Audio’s Opportunity and Who Will Capture It — MatthewBall.vc

While the past 40 years tell a frustrating story in audio, the 100-year history is very different. Throughout the 20th and 21st century, audio has continually discovered new delivery mediums, formats and monetization models. This began with the launch of the radio broadcast in 1927, which blanketed the country in audio, extended with the transistor radio of the 1950s, which made audio truly portable and private, through to satellite, digital stores, and Spotify streams. Today, the audio category is 40 times bigger in real terms than it was exactly a century ago, two times as big as it was 50 years ago, and up 30% since 1994.

And just as audio needs a broader 20th-century framing, it also needs greater 21st-century context. While it was the first major media category to be disrupted by the internet, it remains the least connected to it when considering both time and revenue. Terrestrial broadcast radio still has more than 40% of non-concert audio-related revenues and listening time – a feat maintained since 1930.

This is good news. The reallocation of revenue and time will fund an enormous set of new content creators, production companies, and distributors. And as always, monetization will be affected too. For example, terrestrial broadcast radio pays fixed per-play rates, regardless of the number of listeners, and only a song’s writers are compensated, not the performers. On-demand streaming pays per listen and all talent is compensated. In addition, these services pay on a fixed share of revenue basis, which means talent’s revenues grow linearly with that of distributors.

More importantly, technology is now affecting the audio category faster than ever before. The diversity of its revenue models, content, and delivery has never been greater. This is inspiring and healthy. And there is a lot more to come.

Audiobooks, Podcasts, And Audio-Only Stories

Audiobooks and podcasts are a great place to start. Some of the former is cannibalized from books — which is still good for audio — but some is also net new. U.S. audiobook revenues are estimated to hit $1.5 billion in 2020 (roughly 15% of the money spent on recorded music) and continue growing 15 to 35% per year.

Podcasting is more directly competitive with radio, which remains roughly 30% talk and 70% music. But the considerable investments being made by market leaders such as Spotify and Audible/Amazon Music (which recently greenlit several series, including shows from Will Smith and DJ Khaled) should also grow the market, too.

TV achieved full penetration in the United States (90%) by 1961, at which point the average family watched five hours per day. Over the next 40 years, television went from being free to costing a minimum of $60 per month. And while many households expressed annoyance at the volume of unwanted channels they were forced to buy, the diversity and quality of the content in the cable bundle led to a nearly 75% increase in view time. Investments in audio should have a similar impact, while also allowing Spotify to hike its price (thus lifting industry revenues).

Similarly, we need to consider how the scale of today’s global on-demand music streaming platforms return (and expand) old opportunities in audio. In 1940, the average family listened to more than five hours of radio per day. By 1960, that was down to two – much of which was in the car (home listening was primarily focused on sports). This drop, exacerbated by the need to listen live, made it impractical for any mass media company to tell audio-first stories. Of course, an audio story could be pressed to vinyl, thus removing the limitation of live air times. But releasing weekly or monthly audio series on vinyl was prohibitively expensive, especially compared to print-based ones (i.e. comics, weekly magazines or newspaper fiction), and meant the loss of ad revenues.

Today, it is easier than ever to reach national audiences with audio stories. There are two primary points of upload (...

While the past 40 years tell a frustrating story in audio, the 100-year history is very different. Throughout the 20th and 21st century, audio has continually discovered new delivery mediums, formats and monetization models. This began with the launch of the radio broadcast in 1927, which blanketed the country in audio, extended with the transistor radio of the 1950s, which made audio truly portable and private, through to satellite, digital stores, and Spotify streams. Today, the audio category is 40 times bigger in real terms than it was exactly a century ago, two times as big as it was 50 years ago, and up 30% since 1994.

And just as audio needs a broader 20th-century framing, it also needs greater 21st-century context. While it was the first major media category to be disrupted by the internet, it remains the least connected to it when considering both time and revenue. Terrestrial broadcast radio still has more than 40% of non-concert audio-related revenues and listening time – a feat maintained since 1930.

This is good news. The reallocation of revenue and time will fund an enormous set of new content creators, production companies, and distributors. And as always, monetization will be affected too. For example, terrestrial broadcast radio pays fixed per-play rates, regardless of the number of listeners, and only a song’s writers are compensated, not the performers. On-demand streaming pays per listen and all talent is compensated. In addition, these services pay on a fixed share of revenue basis, which means talent’s revenues grow linearly with that of distributors.

More importantly, technology is now affecting the audio category faster than ever before. The diversity of its revenue models, content, and delivery has never been greater. This is inspiring and healthy. And there is a lot more to come.

Audiobooks, Podcasts, And Audio-Only Stories

Audiobooks and podcasts are a great place to start. Some of the former is cannibalized from books — which is still good for audio — but some is also net new. U.S. audiobook revenues are estimated to hit $1.5 billion in 2020 (roughly 15% of the money spent on recorded music) and continue growing 15 to 35% per year.

Podcasting is more directly competitive with radio, which remains roughly 30% talk and 70% music. But the considerable investments being made by market leaders such as Spotify and Audible/Amazon Music (which recently greenlit several series, including shows from Will Smith and DJ Khaled) should also grow the market, too.

TV achieved full penetration in the United States (90%) by 1961, at which point the average family watched five hours per day. Over the next 40 years, television went from being free to costing a minimum of $60 per month. And while many households expressed annoyance at the volume of unwanted channels they were forced to buy, the diversity and quality of the content in the cable bundle led to a nearly 75% increase in view time. Investments in audio should have a similar impact, while also allowing Spotify to hike its price (thus lifting industry revenues).

Similarly, we need to consider how the scale of today’s global on-demand music streaming platforms return (and expand) old opportunities in audio. In 1940, the average family listened to more than five hours of radio per day. By 1960, that was down to two – much of which was in the car (home listening was primarily focused on sports). This drop, exacerbated by the need to listen live, made it impractical for any mass media company to tell audio-first stories. Of course, an audio story could be pressed to vinyl, thus removing the limitation of live air times. But releasing weekly or monthly audio series on vinyl was prohibitively expensive, especially compared to print-based ones (i.e. comics, weekly magazines or newspaper fiction), and meant the loss of ad revenues.

Today, it is easier than ever to reach national audiences with audio stories. There are two primary points of upload (...