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A podcasting startup called Luminaryhas received $100 million in funding and will launch a subscription-based podcast service that will aim to become the Netflix of podcasts, per The New York Times.
The service will offer more than 40 exclusive shows through a dedicated mobile app, ad-free, for $8 a month, and represents the latest attempt to monetize podcasting with a subscriptions model.
It's unclear if Luminary's plan will suceed, due to questionable demand for subscription podcasts and general subscriber fatigue. It's unclear whether demand for subscription podcasts exists at all, given the number of freely available shows — which tops 650,000. Also, there's a ceiling on the number of subscriptions a given consumer can afford, across all media — and many already pay for SVOD, music streaming, and news.
Luminary's best shot at success is to focus on scoring key talent under exclusive deals, something its already working on. The number of podcast listeners is growing — Business Insider Intelligence estimates it will reach 106 million by 2023, up from 74 million in 2018. That new growth could bring in enough consumers interested in a more premium experience.
By securing hot pod producer talent to create exclusively for the platform, Luminary could feasibly attract gung-ho fans. That’s the same content strategy as SVOD giants like Netflix, Amazon, Hulu, and likely Apple, who have poured billions into landing production deals with big names. So far, Luminary has landed forthcoming shows from comedians like Trevor Noah and Lena Dunham; documentary filmmaker Alex Gibney; and hit podcast producers, like Guy Raz ("How I Built This").
Luminary's subscription model could be attractive to high-profile talent for a few reasons:
- Big payouts: Luminary, at least in the short-term, will offer huge payouts to producers: The $100 million in funding will go toward securing podcasts through upfront payments to producers of as much as $2 to $4 million, and possibly higher, for exclusive rights to certain shows, per an anonymous source.
- Less risk: Producers might be enticed not just by outsize deal amounts, but because they can reduce the risk of sinking in a growing sea of podcasts. Sheltered by a subscription platform, pod producers wouldn't have to worry so relentlessly about the pressures of content discovery and audience growth.
- Monetization options: Producers are also likely to be compelled by other means of incremental revenue introduced by Luminary. For example, the service will enable listeners and subs to “tip” pods, similar to how users can tip creators on Twitch. And tipping could earn producers some real cash: In esports, revenue from discretionary tips reached $129 million in 2017 and could grow to $372 million 2022, per Streamlabs/Goldman Sachs.
Regardless of how Luminary fares, we believe the future of podcasts remains ad-supported — it's an effective model, even if it doesn’t scale as well as other digital media. Most podcasts are free and ad-supported, and about two-thirds of podcast ads are host-read, and thus require more personalization. As a result, podcast listeners are generally receptive to podcast ads: Fewer than 10% of podcast listeners say they skip podcast ads, per Gimlet Media.
Podcast listeners also have 4.4 times greater brand recall, as well as elevated purchase intent, compared with other forms of digital ads, per Nielsen. The effectiveness of podcasts could keep advertisers investing in the medium, even if it remains a relatively niche opportunity because the audio shows don’t lend themselves to automated, large-scale buys. In 2017, US advertisers spent about $314 million on podcast ads, compared with about $1.8 billion for all of digital audio, according to the IAB/PwC.
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