Podcasts: For free or not for free?

Or, how I got shouted down
at the PRPD conference

Originally published in Current, Dec. 19, 2005
Commentary by Paul Marszalek

I’m gonna be honest. Several times in my career I’ve offered unpopular opinions.

It happened again in September after a panel discussion at the Public Radio Program Directors Conference in St. Louis. I wasn’t exactly booed, but as my fellow panelists answered audience questions, they made their strong disagreement crystal clear.

I had said public radio, rich in exclusive content, should strongly consider not giving away that material via free podcasts. I believe we, collectively, are in a strong position to create the appropriate business model from the start.

My idea was that stations could drive membership and revenue by making podcasts available as a free benefit to members while requiring small on-demand payments or subscription fees from nonmembers.

Consider the following sketch of a business model: web users download 100,000 podcasts a day of KCRW’s incredible homegrown content. If the station teamed with, say, Apple Computer and charged 25 cents per cast (think newspaper pricing) — even after handing half the revenue to Apple — the podcasts would yield a cool $4.5 million a year.

Disruptive technologies like podcasting have shredded the business models of other industries, I said. First example: The record industry collapsed under the stress of free content via Internet piracy. We could debate whether the record industry had it coming (I think it did — for overcharging customers for subpar products), but it’s hard to deny that consumers bypassed the record company business model and left them and their distributors — record stores — for dead.

Second example: The movie theater business, just three years after counting all-time high box-office receipts, is in its worst slump in 20 years. Again, we can debate whether they’re suffering from crummy products or two other likely factors: (1) most people would rather see a movie in their living rooms than in a theater (73 percent, according to an AP/AOL poll) and (2) movie studios release a DVD of the film, on average, a mere four months after theatrical release.

The DVD release schedule, dictated by Wall Street’s demand for quick financial results, is helping to fuel a new “on-demand” business model: Movies and consumers bypass the theater. It’s okay for studios and producers, not so okay for the theater owners.

Well, the reception of my pitch at PRPD was less than enthusiastic, almost vitriolic. You would have thought that I was Gordon Gecko up there before the microphone reciting, “Greed is Good.” It was a strange, emotional response to the idea of, heaven forbid, charging for something on the Internet.

Two panelists — David Weinberger of Harvard’s Berkman Center for Internet and Society and Jeff Jarvis, president of Advance.net — suggested my record company analogy was flawed, citing that record labels’ refusal to embrace the Internet was partially responsible for their downfall. With this I agree. However, there is a difference between not embracing the Internet as a new distribution opportunity and using the Internet to make content available for free.

What surprised me most was that I really thought the panel would agree with me wholeheartedly. Earlier, the moderator, Brooke Gladstone from On the Media, asked Jennifer Ferro of KCRW in Santa Monica to prognosticate about the future of radio. Jennifer said she wasn’t sure, but she was certain that things look worse for stations that don’t produce original content. She’s dead right on that one.

And David had begun his initial remarks by pointing to the cover story of The Economist, “How the Internet Killed the Phone Business.” The article begins, “The purchase of Skype by eBay signals the coming-of-age of Internet telephony — a technology that will destroy the phone business....” David commented that the only problem with the article was that it should have been written five years ago.

My concern is that we could be writing the same story today about public radio. We would describe how new delivery systems are allowing public radio listeners, like the former customers of record companies, movie theaters and phone companies, to bypass the local affiliates and the current business model.

Some media professionals are running scared. They’ve come to believe, sometimes reluctantly, the Internet utopian article of faith that informational content on the Web can and must be free. I don’t believe mainstream Americans truly share that view. We spend millions online — buying iTunes, airline tickets and all kinds of products. But we won’t object if somebody offers us valuable content for free.

The panel’s strongest argument for keeping podcasts free was that free online content will attract new listeners and, in turn, add donors and members. I like the idea, but it feels a lot like hope. Giving away content on the Web might attract new support for producing organizations, but it’s much less likely to drive new members to your average affiliate.

Let’s not permit the disagreement over free online content to distract us from an important question: Who’s ultimately going to foot the bill for the programming? Are the revenue sources status quo—members, foundations, taxpayers and underwriters?

Or how about this one: If the stuff is free on the Internet, why isn’t it free on the radio? The radio side needs members, pledge drives and underwriters to make it all go. Why the difference?

Why should 8 percent of the listeners—the station’s members—pay the freight for everyone else? Why do we assume they will continue to do so? What exactly are members, anyway? Are they subscribers who pay for the use of a product, or miniphilanthropists who sort of expect to pay for everyone else? Pledge drives exhaust our development directors and our listeners, too.

Furthermore, what happens when NPR and the big producers start offering everything via podcast or satellite radio? What would compel listeners to become members of a local station? Would they still want to shell out 10 bucks a month for public radio—or prefer to pay 12 bucks a month for public radio plus 150 other satellite channels?

As a guy on my softball team recently remarked, “Whenever WNYC is in pledge mode, I just hit the BBC on satellite for a week.” This unsolicited remark may be anecdotal evidence, but it’s one of many I’ve heard from listeners since the sign-on of satellite radio and new competitors of public radio such as Air America. And if the new delivery options mean even slightly fewer public radio listeners, can’t we expect to lose underwriting?

Digging deeper, more questions: Why should a station pay a carriage fee for a program if it is available for free via podcast? In essence, it’s subsidizing a competing delivery system!

