January 28, 2020

Does Anyone Want to Buy a Podcast?

I’m probably a little early with this, but is the podcast market starting to get a little frothy? There are so many new ones launching and now there are reports that multiple major podcast creators are looking to sell.

Last week, The Wall Street Journal reported that the company that creates “Serial,” a true-crime podcast that many consider the first show to really popularize the podcast format, was looking to be acquired. The Journal reported:

Serial Productions is best known for producing “Serial,” a podcast that tells a new multipart series every season. Its first season garnered more than 300 million downloads.

Among the potential buyers for Serial Productions is New York Times Co., the person said. A deal could accelerate the growth of the Times’s audio division. The revenue and potential valuation of Serial Productions wasn’t clear, but any transaction would likely be small for the Times or another major media company.

It’s a bit weird that, despite having over 1,600 journalists, the only real success for the audio division is The Daily by Michael Barbaro. I like the show, but is Barbaro the only journalist at The Times that can do a long-standing successful podcast?

Suffice to say, this acquisition could be a good addition to the team, less for the immediate revenue and more for the framework that Serial brings. Specifically, could it help The New York Times start to produce a greater number of these multi-part narrative podcasts versus just a news show? I know they did Caliphate, which was about ISIS, but for an organization as large as The Times, it just doesn’t feel like they’ve leaned into audio as much as they can. It’s a bit off-putting to write that because The Times is the 4th largest podcast publisher, but again, besides The Daily, do they really have any other products?

It’s not just Serial and The New York Times, though.

The Wall Street Journal also reported that Bill Simmons is looking to sell The Ringer to Spotify. In what sounds like a story meant to test the waters on a deal, The Wall Street Journal reports:

Spotify Technology is in talks to buy sports and pop-culture outlet the Ringer, according to people familiar with the matter, a deal that would let the audiostreaming giant break into broader digital media and bring a network of more than 30 podcasts under its roof.

Discussions are early, these people cautioned, and may not result in a deal.

My guess is that this deal is not imminent. It’s likely that Spotify has reached out to The Ringer and now they are doing diligence and circling around a price of some sort.

The good news about The Ringer is that, in 2018, it hit $15 million in revenue and was profitable, according to The Wall Street Journal. The bad news is that Simmons thinks his business is worth more than it actually is.

According to Peter Kafka at Vox:

Simmons has talked about selling his company before. Last year he discussed a sale with AT&T’s WarnerMedia, proposing a price around $100 million, according to a source familiar with discussions. WarnerMedia was already working with Simmons via its HBO unit; it also owns Turner, the TV network that owns Bleacher Report, a digital sports publisher it acquired in 2012.

Talks between WarnerMedia and Simmons stopped before news that Spotify was buying Gimlet broke. Since Spotify embarked on its podcast buying spree, lots of podcast-related businesses have imagined that their value has increased, so it’s quite possible that Simmons feels the same.

There’s no denying that Spotify being the buyer elevates the value—Spotify is pretty desperate to acquire podcast companies for a variety of reasons—but $100 million is already pretty high. It’s not going higher.

Let’s use some basic math …

Assume in 2019, it hit $20 million in revenue. It’s not unreasonable, considering the network continues to grow. Can it convince Spotify to spend 5x revenue? Spotify likely paid a higher valuation when it acquired Gimlet last year for $200 million, but that was also the first deal. I can’t imagine Spotify is going to pay more than 5x. Honestly, every conversation I have around media acquisitions these days is that valuations are strictly in the 2-4x range.

Then again, your business is only worth as much as a company is willing to pay. If Spotify really feels passionate about owning as many podcast providers as possible, they may overpay.

I guess we’ll see.

Oh look, The Athletic raised another round

Sara Fischer over at Axios reported right after I sent last Tuesday’s email that The Athletic had raised another $50 million, valuing the business at $500 million. She wrote:

The company expects to become profitable in 2020 and says it will soon hit a million subscribers worldwide, according to The Athletic co-founder Adam Hansmann.

The company isn’t looking to increase prices on consumers to hit profitability, but rather is focusing on growing and retaining its user base, Mather says.

Stromberg says he “likely” expects profitability next year because the company doesn’t spend a lot of money acquiring customers,

He says that 80% of Athletic subscribers stay past one year. “Retention is really what sets The Athletic apart.”

A few things jump out to me here.

First, it appears the valuation is hard to value here. According to Bloomberg back in August:

It has yet to turn a profit. Venture capital investors have poured more than $90 million into the site to date; in the most recent fundraising round, a $22 million investment the Founders Fund led in May, the company was valued at about $500 million, says a source familiar with the offering. (The Athletic declined to comment on its valuation.)

But now Fischer is reporting that The Athletic had raised $50 million and its valuation was now around $500 million. One of two things is going on here. Either Bloomberg’s sources were wrong when they reported on the $500 million valuation or The Athletic was valued at around $500 million last time and this was a flat round.

Second, retention appears to be staying relatively constant. The Athletic told Bloomberg that it retained over 80% of its subscribers; now it’s at 80%. It’s hard to comment on that, but I have always felt January was when things were going to start getting important for The Athletic.


If we look at this chart, The Athletic added 250,000 subscribers between January and August 2019. Therefore, we are about to see 42% of its subscribers approach their first year renewal.

If The Athletic can keep these people retained at the 80% mark, the business, overall, should be able to reach that desired target of profitability.

Simon Owens, a media journalist, tweeted this:

We couldn’t come up with a single one. There have been some mergers where equity was just combined, but an outright acquisition where investors are made whole? Or generate an actual ROI?

The Athletic is one of the most exciting media companies to watch these days and I love reading the content. But I don’t see the path to returning any sort of ROI to investors.

I hope I’m wrong.

Politico launching super-priced membership

Let’s wrap up with a product that every publisher wishes it could have, but only very few can actually launch.

Digiday reported that Politico was launching a new membership product with a hefty price tag.

AgencyIQ will offer subscribers news coverage of the FDA, as well as research and analysis, data and detailed information about the people who lead government agencies. The product will be aimed at individuals working in regulatory affairs roles in the heavily regulated biotechnology, pharmaceutical and medical industries. AgencyIQ will be offered through a seat-based pricing model, meaning the annual subscription charge will depend on the number of people at a particular company granted access to the product, said Aaron Kissel, AgencyIQ’s general manager. Subscriptions will cost from $25,000 to $75,000 a year.

Kissel told Digiday that there are 75-125 companies that he sees needing to know what the FDA is doing, making them the ideal client for Politico. By the end of the year, Politico expects to convert half of them.

This product exemplifies the value of going niche. Very few media companies would stop and think about the regulatory affairs roles within the biotech/pharmaceutical industry. The audience is so small and yet, they have informational needs that they are willing to pay for.

Launching this kind of product is not easy. The researched needed to understand what this audience needs is important and, if you get it wrong, the outcome is a failed product. Then the people on the team are likely expensive. How much can an expert in FDA policy earn?

Gwen Vargo, director of reader revenue at the American Press Institute, told Digiday:

The organizations that have to deal with the FDA — their entire businesses are dependent on compliance, but they also have the money to spend on these things. The regulatory agencies are complicated and therefore this service can act like a translator and put it into English.

Politico is apparently using the FDA as the first agency it is focusing on, but as time goes on, it will expand into other agencies. With that expansion, further regulatory affairs departments will need Politico’s help.

Like I said above… This is the type of product that any publisher would be ecstatic to have, but very few have the product and editorial chops to build it. Politico is one of those brands that has it.