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Why local podcasts are rarely sustainable

There aren’t many companies attempting to build sustainable business models for local podcasts, but the few that exist are heavily concentrated in the sports space.

And this makes sense: sports franchises have fervent fan bases that are already primed to consume audio commentary via the radio. Because most teams have their own regional monopolies — with only one or two teams allocated to each state — they cast a rather large geographic net. And nearly every sports league is spread out across the US, which creates the opportunity for a podcast network to patch together a national audience. In theory, team-based sports podcasts should be ideal hosts for both local AND national advertising.

But even with these advantages, media companies have struggled to build profitable businesses around local podcasts. Last year, The Athletic shuttered many of its team-specific shows while leaving most of its national podcasts largely intact. And then this week SB Nation — which arguably pioneered the model of amassing a huge audience through dozens of team-focused verticals — pretty much disbanded its entire network of local podcasts.

The situation is even more grim outside of sports. I speak to lots of different local media operators, and most have either never launched a podcast or shuttered one after only a few months. At first glance, this seems strange given that the US radio industry generates over $12 billion a year, with much of that revenue stemming from a mixture of local and national advertisers. With 40% of Americans reportedly listening to podcasts on a regular basis, why aren’t there many examples of sustainable local podcasts?

I think there are four main factors at play that make it difficult for local podcasts to grow their revenue:

Audience growth is extremely hard

Of all the different digital content mediums, podcasts are the most difficult to scale. While there are a handful of shows that boast audiences in the millions, the dropoff is particularly steep. There are only a handful of shows that generate over a million downloads per episode, and it wouldn’t surprise me at all if there are fewer than 200 shows that manage to even pull down a 10th of that. The vast majority of long-running shows struggle to grow beyond a few thousand regular listeners.

And those are shows meant to appeal to national or even international audiences. Imagine operating in a small city of 100,000 people; how many of those could you reasonably expect to convert into regular podcast listeners? Many local outlets would struggle to generate even a thousand downloads per episode, and it’s extremely difficult to build a business on that small of an audience.

Local news budgets are tight

I don’t know if you’ve noticed, but the local news industry isn’t exactly thriving right now. Most legacy newspapers have faced several rounds of layoffs. All the local news startups are extremely lean and only employ a handful of people.

When I speak to these operators, they tell me they simply don’t have the bandwidth or budget to invest in a medium that likely won’t have an immediate return on investment. Not only do they lack the in-house expertise needed to build a professional podcast operation, but their ad teams aren’t trained on selling audio ads. The barrier to entry is much too steep for what they consider to be an untested model.

Local brands are unsophisticated ad buyers

Many national brands either employ an in-house media buyer or outsource the work to an ad agency. That degree of specialization allows for sophisticated buys across various mediums and ad tech platforms.

Most local businesses rely on either the owners themselves or a general marketing person to buy their ads, and as such they’ll be much more conservative in how they focus their marketing.

That’s why so much local digital advertising goes to Google and Facebook; both these companies have intuitive, easy-to-use targeting tools that can be learned by watching a few YouTube videos or taking a quick course. It’s also relatively easy to track the ROI of these ads via clicks.

Podcasts aren’t great for driving clicks; hence why they rely heavily on promo codes for their direct response advertising. But most local businesses don’t monetize through online sales; they instead depend on foot traffic, and it’s extremely unlikely that a podcast listener will remember a promo code when going to a restaurant or furniture store.

The podcast ecosystem is too fragmented

Well, if local advertisers are out of the picture, why can’t an entire network of local podcasts simply aggregate its audience and sell ads to national brands?

If you’re a regular reader of this newsletter, then you’re likely already aware that podcast distribution is largely decentralized. Most podcast players pull in episodes via an RSS feed, and even the most sophisticated podcast ad platforms have therefore struggled to collect the level of user data that can be found on, say, YouTube or Facebook.

That’s why the podcast ad market is so tiny for a medium that’s nearly 20 years old. Under the current CPM model, even moderately successful shows struggle to reach a sustainable level of revenue.  

Now let’s apply that CPM model to a hypothetical local podcast network. Let’s say you have a network of 20 podcasts, each requiring two hosts and a producer. If you pay each of these employees around $75,000 a year (salary + benefits), then that’s $4.5 million in annual overhead for just salaries alone. That comes out to $375,000 per month.

Let’s then say you were able to sell out two ad slots on every show for $25 CPM. You would need to generate 7.5 million downloads per month across the entire network, an average of 375,000 monthly downloads per show. Do you know of any local podcasts that generate 375,000 monthly downloads? Outside of a handful of local sports podcasts, there aren’t many. 

***

While building sustainable business models around local podcasts is difficult, I also want to acknowledge that it’s not impossible. In the wake of the SB Nation announcement, a sports podcast network called Locked On published a LinkedIn post claiming that it has built a healthy business around its 200 podcasts by relying on a mixture of local and national advertising. And I’ve certainly profiled a couple of individual podcasts that succeeded with their own models (example 1, example 2).

But I think we’re still a few years away before the podcast market has matured enough to support local shows. Podcast advertising sees wider adoption every year, and consumers are increasingly embracing paid podcast subscriptions. Given the rich audience engagement podcasts can offer, I’m bullish on the longterm viability of local podcasts. We’re just not there yet.

What do you think?

Quick hits

This YouTuber loses upwards of $300,000 a year from gambling but earns far above that through sponsorships and advertising. [Passionfruit]

To date, Puck has hired seasoned journalists and then launched newsletters around their work. This is the first case where Puck is acquiring an already-existing newsletter. [Axios]

Wow, this may be the largest VC investment to date into a creator-led company. [Axios]

A new example of a non-media company moving into media — not just to promote its core business, but to diversify its revenue streams. Will be interesting to watch over the coming months/years. [Axios]

Fortune is "profitable and had added more than 130 positions in the past 12 months across the editorial and business sides. The newsroom has doubled in size since 2021." 70% of its revenue comes from a mixture of digital advertising, digital subscription, and in-person events. The remaining revenue comes from its print edition. [NYT]

"In 2020, Facebook-referred traffic to BuzzFeed was six times higher than direct traffic to our site. Today, Facebook is no longer a material source of referral traffic. From 2020 to 2023, Facebook traffic has declined 74%. Over that same period, our direct traffic has grown by 12%." [Digiday]

“If people become a subscriber to The Telegraph after clicking on a link in a newsletter, they’re 50% more likely to still be a subscriber a year later. We definitely do see that being engaged with newsletters, and subscribing on the basis of a newsletter, really creates a high-quality reader who is likely to remain engaged with The Telegraph long-term.” [Media Voices]

"If global publishers feel the need to spoof their own websites to sell garbage ad inventory, it means the state of online advertising is in even worse shape than many realize." [The Media Leader]

I think this is the first time I've been described as a "media maven." [Media Makers Meet]

This startup is licensing old TV shows and then working with famous Twitch streamers to provide a layer of live commentary and audience interaction as they stream it. The idea is to sell advertising against an audience that wouldn't typically tune into these shows on traditional TV. [Business Insider]

Why the Polynesians were the greatest explorers in human history. [Momentary Experts]

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