Can Gimlet Turn a Podcast Network Into a Disruptive Platform?

Can Gimlet Turn a Podcast Network Into a Disruptive Platform?

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Harvard Business School professors John Deighton and Jeffrey Rayport discuss their case, “Gimlet Media: A Podcasting Startup,” and how two former public radio producers launch a podcast network, entering the last frontier of digital media. Can they turn a content supplier into a disruptive platform?

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BRIAN KENNY: If you love linguistics, you might know what a portmanteau is. If not, I’ll explain. A portmanteau is a linguistic blend of words in which parts of multiple words are combined to make a new word like smog, which is a blend of smoke and fog, or combining chuckle and snort to come up with chortle. You get the idea. The origin of some portmanteaus is quite interesting. Such as when Massachusetts governor Elbridge Gerry took it upon himself to redraw a voting districts in the hope of skewing election results. One of the new districts resembled the curvy outline of a salamander, and the term gerrymandering was born. Which brings me to the subject of today’s discussion, podcast, a portmanteau combining iPod and broadcast. According to Edison Research, as of April 2019, there are over 700,000 podcasts and the number rises by about 2,000 every week. It’s an ocean of content in a rising sea, leading some to wonder if we’ve reached a tipping point. Today we’ll hear from professors John Deighton and Jeffrey Rayport about the case entitled, “Gimlet Media, A Podcasting Startup.” I’m your host, Brian Kenny and you’re listening to Cold Call, recorded live in Klarman Hall Studio at Harvard Business School.

BRIAN KENNY: John Deighton is an authority on consumer behavior and marketing with a focus on digital and direct marketing, and big data and marketing. Jeffrey Rayport is an expert in online media and e-commerce with a focus on new business activities enabled by emerging digital technologies, which is perfectly appropriate for today’s conversation. Thank you both for joining me.

JOHN DEIGHTON: You’re welcome.

JEFFREY RAYPORT: Thank you for having us.

BRIAN KENNY: We’ve invited both of you today because John ,you’re the author of this case on Gimlet Media. Jeffrey, you’ve taught the case, actually now you’ve both taught it. As we get later in our conversation I want to hear what the reactions are in the classroom when you teach the case, but I’m guessing that 100% of the people who are listening to this program are podcast listeners. I can safely say that.

JEFFREY RAYPORT: (laughing) Seems like a safe assumption.

BRIAN KENNY: So, they fit into this niche category. We’re going to learn more about who listens to podcasts and what the landscape of podcasts looks like out there. John let me just ask you to start the way we always do. Can you set up the case for us? Who’s the protagonist? What’s on their mind?

JOHN DEIGHTON: There are two protagonists. There is Alex Blumberg, the radio expert as it were, and there’s Matt Lieber who has some radio experience but has an MBA from a school down the river and is the business dimension of the problem. So, we set the case up with these two protagonists being goaded by an investment analyst who says, somewhat skeptically, “What do you want this company to be?” On the one hand, is it an art project? As it clearly is in the eyes of Alex. Or is it the start of a massive media company? That’s the question we throw at the class.

BRIAN KENNY: Why did you decide to write about this case? How did you hear about Gimlet? I mean a lot of people have heard about Gimlet, but what prompted you to write a case about it?

JOHN DEIGHTON: Well I was just reflecting that Jeffrey and I have been following this trend the movement from analog to digital since we met back in the, what we were describing as the 1900’s. This started with a case that Jeffrey did on the New York Times as it confronted the digital impact on print. My interest more recently has been in the effect of the internet, the effect of the free flow of data on entertainment companies, and I’ve looked at everything from movies to television to print, and have watched with curiosity why radio has been relatively resilient through all of these disruptions, these dislocations.

BRIAN KENNY: So, speaking of that, how has audio evolved in the digital age? It seems like it has been greatly impacted in some ways. Any thoughts on that?

