Realizing Podcasting’s Potential – The Market Beyond the Pod

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Next Generation Podcasting

Podcasting 1.0 has been the age of iTunes and iPods. The original software clients that were built in late 2004 and early 2005 were designed to automatically download media files and put them into your iTunes music folder. By labeling the files as podcasts, they automatically went into a folder on iTunes for podcasts and from there the files were automatically synchronized with your iPod.

Clever and simple it was. Using the RSS feed, you could set your software to record your favorite shows directly to your iPod for listening or viewing whenever you wanted. The iPod became a portable Tivo for audio and later video with the release of the video iPod.

Media could be published by anyone, anyone could subscribe and new stuff showed up on your iPod by simply connecting it to your computer. The term Podcast for this subscription based media distribution mechanism was a natural.

This simple innovation became even bigger when Apple saw the opportunity that podcasts presented. Massive amounts of new and free content that could be provided by iTunes. The fact that it was free meant that everyone could start filling up their 40 or 80 GB iPods with all kinds of subscribable media.

In 2005, we saw lots of growth in podcasting and by 2006 it had been picked up by mainstream media as well. NPR, NBC, ABC and many other media companies started to provide podcast content and these mainstream media publisher quickly rose to the tops of the iTunes charts along with a number of new players.

While the growth that came from Apple’s integration of podcasts into iTunes has been great, I believe the tight association and integration with iTunes and iPod is holding back podcasting from realizing its true potential.

The word itself leads one to believe you need an iPod if you want to get a podcast. Those of us in podcasting constantly try to communicate that you don’t need an iPod to enjoy podcasts, but it’s a small voice compared to the perceptions of consumers. The issue is further compounded by the fact that the easiest way to subscribe to podcasts is to use iTunes.

The Limitations of the Pod Market

The problem is that the installed base of between 100 and 200 million iPod devices is actually quite limited, particularly when you take into account the number of iPods people own and how many actually get used.

In my own home, my kids and I have six or seven iPods, and only one of them gets used for playing podcasts. I also have many friends who have been given the device for Christmas or a birthday, but don’t actually use it.

If we reduce the installed based by 50% for duplicate iPod owners and a further 50% for those who don’t use the device or listen to podcasts we end up with a potential market size of 25 to 50 million users. If we take the old 80-20 rule, it says that the hard core market for podcasts on iPods is probably between 5 and 10 million users at the current time.

If we move beyond iPods and say the market is iTunes users then things look a little brighter. iTunes is said to have an active user base of 500 million. If we apply the same math that we used above we could probably get the market up to 125 million people who have tried podcasts, with a hard core market of 25 million people who are heavy users.

Moving Beyond the iPod

The market starts to look more interesting if we move beyond iPods and iTunes to the broader internet. Some recent survey data from Universal McCann shows that of 475 million active internet users in the world 45 percent have downloaded a podcast and that 7 percent download daily. These numbers suggest a market of 213 million who have tried podcasts and a hard core market of 33 million users who download daily.

Beyond the PC, lies the huge potential of the mobile phone market. Phones that support subscribing to podcasts like the iPhone (received through iTunes) and Nokia’s N95 (received through an on-phone podcast application) show the potential of mobile phones as the next generation of portable Tivos.

There are billions of mobile phones in active use every day. While most of these phones don’t yet have the capability needed to be portable Tivos, the installed base continues to be upgraded at a rapid pace.

500 million cell phones equipped with mp3 players were shipped in 2007 and estimates call for over 900 million to be shipped each year by 2011. On the video front, 3G phones with video capabilities is one of the fastest growing segments.

Within the next 5 to 10 years, it is quite likely that most new mobile phones being sold will be video capable, and if good fortune/open markets prevail they will be WiFi enabled. This will expand the market for subscribable media to billions of mobile devices worldwide with potential audience sizes as big or bigger then television.

Connected digital TVs represent yet another big opportunity, but one that will take longer to evolve due to the slower turn over of the installed base of devices. HDTV’s are basically very large monitors that can be connected to the internet via set top boxes, PCs, Mac Minis, Apple TV and the like. Tivo is already providing some support for podcasting. The publish and subscribe model that is the foundation of podcasting can turn every one of these devices into Tivos for internet video and audio.

The PC, mobile and HDTV are the markets that will allow subscribable media/podcasting (or whatever new name it takes on) to realize its true potential. These markets will give podcasting the reach and scale required to turn subscribable media into a sizable industry. These are the markets that matter and the markets that every serious publisher should be working towards. Now is the time to establish your position.

Getting from here to there

Getting from here to there requires a change in mindset. In many cases, today’s traditional publishers treat subscribable media as a sideline with little strategic thought and poor execution.

In contrast, new media players like Revision3 and TWiT.TV are thinking strategically about building audiences and brands that form the basis of a real business. Winners will take the business seriously.

Publishers who see the opportunity on the horizon will begin to shift their focus from iPods/iTunes to the PC, mobile and connected TV segments. Too many publishers rely too heavily on iTunes. This dependence manifests itself in many ways such as the use of one click iTunes buttons as the only way to subscribe and the use of iTunes as the way to present the content archive.

This shift in focus requires a multi-device content strategy. This is particularly important for video, because what plays on an iPod, won’t necessarily play on a cell phone. In a recent survey I did of 25,000 video podcast episodes, I found only 6 episodes encoded with 3gp (the video standard for 3G phones). If publishers want to tap the mobile market, then they need to make sure that the content they produce can be played on these alternative devices.

Building real businesses in this sector will take investment and sound execution. Revision3 has taken in $9 million in investment and Mevio (formerly PodShow) has taken in $24 million in funding. This is the kind of investment that traditional publishers will need to make if they are serious about building new media businesses.

On the execution front, there are profound differences between those who are focused on building new media businesses and those that treat it as a sideline. Companies like Revision3 and TWiT.TV show a commitment to the business and best practices that is just not found in many traditional media companies.

These new media companies are successfully building brand franchises and growing audiences that are attractive to advertisers. They are positioning themselves ahead of the huge demand wave that’s building.

If you want to ride that wave, now is the time to get serious about building a new media business.

As always, comments and feedback are appreciated.

[tags]podcasting, podcast market size, podcasting 2.0, subscribable media, mobile media[/tags]

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