For personal podcasts, we assume that the podcast itself is going to be your revenue stream. This means you are not using it to shill a book or sell some other product or service (see the next section for that situation). For this section, we look at the amount of money you need to generate from your podcast to get a good return on investment (ROI) or even to get you to where you can quit your day job. In the next chapter, we will look at many different ways to generate revenue from your podcast and website, but for now we will concentrate on ad-generated revenue from the podcast only.
The first phrase you need to know about is cost per thousand (CPM). You will hear this phrase tossed around a lot when talking to the different advertising networks.
So if CPM stands for cost per thousand, why isn't the acronym CPT? This expression is actually based on roman numerology, in which M equals 1,000.
The CPM you can get for your show means how much advertisers are willing to pay per 1,000 downloads of your show with their ad inserted into your podcast. The CPM you will be able to get for your show depends greatly on the niche your show addresses. If your show is a tech show or a comedy show, sadly you are going to be in the "dime a dozen" category and will be on the lower end of the scale (before you flame, Rob wrote this and he has a tech podcast) and will be lucky to get even close to a $50 CPM. However, if you have a really niche-type show such as White Roof Radio (a show about MINI Coopers), a company that does conversion kits for MINI Coopers will more than likely be willing to pay a much higher CPM to get an ad to its targeted market. We talked with Jonathan Cobb, CEO of Kiptronic, about what a good CPM is for podcasting.
For our calculations, we assume an advertiser is willing to pay a CPM of $50, and because many podcasters will likely find this advertiser through a network, there is a split to be accounted for. Most of the podcasting networks we believe will settle on a 70/30, 75/25, or 80/20 split with the majority going to the podcasters. So after the split, we assume for our calculations you get a net of $35 per 1,000 downloads.
Some networks will offer much worse splits, with some less than even 50/50. Usually these networks try and explain this by stating they can bring you better deals. Be very careful of these used-car salesmen. If someone makes you sign a nondisclosure agreement (NDA) to see their T's and C's (terms and conditions) and then their T's and C's suck, they had you sign the NDA because they don't want people to know they are out to take advantage of you and other podcasters. Look for networks that openly state what their T's and C's are. As an example, both Podtrac and Kiptronic have been very open about their T's and C's and both offer very good splits, with the podcasters getting at least 70% of the revenue.
If we go back to our chart of type of need vs. investment (Table 17.1) and try and figure out how many subscribers (not downloads) you would need to just break even in the next 12 months, Table 17.2 is what we find for a show produced weekly.
From this table, you can see that you only need 14 subscribers for each show over a 52-week period to break even for the basic setup for a one- and two-person show. However, the highest-end setup requires an average of 1,083 subscribers per show over a 52-week period to just break even. To put that into perspective, only about 50 podcasts out of 20,000 using Feedburner (that allowed the public to view their stats) had more than 1,083 subscribers at the end of January 2006.
Not everyone does a weekly, show so in Table 17.3 we also charted the break-even numbers by total needed downloads in the thousands.
Based on this table, it takes 710 downloads to break even for the one-person basic setup and over 56,000 downloads for the highest-end setup. This means for a show with 500 subscribers released each weekday, it would take over 22 weeks before you reached 56,000 downloads.
Now let's look at that whole "quit your day job" thing and what it would take to do so. If we look at the real median income in the U.S., for 2004 it was $44,389. So lets assume that is the number you need to get to quit your day job. Table 17.4 lists the yearly revenue generated for shows that are released one, two, three, and five times a week and have 1,000, 5,000, and 10,000 subscribers per show.
From this chart we can see the following:
What does this all mean? Well, first, don't type up that resignation letter just yet. And second, it is going to take other revenue streams besides ad revenue for you to quit your day job. In Chapter 18, we will get into those other revenue streams.
Granted the number of people who were subscribing to podcasts in January of 2006 is a far smaller number than those who will be subscribing in January of 2007 and so on. As more and more people learn about podcasts and start subscribing, a few shows will break free and reach subscriber numbers where their hosts can make podcasting a fulltime gig. But the overall percentage of podcasters who will be able to do this will always be very small. Probably less than 5% of podcasters will make enough money to simply cover their overall costs. And less than 1% will make enough money to even consider quitting their day job.
If you are getting into podcasting just to make money, you are most likely going to fall short on reaching that goal, or at least the odds are stacked against you. Remember, podcasting is really a hobby at its heart, and just like you do not expect to make money flying RC airplanes, you should also not expect to make money podcasting. If it happens, great. Let us be the first to say job well done. But if it does not, we hope you entered into podcasting because it was something you wanted to do and you are having fun doing it.