concluded that they don’t need to own, but can operate nicely by licensing content. “This is ultimately good for high-quality content creators,” he says.
In his analysis, Peterson says that several factors are contributors of the “major tailwinds and opportunities” that he sees for the podcast industry this year and beyond. It includes new technologies, including those built around AI, which will not only help bring more ad dollars to podcasting, but also improve recommendations, measurements, and audience growth.
It could also help trim production costs, which Peterson says have gotten out of alignment with shows costing hundreds of thousands of dollars to produce. “Lowering the cost of production is the most impactful way to increase margins and build a healthy, sustainable business and industry,” he says.
Peterson also think subscription revenue remains untapped in the U.S., saying he has seen podcasters in other countries where podcasting is smaller, create successful subscription-based podcast networks.
More controversially, Peterson also thinks platforms like Spotify and Apple should be expected to compensate high-quality creators for their content that currently comes to them free through podcasting’s long-established open RSS ecosystem. “After all, the platforms are building their subscription platforms, outside of podcasting, off the back of content they are getting for free. Seems like it’s time to level the playing field a bit,” he says.
The same holds true for YouTube, which Peterson thinks is somewhere podcasters need to be, even if it is just posting audio since the video site is the second largest search engine in the world. “Short clips can be more powerful than full videos on YouTube, so there’s plenty of room to get creative and see what works best for each podcast,” he says.
Dwnload Media has not yet announced any deals, but Peterson says they are raising capital as he expects to see some similarly sized companies merge this year.
“If you’ve ever considered investing in the space, now is the time,” he argues. “We are in a once-in-a-generation time to acquire assets with incredible upside in the podcast space.”
Download his full analysis HERE.