JOHN DEIGHTON: Well, there are three, you could call them three elements of the radio product. There is sport, there is music, and then there is talk of which news is a big component. The thing I think that has constrained the revolutionizing the disruption of radio has been the car. If you’re under 35, 63% of you don’t listen to radio outside of a car. That means that for many, many people the car is the bubble, which until recently has been linked to the outside world through something called radio waves which also come from the 1900s.

JEFFREY RAYPORT: Even later than that.

JOHN DEIGHTON: Right, but by next year, just about all cars sold in the United States will have internet connection.


JOHN DEIGHTON: And that’s what’s going to really move this revolution into the car.

BRIAN KENNY: Jeffrey, let me turn to you on this because you’ve been studying online behaviors for, ever since there’s been an online, I guess, which was after the 1900s (laughing), but tell me, how has streaming affected the way people consume content? Broadband streaming in particular.

JEFFREY RAYPORT: Well, it’s interesting. It’s clear that what burgeoning media companies like Gimlet, aiming to become major media companies as podcasters, are thinking that what Netflix has done to movies, what the web to did to print, what YouTube’s done to video, what Spotify has done to music, surely somebody in the podcast world could have the same extraordinary effect. As John’s implying, audio is more complicated, and it starts with this idea that we all understand what appointment television is, but has anyone ever talked about appointment radio? And this notion, as John describes it, of driving a car music is the wallpaper. This question of how you actually get people to focus on this particular stream has in some sense been a long standing challenge. Daniel Ek, the founder of Spotify, in John’s case, has this wonderful quote that John included in which he says, “Look, movies and television, it’s a trillion-dollar digital market. And music is a hundred billion dollar digital market. How could it possibly be true, that your eyes are worth ten times more than your ears?” So that’s kind of a conundrum, and that’s in a sense the conundrum at the heart of this case.

BRIAN KENNY: What does the ecosystem look like at there for streaming content? Who are the big players? You mentioned Spotify. We know Pandora. Who else is in this space?

JEFFREY RAYPORT: Well it’s interesting. Music is, in a way, a very different discussion, which is quite fascinating for us looking at the emerging podcast industry is that a brand new ecosystem had to arise to make podcasting possible. So, we have companies like Gimlet Media, and others like Wondery, and Panoply, and spinoffs from National Public Radio, ESPN, iHeartRadio, all these folks produce podcasts, but somebody has to host the content. And while you can put a podcast on a computer server, it turns out that being able to deliver multiple streams on demand, start, stop, speed them up, slow them down, all of those features actually have given rise to a specialty category of hosting companies which are designed as platforms to serve up not musical streams but specifically spoken words streams, otherwise known as podcasts. Then, in turn, somebody’s got to pay for all this and we as consumers don’t tend to pay for podcasts including I fear this one.

BRIAN KENNY: Right. Right. People get this for free.

JEFFREY RAYPORT: Yes indeed. And you know, it happens to be institutionally supported, but if it weren’t advertising would be very important. So there are a variety of ad networks that have grown up in this space as well as ad servers that insert dynamic advertising content for programmatic channels at the podcast, if it’s targeted at all, but then you have the hosting platforms, you have the advertising, you’ve got the publishers creating the content. Somebody needs to provide an app, so you can actually listen to it, and of course the major apps that we know are Spotify and Apple Music, but there are also specialized apps just for podcasting from companies like Stitcher, and you put all that together and that kind of connects the creators working with the publishing platforms with us consumers listening to podcasts. But the fascinating thing is John documents in the case is that all of this has come together with enormous rapidity, but just in the last few years. So it’s all brand new.

BRIAN KENNY: And it’s complicated. Even as you explained it, there’s a lot of players involved, and it wouldn’t surprise me if listeners are confused about where do I go to get this podcast?

JEFFREY RAYPORT: Confused, falling asleep, glazing over.