Let me offer an analogy from the record industry: Warner Brothers invests millions of dollars in promotion and videos, subsidizing the attempt to make Faith Hill a star. It hopes to recoup its money in record sales. When Hill finally becomes a star, she goes out and sings at a corporate Christmas party and gets paid $500,000 for it. Warner’s share? Zippo. And record sales? Well, let’s just say they ain’t what they used to be.

Remember this analogy the next time someone wants you to pay a carriage fee for a new program being launched.

Back to radio: If the producing organization wants to offer free podcasts in part to expand the program’s reach, it could certainly expand reach even more by offering the program free to affiliates. Station managers are much more receptive to programs without carriage fees.

With podcasts having such great potential, why would we leave so much money on the table? KCRW might not be able to reap revenues as high as $4.5 million, as estimated earlier. But even if the station brought in a fraction of that, the money could be plowed back into the service in the form of better pay and health benefits for staff, new hires, new program launches, lower carriage fees for affiliates, or even purchase of new stations. Or how about this crazy idea — fewer pledge days?

To its credit, KCRW is working to monetize podcasting by charging for gateway ads at the rate of $25 per thousand listeners. I love this idea because it essentially keeps the show “free” to consumers and is thus likely to expand reach even more. But it still circumvents the current business model for affiliates. If my station’s listeners don’t need my station to hear Le Show, I wonder if I should bother carrying it (or at least paying a carriage fee for it).

The funny thing is, I think these issues can all be worked out by employing some simple etiquette between producers and their affiliates. For example, one simple idea is to protect the affiliate by offering only archive shows via podcasts.

Producers mess with affiliates at their own peril. If they push stations too far, producers and distributors might see their carriage fees evaporate and their reach shrink. Or they could face stations’ demands that they eliminate or lower carriage fees for programs that are given away on the Internet. Based on my conversations with general managers, trimming program acquisition budgets is on their agendas. Some cutbacks could come as a surprise to producers.

My position might sound like that of a Luddite, but it is actually quite the opposite. Public radio’s current business model is, to be blunt, broken. We must move quickly but wisely to adopt new technologies and to adapt the business model to the future.

After all, there are indications that a pay model for podcasts might actually have legs. This American Life, among many others, is experimenting with subscription podcasts via Audible.com—at prices well above my populist suggestions.

An episode of Car Talk has gone up to a mean $3.95, while I could download a commercial-free episode of Desperate Housewives to my iPod for $1.99. Seems like Audible’s pricing needs further adjustment. None of us expects Click and Clack to compete with Eva Longoria and Teri Hatcher, but why does it actually cost more? Maybe because we can’t see the brothers, it’s a premium service of sorts. (Sorry, guys.)

By the way, one analyst believes that at roughly a dollar a download, TV studios could see a windfall of as much as $5 billion annually. Heck, they could make millions by simply making available the outtakes of a show like Housewives. Disney, which also owns the middleman ABC in this case, might be on to something.

On the flip side of all this, in the October issue of Business 2.0, writer Peter Schwartz calls podcasting “one of nine fads to ignore.” He cites the lack of a business model. But Schwartz also starts his article by citing Amara’s Law. Roy Amara, a founding member of the Institute for the Future, says, “We tend to overestimate change in the short run, and underestimate it in the long run.” It’s a simple statement but so amazingly accurate.

If anyone was afraid that podcasting would crush public radio’s business model in the short run, he or she may feel relieved that it hasn’t. But he or she may not like how consumer behavior changes in time.

The bottom line here is: We in public radio have a huge opportunity with new technologies, but we might have only one or two chances to get it right.

I’ve posed a lot of questions, and I don’t have all the answers as to how it will all turn out. But I do have some clues — based on my own behavior.

When I travel overseas, I use Skype to call home through the Internet. When I’m in the office and have a conference call with Radio Free Europe in Prague or Moscow or Kiev, I use Skype as well. My phone bill for all of this talk is less than $5 so far this year.

I travel about 100,000 miles a year—without the help of a travel agent. Five years ago there were three in my neighborhood. Now there are zero.

Married with kids, I haven’t been to a movie theater in what seems like forever. But I’ve kept up with movies like Napoleon Dynamite, Spider-Man and Spanglish by using Netflix. I can’t remember the last CD I bought in a record store, but I still spend a lot on music.

Last week, my wife and I played Santa Claus, ordering virtually all our gifts from the comfort of our bed via my Wi-Fi-equipped laptop. Who needs crowds?

And I sometimes listen to All Things Considered by simply cherry-picking and streaming stories from NPR’s website.
All this has me feeling a little guilty, thinking that I owe Mikel Ellcessor and WNYC a check. Not to worry, I’ll get to it sometime soon — it’s not like they’re going to turn the thing off tomorrow. . . .

Paul Marszalek, a longtime programmer in commercial radio and former v.p. of music programming for VH1/MTV Networks, is now a consultant to public radio and commercial media [and executive producer of Air America's morning show]. In his 25 years in media, he programmed such stations as KFOG in San Francisco and WXRT in Chicago. Marszalek is managing partner of Media Mechanics, a consulting partnership with J. Ben Manilla and Mike Henry. E-mail:

Web page posted Dec. 30, 2005
Copyright 2005 by Current Publishing Committee