Genesis Stories
The Father of Broadcast Radio Norm Pattiz on Digital Audio Advertising

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Norm Pattiz
Founder & Executive Chairman
PodcastOne

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You are considered one of the pioneers of the Broadcast and Radio industry, having founded Westwood One in 1976. Can you tell us a little more about your new venture, PodcastOne, and the story behind its genesis?

Like Westwood One, I really created PodcastOne by accident. Westwood One was created almost 40 years ago because I got fired from my job as a sales manager at a local television station, and I needed something to do. I was sitting around one afternoon, after getting back from my honeymoon, listening to a local radio station – an Urban station – that was airing a 24-hour Motown special.

I was sitting with a buddy of mine who was “loosely” in the radio business, and asked if they ever syndicated these programs and sold them to national advertisers. He didn’t know the answer, so we met with the General Manager of KGFJ, and a week later, I was producing a 24-hour radio special called “The Sound of Motown.”

I wound up calling radio stations about the concept of advertiser-supported syndicated radio, and it wound up running on about 300 radio stations with four or five big, national clients that I knew from my television days. That was the genesis of Westwood One. The company began to grow exponentially from a company that did $200,000 worth of revenue in its first year, to a company that, right before going public, was generating over $600 million in revenue and went public with a market cap of $4 billion.

The launch of PodcastOne was similar in a lot of ways. When I left Westwood One, there were a number of personalities on the network who I had signed and had long relationships with. Both Westwood One and the talent wanted to keep me involved in some capacity, so I started Courtside Entertainment Group for consulting. Everything was funneled through Westwood One for distribution. It was a natural extension.

I was then introduced by a mutual friend to a young man named Kit Gray who was representing podcasts from his apartment in Marina Del Rey with his dog, and had a couple dozen podcasts which he was selling to direct-response advertisers. The more I looked at it, the more it reminded me of myself when I first started Westwood One – but the digital version.

So we partnered to create PodcastOne, and business for 2016 will be around twenty-fold our first year. While we’re not a big company, we’re certainly growing rapidly, and we’re a major piece of the overall podcast industry which is probably a $100-120 million business. We’ve built off the base of direct-response advertisers to now include major brand advertisers. We did this by investing in technology that gives us very sophisticated metrics to make national brand advertisers comfortable with the way we deliver the audience we say we have, and do have.”

 

Westwood One became one of the largest syndicators of premium radio, eventually growing into a half a billion-dollar company by the early 2000s. What are your plans for PodcastOne in the coming years, and how large do you foresee the digital audio and podcasting industry growing eventually?

I think PodcastOne has every chance of growing just like Westwood One, not that we have to in order to become a very successful company. So far, it’s astonishing if you take a look at the growth pattern in terms of revenue of Westwood One – it’s almost identical to the one we’re seeing at PodcastOne. I believe podcasting is going to become a billion-dollar business, and I think we can be a large part of that over time.

Whether I’ll be running the company when it hits the threshold that Westwood One did, I don’t know. I mean, I feel good, but I can do the math. But the future is bright, and I do believe that we are poised for growth in a variety of ways and that digital technology, which has been disruptive of the way traditional media has been utilized and bought, will continue to provide opportunities for access to that $17 billion of traditional audio ad spend and the fast-growing digital-audio ad spend.

I love the fact that we’re going to be as good as the content we provide, and that the digital nature of the business will simply be a more convenient way to get our programming. Consumers can listen to our podcasts or active streams whenever they want, however they want. That’s the pattern of consumption these days, if you take a look at all the other media out there.

 

The current PodcastOne show roster includes big names such as Adam Corolla, Dr. Drew, Steve Austin, Larry King, Snooki, the creators of Freakonomics, and many others. I believe your last public count was having over 200 different shows with 120M downloads per month, equating to over 100M listens. How was the PodcastOne team able to build out partnerships with so many premium content producers so quickly? How many shows do you think the company will support by end of year?

We were able to get to our present size, which is about 200 podcasts, fairly quickly. The reality is, we could probably have 400-500 podcasts on our network right now, but our podcasts are rooted in partnerships – about 80 of them we own – but the rest of them are partnerships with either talent or producer-publishers. Since they are partnerships, we don’t want to build the size of the platform until we’re pretty close to sold out because our deals are only as good as our relationships with our partners. They want to make as much money as they can on their individual podcasts, and we want them to do that.

We’re looking at new programs and adding programs all the time, but the bottom twenty percent of our shows, in terms of audience, see a pretty consistent churn. We’re constantly trying new concepts, and there’s no reason not to try it because the cost of production is generally low. We also have our own studios and engineers, and we’re sort of a 360-degree solution for people who want to do a podcast and don’t know the first thing about how to do it.