BRIAN KENNY: Who knows? Right, and I should clarify, by the way, that we do have advertising. We moved onto the Harvard Business Review Platform recently, so Cold Call is now part of the HBR Presents Network, so if there’s advertisers out there listening and they want to sign on, we would welcome them to do that. That’s a shameless plug that I just did there.

JEFFREY RAYPORT: That’s right, served it right up to an ad network near you.

JOHN DEIGHTON: If the people listening to this program are confused by the structure of this emerging industry, I think we can say that the players are equally confused. It’s a real question in the case as to whether Gimlet should have its own app, its own listener app or not. That becomes a hot debating point. The listener app, being a pretty important part of the ecosystem, along with the people who put the ads in, and the people who host the video. It’s in a way, the gateway. And yet the decision is suggested in the case that they’re not going to do it. And you’ve got to wonder, if you want to be a major media company can you do it without having your own proprietary channel to the consumer.

JEFFREY RAYPORT: And a great, for listeners who are sort of trying to figure out what would a Gimlet Media app look like if many of our listeners, probably NPR listeners, and we suspect many of us are also addicted to the classic NPR app, but the new app called NPR One. And NPR One is clearly designed as a piece of software that is optimized as an interface specifically for public radio. And a lot of features that you wouldn’t build for other use cases, but you would build it for NPR.

BRIAN KENNY: Brings up another point, I don’t know if the case directly addresses this, but where are the lines drawn now between radio and podcasting because NPR does have this great app and they’re producing podcast content and you’ve got iHeartRadio which began as a music streaming platform, but again more blurry lines, but where are the distinctions there I guess?

JOHN DEIGHTON: Well just this week in Toronto, at the Hot Docs Conference, ABC New York, announced that it now produces podcasts simultaneously with the production of TV shows, and it’s doing that partly because it’s the same work, the same content is being used in both devices, and partly because the audience is fairly radically separated on age.

BRIAN KENNY: So we now have sort of multi-platform plays that are unfolding with the major media platforms that are already out there.

JEFFREY RAYPORT: Yes, and if you look at the top 10 or 20 podcasts, measured by monthly downloads, not surprising roughly half that lead table is either NPR or NPR affiliates, or franchise shows like This American Life, or as I said earlier, some vertical cable networks like ESPN. So the traditional broadcasters are attempting to play the game, and then there’s this new wave of specialists, sort of the fleet of foot venture-backed attacker companies, like Gimlet, trying to come in here and give them a run for their money.

JOHN DEIGHTON: As one of the students in my class said, without wishing to blow the reveal at the beginning of the case, there’s nobody that a media company can buy except the small handful that Jeffrey just referred to, the Gimlets and a couple of similar, because you’ve got public radio, you’ve got iHeart, you’ve got very established players, BBC, and as investors look at how they can get in on this action, these privately funded independent companies are very, very attractive. Shall we talk about the reveal?

BRIAN KENNY: Not yet. I would love to know more about podcasts listeners. So tell us a little bit. Jeffrey, who is listening to podcasts, and what makes them an attractive audience for an advertiser?

JEFFREY RAYPORT: Well, as John said a moment ago, one thing that makes them very attractive is there about 25 years 30 years younger than your median age of a television viewer for say ABC in primetime. So they tend to be affluent, well educated. They tend to be male. They tend to be in their 20’s and 30’s. They are more likely than the general population to own a smart speaker. They watch a lot of television, but and here’s the key, they watch a lot of television on Netflix and Amazon Prime. Which means that they’re major consumers of media, but they don’t see any advertising, and the classic podcast profile is roughly 65% of the target market segment, has installed ad blockers on their laptops and their phones. So, these are very desirable consumers who are very hard for advertisers to reach, and the argument around podcasting is wow, if this is a medium that uniquely appeals to what Gimlet calls, “The Unreachables,” then maybe there’s a commercial opportunity to be built there. Sharing with them, trusted brands, trusted vetted messages that might actually sell product.

