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Podcast Paywall: Big Money For Talent, Big Loss In Listening.

As more podcast platforms explore putting shows behind subscription paywalls, there's growing evidence that the short-term revenue gain from subscribers is not worth the long-term loss – perhaps as much as 50% – of listeners. Conal Byrne, CEO of iHeartMedia's Digital Audio Group, suggests a better plan is to make all podcasts accessible on all platforms free, build a large following, and bring the resulting value to advertisers.

The 'fee or free' question for podcasts came up again this week as Bloomberg reports that "SmartLess," one of the few remaining 'breakout' podcasts not tied to a major platform, is fishing for a home – with a price tag of $20 million.

"SmartLess" launched last July and features hosts Jason Bateman, Sean Hayes, and Will Arnett. In each episode, one of the hosts reveals his mystery guest to the other two. The trio's Hollywood connections have stacked the guest list with plenty of well-known actors and politicians.

One analyst noted that no podcast is generating that much in ad sales on its own. So why is the show worth $20 million? To make a name for the platform - not the show. And to turn listeners – even just a portion of them – into paid subscribers.

There's already a well-known 'fee or free' story involving radio. Look what happened when "The King of All Media" left the empire he'd built via terrestrial radio for start-up satellite radio service Sirius. Stern had the number one morning show in several cities and attracted millions of listeners each week. But as soon as his broadcast was no longer free via radio, his numbers took a dive.

Sirius (before acquiring XM) had only 600,000 subscribers when Stern joined the satellite company in January 2006. Although the subscription-based service now has over 35 million subscribers, how many can you attribute to Stern?

SiriusXM doesn't report audience numbers. But online estimates claim Stern attracts 1,225,000 to as many as 2 million a day. Either number is a long way from the 20 million listeners Stern had (and could prove via Arbitron) during the 80s and 90s on his syndicated radio show. The most expensive deal so far in podcasting is Joe Rogan’s move to Spotify for $100 million. When Rogan’s podcast was available on unlimited platforms, his show was downloaded an estimated 200 million times each month. While Rogan’s show was the biggest podcast of the year in 2020 globally on Spotify, the service did not share how many downloads it actually received last year. Half? Fewer?

Does the home base of the podcast matter? iHeart's Byrne believes it's the shows that drive the popularity and growth of podcasting, not the platform.

"During the quarantine, more people discovered podcasting," he says. "Because the quality of content has increased so dramatically, some platforms want to drive other businesses, like subscriptions, by using the popularity of podcasts. But in the long term, that may hurt the business and advertisers."

The iHeart Podcast Network has no plans to put any episodes behind a paywall. "iHeart's strategy is simple. Offer the best podcasts from 'A list' celebrities like Will Ferrell and Shonda Rhimes, and other up-and-coming creatives, to the largest audience possible at no charge," says Byrne, " and build a massive audience that gives scale to brands and advertisers."

"Free" seems to work for the listener. In May, iHeart Podcast Network was again the largest podcast publisher, with over 268 million downloads. NPR was second with 180 million downloads, and The New York Times came in third with 105 million.

"When it comes to building paywalls, one thing is certain: It decreases the audience for that high-quality content, perhaps by half of the size versus when the program was widely distributed free," says Byrne.

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