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Insider: May 14, 2020

- Trouble at Luminary - Apple News Audio - iHeartMedia Earnings

Trouble at Luminary. The subscription podcast platform, which recently celebrated its first year since launch, has just raised a further $30 million in a new funding round, according to a Bloomberg report. The company is also seeking further investment to help it get through the pandemic, “according to people familiar with the matter”.

There are some further details from Lucas Shaw and Priya Anand’s reporting that throw some light onto why this additional cash is required. Luminary apparently only has “about 80,000” subscribers who have stayed on after completing their free trial. Until the coronavirus outbreak hit, the company “was burning through more than $4 million a month… while generating less than $500,000 in monthly revenue”. In addition to seeking extra funding, it has “cut spending on marketing, new shows and staff” in an effort to make ends meet.

I know there are lots of people out there who will have a somewhat… gleeful reaction to this information. After Luminary’s botched launch in April 2019 and the initial licensing problems that saw big hitters like Joe Rogan, the New York Times, Gimlet Media and others withdraw their shows from the app’s free tier, it has long been clear from the conversations I have with readers and in the industry more broadly that there’s a substantial frustration out there about this company. And I get it: I’m also pretty allergic in general to the “hey, my startup is going to fix everything other people have already been working on for decades!” business philosophy.

But stepping back a bit, there are two points to make here, I think. The first is that however much you might not like this company or the model it espoused, people are losing their jobs at a really rough time and that’s not fun. More than that, the money that Luminary was offering creators who signed up to make exclusive shows enabled some truly interesting production companies to come into being that might not have existed otherwise. When I interviewed Lauren Shippen last year, for instance, she said that without the money Luminary paid for fiction series The AM Archives, she would not have been able to double down on her commitment to diversity when hiring talent through her Atypical Artists outfit.

Secondly, let’s take a quick gander at what this development might tell us about the viability of that much-vaunted “Netflix for podcasts” model. I think this question that Nick posed way back when Luminary launched is worth revisiting:

“The fundamental question with Luminary is whether it can beat an entire universe of free alternatives by financing sufficiently buzzy projects and/or convincing users that they’ll have an easier time finding good podcast-style programming on its closed platform than on the sprawling, chaotic open ecosystem.”

Based on the subscriber numbers in that Bloomberg report, I think we can theorise that no, so far Luminary hasn’t created a sufficiently compelling exclusive content slate to overcome enough listeners’ preference for the free alternatives.

The vast variety of free podcasts represents a high bar to clear, for sure, but I remain convinced that it is theoretically possible, given the continued success of other digital subscription types. I don’t think this presages the death of this premium model, by any means, but it might prompt a reconsideration among those considering a similar podcasting venture built on using exclusivity to attract subscribers. Perhaps stacking your paywall with a lot of shows hosted by celebrities isn’t the way, or perhaps they were the wrong celebrities. There is, after all, a lot of free competition in that space nowadays.Apple News gets into audio. Another longrunning and hot topic, this one — Apple is getting into original audio, sort of. This particular push comes through Apple News+, which according to Digiday is working on adding audio versions of news stories on its platform. More details from that report:

“Apple will handle production costs, and compensate publishers in the same way it compensates them for the written content available on Apple News+, two sources said; Apple metes out 50% of subscriber revenue to publishers based on how much time those subscribers spend with publishers’ content in a 30-day period.”

Apparently publishers will pitch suitable stories for this treatment to Apple, rather than there being any automatic or blanket transformation — licensing issues would prevent some stories becoming audio, for instance.

There isn’t any reliable information out there about how many subscribers Apple News+ has, nor when this audio version might launch. Plus, publishers routinely report being dissatisfied with the revenue share they receive from allowing their articles to appear in Apple News. It’s also worth noting that a similar initiative was reported as being in the works back in 2016, when a “spoken edition” format for various publications was experimented with to work like podcasts.

That’s not to say that making this move now isn’t plausible. A number of publications already offer their own audio editions, often using a service like SpokenLayer (which was Apple’s partner back in 2016). Audm, which the New York Times acquired in March, specialises in turning longform features into audio and has in the past worked with places like the Atlantic as well as the NYT. The Guardian makes its own longreads into a podcast inhouse. It doesn’t seem beyond the realm of possibility that Apple might want to get into this game, too.iHeartMedia Q1 earnings. This week, iHeartMedia reported its earnings for the first quarter of this year. Overall, revenue fell 1.9% compared with Q1 2019, from $795.8 million to $780.6 million, a gap that widens further to 4.8% when you take out the once-in-four-years boost from political advertising. Broadcast revenue dropped 5.2%, but the big story the company is keen to tell is a rise in digital advertising — which includes podcasts. The key quote:

“Digital revenue increased $16.8 million, driven by continued growth in podcasting, as well as other digital revenue, including on-demand services. Audio and Media Services revenue also increased $8.8 million primarily as a result of a $7.1 million increase in political revenue.”

The presentation to investors also included this nugget about their podcast audience:

“In Q1, usage increased by 35% year over year based on unique audience and our podcast revenue in Q1 grew 80% year-over-year; podcast revenue is currently pacing at over 100% year-over-year for Q2.”

However, there were signs that there will be bad news ahead once the impact of coronavirus in Q2 is tabulated. In light of the economic turmoil, iHeartMedia decided to withdraw its forecasts for the rest of 2020, but CEO Bob Pittman did say on the call that “revenue began to fall off in March, as it did for most ad supported companies, and that trend became even more pronounced in April, with a sharp decline in ad revenue across almost all of our revenue segments.”