BRIAN KENNY: John: we talked a lot about Gimlet just in passing here, but can you just dive a little bit into Gimlet like what’s unique about them? What’s their place in the ecosystem?

JOHN DEIGHTON: So, Gimlet is an outgrowth of This American Life, certainly Alex is. So it brings the values of that NPR show to the appointment environment, and I think what distinguishes that show and a couple of others is that they’re highly produced. They don’t just happen. They are sophisticated pieces of audio production. I think the roots lie there. This industry began to really move when it became highly professional in terms of the content.

BRIAN KENNY: I guess one of the things that makes podcasts attractive, and maybe the reason that they’re being introduced at such a high pace is that the barrier to entry is pretty low. You don’t need a lot of investment to start a podcast, but the quality varies pretty widely.

JEFFREY RAYPORT: Just to put that in perspective, there are about half a million active podcasts now on our planet and of them, thinking about who gets into the top percentile, the threshold is about 80,000 downloads a month. So there’s an enormous long tail, and then, in that top percent of all podcasts, what’s fascinating is to see how disparate the performance is of these properties. So just to give you an example, ESPN reaches about 5 million monthly listeners. They have 61 podcasts. iHeartRadio reaches about the same number, a little more than 5 million, they have 639 podcasts. This American Life reaches about 5 million, and they have 3. And that tells you something about how this medium has come of age: podcasts became technologically feasible. The introduction of the iPod as you said at the outset in 2003, the industry began to take off in 2005. Apple got into it around then and built in a podcast category on iTunes. But then the category went to sleep, and it didn’t wake up again until a few years ago when the spinoff of This American Life, called Serial was released. It became an absolute phenom and lit up the category. It’s 250 million downloads across the first two seasons and counting. That woke up the industry and arguably was the stimulus along I think with Apple’s Air Pods to a bunch of folks, as John was alluding to, who said wait, maybe there’s an entrepreneurial opportunity here to build something real.

JOHN DEIGHTON: And as Ira Glass said, “It enables us to be as engaged in content as we are with the great classic HBO and Hulu series, but we don’t need to use our eyes. We can listen.” Surprisingly, Ira, who has the entire conception of the power of this thing is not leading the charge, but I guess that’s what artists are all about right?

JEFFREY RAYPORT: Yes, he’s been a brilliant midwife, or incubator, or one of the two.

BRIAN KENNY: What’s Gimlet’s strategy? So let’s go back to the case here. What are they thinking about? What things have they decided not to do I guess because the case outlines that too?

JOHN DEIGHTON: Well they make it clear that they are a network in an unusual sense of the word. They’re a network of content producers. So they become a magnet for people who want to do this kind of stuff. It wasn’t, I think this is fair to say, not a coherent strategy as to where they were going. There was a little bit of a division. It’s played out in a podcast they did on their own inception called StartUp. They play out the debates about where they are headed.

BRIAN KENNY: Which, by the way, is a podcast about a podcast, which I guess this is also.

JEFFREY RAYPORT: That’s right, we’re now triple meta here today on Cold Call.

JOHN DEIGHTON: The case moves toward the question, how much of the infrastructure do we need to own, and to what extent could we retreat and simply become a production company? We know how to make these things. We know what the length has to be. We know some of the structures. We don’t make all kinds of podcasts. We stay away from a number, but the kind that we make we do very well. Or do we have to get into ownership? So even NPR One is not the only way that you can listen to NPR. Very little technology is actually required. So the debate is do you need a monopoly on a delivery system or can you simply free ride on everyone’s? And if you do acquire your own, does that mean that others will boycott you and you won’t be carried in their systems?

BRIAN KENNY: You know just thinking about, contrasting this say to the advent of television or radio, it seems harder in this category to create a breakthrough product because the barrier to entry is low as we discussed. It’s growing so rapidly that we do have this sort of overwhelming effect of being a voice in this vast pool of voices. I don’t know if you have thoughts on how does this compare? Is this a more difficult thing than in the early days of say radio broadcasting?

