Podcasting – It’s Either A Big Fad That Will Fade As Business Models Fail, Or It’s The Best New Way to Make Money on the Internet. And Right Now the Experts Are Divided on Which It Is

Philip Stone July 18, 2005

Mark Cuban, the respected Internet entrepreneur who made more than $1 billion selling his broadcast.com to Yahoo says Podcasting is a fad. Have fun with it, he says, but don’t expect to make money. The very respected Wharton School of Business, on the other hand, isn’t so sure. “Some will do Podcasting well and be rewarded for it,” says a Wharton marketing professor.

So what is it that has everyone so excited, that makes any Internet pc user armed with a cheap microphone a radio personality who can be heard around the world, and what is it that has some of the world’s leading media groups already offering their own Podcasts on the web.

Podcasts are recorded MP3 audio files that are downloaded via the Internet for use on Apple’s iPods or other digital media players.  Anyone with a cheap microphone and with a free sound-editing program available via the web can be in the Internet radio business in just a few minutes. A typical podcast would be this writer reading to you this story. Most Podcasts are talk because of music rights issues.

The question is whether you and others like you want to hear me reading this story, and what business model would be attractive so I could make some money out of it and you would keep listening.

Mark Cuban believes Podcasting is just a fad. “Creating your own Podcast and trying to make a business out of it is a mistake,” he said in a recent column on his blog site. But that is not stopping major broadcasters like Disney and National Public Radio, or major print organizations like Newsweek and the Washington Post from getting in on the act. They may be paying more attention to research such as that from The Diffusion Group that predicts the US Podcast audience, now at about 840,000 listeners, will grow in five years to about 60 million.

That huge increase will probably be dependent on the mainstream media becoming bigger players.  But can they make money? ´”A lot of attention has been overdone, but Podcasting is not going away,” says Wharton marketing professor Peter Fader.

There are already examples of Podcasts being commercially sponsored, especially those that reach a particular listening niche (for instance a regular Podcast concentrating on following the media). Advertisers like returning audiences, even if they are small, if they are an audience that uniformly would have an interest in the products being flogged. 

Podcasting is already in these early days turning out to be for commercial radio what digital video recorders are to television – time movers. Can’t listen to a radio broadcast when it’s on air, then download the Podcast at a convenient time. In other words Podcasts are yet another method of allowing consumers themselves to be in charge of their own time, listening and watching what they want at the times they select rather than the times the media dictate via their program schedules. 

Podcasting gets its name from Apple’s iPod which originally was intended to download digital music files. The iPod has been so successful that Apple recently announced a 75% improvement in quarterly revenue, rising to $3.52 billion from $2.01 billion a year ago. Net income quadrupled. Apple increased its iPod shipments by more than 600% in the last quarter to 6.1 million units, with iPod sales quadrupling, accounting for nearly one-third of Apple’s total revenue.

And what seemed to move Podcasting to the next level was when Apple introduced at the end of June its iTunes 4.9 software with Podcast support built in.  Within just two days more than 1 million Podcasts were downloaded from the new Podcast subscriber directory. That actually presented problems for Podcast producers that they were happy to have but which were very unexpected -- that demand would outstrip their servers’ ability to deliver.

But for all of this,  Podcasting is still in its infancy. There are only around 10,000 Podcasts at the present time and it is estimated that less than 1 per cent of the owners of digital audio players regularly listen to Podcasts. So perhaps those 1 million downloads when the new Apple software came out was to just to find out what this new product really is.

But competition being competition many observers believe that Podcasting will eventually become standard for most Internet portals. And how long will Apple remain alone with its iPod?  Common sense answers to those questions indicate that Podcasting is a growth vehicle. 

None of this has been lost on the folks in Redmond, Washington, -- home to Microsoft. According to the Seattle Post-Intelligencer the term “Podcasting” makes some Microsoft employees uneasy; especially those who want to do their own Podcasts. After all the iPod uses a different format to Microsoft’s Windows Media and Windows software runs devices that compete with the iPod. And if you are going to get active yourself in such an endeavor you hardly want to keep mentioning your competitor’s product.

So, first order of business: It’s goodbye to “Podcasting” and hello to “Blogcasting”.