2 Things Left out of the Spotify-Takes-Over-Podcasting Conversation

Heading into Thanksgiving with a pandemic tsunami

This is not your usual Timber update. You’re still in that system and will continue receiving notifications when we have new stories.

What this is, is a whole new newsletter!

Thank you for joining me with a fresh cup of coffee to read my newsletter—the first. Today I have two thoughts to share with you about everyone’s favorite podcast water cooler topic. But first I want to, y’know, shrug off any pretense of formality. What you’re reading right now is just my part in a conversation I hope to have with you. I didn’t do extensive research, I’m just writing in the hopes that you reply and we talk.

Recently Spotify bought Megaphone and the world of podcasting was lit afire. We saw hot takes on twitter, long takes on newsletters, and we had breathless calls with colleagues. Allow me to simply ignore what’s already been written to throw two ideas into the mix that I haven’t seen take root in the discourse. I have to give credit to these ideas to Chris Hickman, my co-founder at Timber, who either came up with them or helped me shape them during one of those breathless phone calls I mentioned:

1) $275,000,000 is not enough. Not enough, that is, to keep VCs interested. So many people in podcasting are astounded at that number, and in general people attach a morality to it that lands on the immoral side of the spectrum. So how could it be not enough for VCs?

The best way to think of this is to imagine you have a billion dollars to invest—not an uncommon number for VC funds these days. You need to spend at least $10M per investment otherwise you’ll be running around keeping track of over 100 investments which is too many to do and still keep a nice VC tan. So now you have 100 $10M investments. By the law of averages in the startup world, 90 of those are going to be worthless, 9 of them are going to be generate modest returns of between 2-10x, and 1 of them will be a unicorn and return 100x. If you don’t land that unicorn, then your entire fund’s return won’t beat the S&P 500 and you’re a bad VC. And in order to get that unicorn you have to be swinging for the unicorn fences on every single one of those 100 investments. So when we see podcasting top out below unicorn levels, it becomes a low value, non-unicorn-producing industry. If this sounds ridiculous, it absolutely is, and it’s basically what’s wrong with late, VC-idolizing capitalism, but that’s a newsletter for another day.

Do you agree? Or have you seen evidence since the Megaphone acquisition that big funds remain interested in podcasting? Please tell me. I’m over here at the water cooler totally wanting to stay a few more minutes and talk.

2) Apple is a big bear and Spotify has poked them. Spotify is in it for the paid subscribers. They are building and buying a podcast ecosystem so that people will spend more time in app and be more likely to convert to paid subscriptions. Ffs, it happened to me! I noticed that the podcast player on Spotify was pretty good at keeping my place in long serialized shows, and before I knew it I was also listening to music on Spotify. Now it’s an exercise in willpower not to buy a premium subscription. I’ll also be the first to say that Apple Music doesn’t touch Spotify when it comes to music discovery. But will it matter if Apple starts dangling other media in bundles? Will people that are strapped for cash during the covid depression be loyal to Spotify when Apple gives them TV, Books, Newspapers, and Music for one price? I don’t think so? I’m not the best judge because I waste money on media. What do you think? Do you agree that Apple still has the ability to walk in and wreak havoc on Spotify’s one-(well now two)-note offering? Is Apple the good guy here? It’s weird when you think about it this way. Who’s the David and who’s the Goliath?

As all big podcast consolidation continues to happen, the rate of podcasting growth continues to increase. I know for sure that at Timber we’ll work towards a future that continues to allow for new voices to be discovered and a future where we encourage creators to put in the work to make great shows.

Reply! Let’s talk! (You can also hop on the Discord here: https://discord.gg/j8khyuMx9Z)