JEFFREY RAYPORT: I think it’s a very interesting question. And it really I think comes down to in a sense the ultimate entrepreneurial or venture question from a scaling perspective which is: does this actually go mainstream? And to some extent, there’s data that says it’s already doing that and there’s data that says it’s not. So the data that is bullish says 17% of Americans have listened to a podcast in the last seven days. 64% are aware of podcasts so they know the category exists. So you sit there again and say maybe there’s money to be made here, and when you look at ad revenues in podcasting it’s roughly doubled every year for the last three years from 100 million three years ago to 400 million in 2018. 400 million in 2018 sounds kind of impressive for podcasts, but it’s 2% of the 20 billion dollars in gross media spend on radio. To say it’s a niche, even sounds like a generous allocation of market share. So the question is: does this micro-niche have the opportunity in a sense to jump the proverbial chasm and enter the mainstream? It is going to take franchise properties like Serial that kind of light up the world, and to some extent I think the fascinating thing about Gimlet is these guys are doing it, which is to say that two stories that have been minted at Gimlet have jumped the aisle into major media. One is the StartUp podcast itself. The podcast about a company producing podcasts that we’re now talking about on a podcast, became an ABC primetime sitcom called Alex, Inc. It only had one season, but it was in primetime. But maybe more notably, one of their hit dramas called Homecoming has become a high-end drama on Amazon Prime starring Julia Roberts, the most bankable actress in America. So it’s sort of a question of how you define victory here. Is victory essentially doing the big Hollywood deals, or is victory having this category become a multi-billion dollar generator of ad revenues within the media ecosystem?

JOHN DEIGHTON: And if this business is truly going to significantly dent the radio business, which I think we all think will be the case in 20 years’ time, how do you get from here to there? It’s very easy to enter, yes. It’s extremely difficult to grow. And the biggest impediment to growth is discovery. Discovery was never a problem with radio or television because there were monopolies on distribution. Here we’ve discussed it’s extremely easy to distribute, it’s extremely easy to create. What does it take? Is Gimlet a brand? Does that mean it’s got coat tails that can cause its programs to succeed? I would be skeptical of that right now, although it’s interesting to examine the fact that they’ve been able to have multiple successes. They can certainly cross promote from one program, one topic to another, but the fundamental problem is we don’t have what Netflix has, or what Spotify has, which is the ability to match people to tastes. We don’t have a discovery mechanism baked into our interface.

JEFFREY RAYPORT: So, there’s an opportunity waiting for somebody to take.

JOHN DEIGHTON: There’s a big opportunity. It rests on personal data. If I know what podcasts you listen to, not just on Gimlet but I know your podcast tastes across all media, which sounds like a distribution opportunity, then I can say I can even offer you podcasts across brands of producer. That’s what’s missing right now. We have nothing that facilitates discovery at the individual consumer level.

JEFFREY RAYPORT: It is interesting that in those early episodes of the StartUp podcast Alex Blumberg is pitching VCs and trying to figure out if he wants to partner with Matt Lieber on the business. His original name for Gimlet was The American Podcasting Corporation. He thought he was going to create the next ABC. APC! Instead what they’ve done is create something that looks more like the Warner Studio System of the 1930’s, where they’ve aggregated a bunch of the best talent in podcasting with a bunch of production resources and they’re producing franchises, house of brands model. But the original idea was indeed that a network would do the curation to guide you to the programming you wanted within this category, and as John says that’s actually solving a fundamental problem when you have not a 500 channel universe as John Malone used to say about cable television, but in podcasts we have a 500,000 channel universe. How do you find your way around?

JOHN DEIGHTON: Most of which is junk.

JEFFREY RAYPORT: Yes. A very, very long tail.

JOHN DEIGHTON: So, sampling is an appallingly wasteful way to spend your time. You really need guidance. At the moment all of our guidance is coming word of mouth.