Right now, I think the size of our platform, our network and our audience is about right. What we’ve got to do is continue to evangelize, and for those people who have already been the beneficiaries of our evangelism, continue to build demand. And that’s what we’re doing. We’ll start adding more podcasts as we create more demand and see more sell-outs in all of our programs, not just our highest-rated.

 

Many web publishers such as Slate, USA Today, CNET, NY Times, and others have started their own daily or weekly podcasts in which they produce audio content for their audiences, that can be consumed on distributed platforms. Do you see more digital publishers moving in this direction, of creating podcasts to further engage with their audiences through digital audio?

We’re certainly aware that there are a lot of digital publications that have been moving into podcasting. We have partnerships with companies like TheCHIVE, Breitbart, Barstool Sports, The Weekly Standard and several others. There’s no question that traditional print media and successful websites and blogs are looking to podcasting to expand their horizons, creating audio versions of what they’re doing. I’m sure they’re interested in creating video versions as well, and many of them are.

But we’re focused on the audio side, and we think it’s built primarily for consumption through mobile. We also think the in-dash solution that radio’s always pushing has already been delivered. Our focus has always been on building a network that’s big enough to promote to its own cume so that when we have a new podcast, we can let the 100 million listeners know, and those would be people who are already familiar with our medium.

We use other forms of promotion as well. However, I’m not going to get into all of that because our competitors can find that out themselves. But as I said, we have a number of these web publishers already, and I expect more to come. We’re bullish about that because we think they’re content guys. We’re content guys too, but what we really do, along with producing our own content, is we deliver audience to new podcasts and, of course, we’re the most reliable revenue-generating option for podcasters who want to focus on their content.

 

Can you share more on PodcastOne Premium and the additional features a user will get by subscribing? Do you see many other digital or audio publishers enacting a subscription model, for super premium content in the future, to bolster their advertising revenues?

We recently launched PodcastOne Premium, and we’re not sure how it’s going to do to be perfectly honest. What we’re doing is taking a lot of our original content that comes from our lineup of podcasters, along with their archival material which will no longer be available after two months on the free, advertiser-supported platform, and making it all available to consumers at a monthly fee.

It started out nicely, and it seems to be building nicely, but we’re going to see just what kind of a business it’s going to be. My experience up to this point is that it’s really not easy to get people to pay for audio content. So we’re going to see if the amount of audio content that we have, and the original audio content that we’ll be producing, will be enough to build a significant business and significant revenue. So this is an experiment for us, but I think it’s something that we have to do, and I think we’ll learn a lot from it. We already are.

 

To the extent that you can reveal, how does revenue sharing work with your content producers?  

Our revenue sharing model is pretty simple. We’re partners with our talent and producer-publishers, generally 50/50 partners. We’ve spent an awful lot of money on metrics and audience solutions to give us the credibility that we need to go into an advertising agency and get them to spend a lot of money with us.

That mirrors exactly what we did with Westwood One. This is not new ground for us. We’ve been there before. That’s why, if you take a look at our presentation, it starts out as “PodcastOne – 40 Years in the Making.” We learned a lot of lessons in creating the syndicated radio business and making it an advertiser-supported medium, and we’re using all of those lessons in the podcast world as well.

 

When it comes to most digital audio ads, especially syndicated digital audio, are most of the advertisements sponsored messages read by the host? Are there any opportunities in the future to insert pre-roll, mid-roll, or post-roll audio ads into these segments?

The mix of our advertising is about 50% direct-response advertisers and about 50% brand advertisers. To a larger extent, they all use the inherent strength of podcasting, which is the connection with the host or subject matter, to the maximum extent possible. Therefore, it’s not unusual to have our hosts either read or get a fact sheet, and extemporaneously talk about the product. It feels much more like native advertising and something that, whether the host is implicitly or explicitly coming out and endorsing the product – there’s always sort of a tacit endorsement.

Even with brands who have produced their own commercials and don’t use our hosts to deliver them, if we take a mid-roll break, our host says something like, “We’re going to take a short break. Remember, these are the sponsors who allow us to bring you this show free of charge and with limited commercial interruption.” The fact of the matter is, we’re running no more than 4 minutes of advertising, including the pre-roll and mid-roll break, while radio stations will sometimes run 14, 16, 18 spots in an hour. So we’re an excellent alternative, and there’s never an instance where we’re talking about commercial clutter.

As far as selling the post-roll break, we didn’t sell it for quite a while because once the show is over, the audience is gone. But what we did recently, and with our technology we can do this and I don’t think anyone else in the business can really do this, is we made a deal with the Associated Press to provide 60 seconds of news headlines which are run at the end of the show. Our host tells listeners to stick around for that news. Although there is some drop-off in audience, a significant amount stays through the post-roll break now, and we can run a spot or two in there. Because of our dynamic insertion technology, we can pull the latest newscast at the time that the podcast is served. So, if you’re listening to that podcast now, and I listen to it 7 or 8 hours later, the news will be different. Now, without any interruption of content, we can get as many as 6 spots in a program as opposed to the 4 that we used to get.