BRIAN KENNY: We talked at the beginning of the podcast about the fact that you’ve just taught this case, both of you have taught. I’m just curious, any surprises? And actually, how many people in the class listen to podcasts? I would expect a fairly large number.

JOHN DEIGHTON: This is the target. The question actually is how many of them produce podcasts?


JOHN DEIGHTON: Almost as many listeners as there are producers.

JEFFREY RAYPORT: When we asked for a show of hands here at HBS, I think 80-90% went up of people who listen to podcasts. But I think that defines also the problem because while 90% of hands may have been in the air, when I kind of went after students how many of you consider yourselves raving podcast fans? How many of you are addicted to a podcast? I think we maybe got 5%, not 90%. So broad-based awareness, but there is something about addiction. The funniest thing was we had a student who occasionally listens to Michael Barbaro on The Daily from the New York Times, speaking of The New York Times, and we did have to remind him that actually The Daily comes out daily. So that bespeaks the addiction problem. I think you’re either addicted or you’re not a customer here in this medium.

BRIAN KENNY: John, did it play out the way that you thought it would as you wrote the case?

JOHN DEIGHTON: It’s a very lively discussion and very engaging because everyone, as Jeffrey’s implied, everyone is a consumer, if not a producer.

BRIAN KENNY: Well I expect in a few years you might have a B-Case about Gimlet if they’re still around.

JOHN DEIGHTON: Well, you’re really being coy about the reveal, aren’t you?

JEFFREY RAYPORT: Do you think now is good timing?

JOHN DEIGHTON: It’s too late for a “B” case. It happened. You know, the fundamental issue that they’re debating is in a way a non-issue because they have known from the time they started that Daniel Ek was in their corner. He had been talking to them from the inception that’s Daniel Ek of Spotify who has all the missing ingredients. He’s got the app. He’s got the distribution. He’s got the personal individual level data that he uses to send you customized recommendations on music, and the only question in my mind is what took him so long? Eventually he essentially bought the company and became the tech component. Turned the production company into a production plus tech. That’s the way it’s ended, and obviously there’s a portfolio play within Spotify. They see audio as the one piece of content they don’t have to pay royalty to studios with so they’re very keen to build it. I think they’re heading, and one of the subsequent acquisitions points that way, is this can no longer be rich, white, young males. It’s got to be a mass market. Content with a broader, broader appeal, and if they’re going to take on radio, significantly or audio more generally, that’s where they’re going.

BRIAN KENNY: It’s going to be fun to watch.

JEFFREY RAYPORT: Our students always want to know what the answer to the question of the case is, and, of course, the presenting question here is sort of implicit in the case is, even though they have not chosen right now to build an app, they are obviously taking very seriously the idea that they should build an app, and when Matt Lieber got up at the end of the classes at HBS to talk about that he said, “We always knew we needed an app, and we didn’t get around to building one, and we never could afford to buy one, but we solved the problem, we got bought by one. Now we have an app.”

BRIAN KENNY: Perfect strategy. Thank you both for joining me today.

JEFFREY RAYPORT: Thank you, Brian.

JOHN DEIGHTON: Thank you, Brian.

BRIAN KENNY: Ever wonder what it would be like to be blind in a sighted world? On a new podcast, Dangerous Vision, host Randy Cohen, a blind Harvard Business School professor, learns how other blind people navigate their way over and around life’s obstacles and barriers with white canes, guide dogs, and advanced technology. Randy loves to learn and talk, and he applies all of his professional skills that reveal remarkable insights about what it’s like to be blind. Find it on Apple Podcasts.

If you enjoy Cold Call, you should check out other podcasts from Harvard Business School including: After Hours, Skydeck, and Managing the Future of Work. Find them on Apple Podcasts or wherever you listen. Thanks again for joining us, I’m your host Brian Kenny and you’ve been listening to Cold Call, an official podcast of Harvard Business School brought to you by the HBR Presents Network.

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