 

PodcastOne currently functions as a Publisher / Network for podcasters, where the company manages the entire operational side of the business, such as sponsorship sales, publishing to different platforms. This frees up content producers to focus on what they do best — producing content. Do you ever see yourselves scaling out the number of shows you offer into the thousands, or tens of thousands, effectively helping the long-tail of podcasters monetize?

In terms of a possible long-tail approach to the business, I think that’s something that will come, and it will be tied very closely to programmatic buying and selling of the inventory. I don’t think we’re there yet because I think we have to sell podcasting as a premium vehicle, worthy of sponsorship by national brand or direct-response advertisers. Once we do that, we’ll have the ability to take thousands of podcasts, which may be delivering very small audiences on their own, and aggregate them in such a way that our technology can provide us with audience information on that mass of podcasts.

I think that the opportunity here is that, even though we’ll be talking about possibly thousands of podcasts with very, very small audiences, I don’t think that the duplication will be much, if anything. The extent to which we can show that, the demographic breakdown and where these podcasts are being consumed, you could go out with a long-tail approach that is sold programmatically. That will clearly be sold at a much lower CPM than we’re selling right now, so I don’t think anybody who’s in the podcast business is looking to run in that direction until we build demand that is far greater than what we’re currently seeing. But will it come? I absolutely believe it will. And when it does, I think we’ll be on the forefront of it.

 

How does podcasting and digital audio fit within the larger picture of terrestrial, and satellite radio?

I’ve made a lot of speeches to a lot of different groups, including radio groups, and I have said countless times that radio needs to embrace its digital distribution as part of the medium. If radio embraced its consumption via digital streaming or on-demand audio, you would have a radio industry that would continue growing, as opposed to one that is contracting slowly. That really hasn’t been the case with major broadcast networks and station groups yet, but the economics of those groups make it very necessary for them to generate solutions that generate revenue lickity-split.

They’re all under heavy debt loads which are coming through. There are a number of groups, which I would consider the second-rail groups, that are a good size, are in many major markets, and may even be part of media companies that own television and cable assets. Hubbard Broadcasting, which owns 30% of PodcastOne, has been very bullish in our sector and wants to be a part of it, and wants to let us do what we’re doing as a minority partner. We’re already exploring many different ways to create larger audiences at the local level through audio on-demand and streaming.

I think we’re going to see the ascension of these groups, like Hubbard and others, as the larger groups start to deal with their huge debt loads and wind up getting rid of assets in order to pay debt down. I would say there are a lot of smaller groups that aren’t really all that small, but are in comparison to iHeart, Cumulus or CBS (whose future is a bit unknown right now). They will be the next generation of broadcasters, and I think that next generation is very, very interested in how to bring digital into the radio tent so the medium can be looked at as growing, as it had been for decades.

 

Lastly, what is your take on the future of the podcasting industry, as it pertains to both content consumption, and advertising spend by brands and agencies?

My take on the future of podcasting is that it’s very bright. There are a number of things that make that future bright. I’m fond of saying that, if radio has a million listeners and television has a million viewers, and we have a million consumers, that our million is worth more. And the reason it’s worth more is because every one of our million had to perform a positive act to listen to the podcast in the first place.

There’s no question about whether this is foreground material or not. Our time spent listening is higher than traditional radio, the fan base of the personalities or subject matter is far more active in the actual consumption of the products that are being advertised on the shows, and everybody knows it. Or, if they don’t know it, they’re going to know it because it’s just too obvious not to know. I think that being able to consume great programs without having to know when it’s airing on your local radio station, or without the limits imposed on programming with the radio format, is going to create a much larger and much easier listening opportunity.

We create a demographic star in podcasting pretty much weekly. I’m hard-pressed to think of the last national star that’s been created on radio in the last couple of years. I like podcasting a lot. If I didn’t like it, I wouldn’t be doing it. It’s not as if I have to do it. It’s an opportunity to do something in the digital age using the skills that we developed at Westwood One and, more than anything, it’s just really fun and it’s a great opportunity to work with a larger creative community and with people that are really passionate about the opportunities that digital brings to the party.

 


 

PodcastOne is the online destination for the very best in digital audio on-demand. We make it easy for people to discover, connect and engage with a selection of over 200 of the most popular podcasts. With 50 collective years of senior management experience pioneering in audio, more than 400 million monthly impressions, and 90+ brand advertisers, PodcastOne delivers the best in content and advertiser results. Podcast listeners perform a positive act just to listen to a show, and combined with built in trust with our hosts and active engagement, reaching ONE of our listeners is more valuable than any other medium. And for podcasters, this cross-promotional reach is invaluable in growing audience and revenue.

For more information, visit http://www.podcastone.com/About

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