Some Thoughts about the ITConversations Business Model RFC

Doug Kaye of ITConversations recently posted an open RFC with the intriguing title: "That Business-Model Thing: How should I Make IT Conversations Self-Sustaining?". Doug brilliantly chose to wiki the input, so there are numerous comments and suggestions from his supporters and listeners that have been posted alongside his original thoughts. Unfortunately, most posters have not addressed the numbers and the economics of the issue, although individual responses on willingness to pay do provide important market research.

Let's pretend we're on the proverbial elevator. What does ITConversations do? From the about.html page on the site:
"IT Conversations is a network of high-end tech talk-radio interviews, discussions and presentations from major conferences delivered live and on-demand via the Internet."

Ignoring the network thing, because in the context of media delivery it might be construed as being like a broadcast network -- and that is not what ITConversations is about -- one can infer that ITConversations is in the business of producing, distributing and delivering audio content related to IT, by way of the Internet.

Where does the content come from? It is created by way of live panel-discussion type shows, trade show and conference presentations and interviews. Production costs are low compared to public and popular commercial radio however one would suspect that the distribution costs are not; given the substantial bandwidth costs that are necessary to push dozens of shows down the network pipe.

That's the business. Someone records something, ITConversations obtains the commercial rights to distribute the recording and makes it available to its listenership. Okay, the elevator has reached the lobby.

How many listeners do you have? Doug notes he is seeing "currently 140 megabytes/day (sic) or 4.2 terrybytes (sic) per month". I think Doug means 140 gigabytes/day and 4.2 terabytes/month. Looking at a "typical" ITConversations download size (ie: I averaged the file size of the last 27 shows from the site that I downloaded) of 24 megabytes, it appears that ITConversations has about 5975 show downloads per day or about 41825/week and 2174900/year. At an average of 4 new shows per week, assuming most listeners are downloading at least 75% of the shows; I would estimate that Doug has approximately 7800 active downloaders. Extrapolating for the number of listeners is very subjective since there is no data on the number of repeat listens or the number of additional "ears" that hear each stream or podcast. We must err on the side of being conservative in this matter so that realistic revenue projections can be made. Let's assume the number of listeners is equal to the number of downloaders as calculated. This allows for the correction of listeners that hear the show "second-hand" but that, in turn, will be offset by the number of people who download and do not listen to a complete program due to lack of interest. So as of this date, Doug has a customer base of 7800 people.

Who are these people? Advertisers will want to know, so a demographic study is going to have to be made. I will surmise however that the listenership is highly literate, technically savvy, with above average incomes and largely university or college graduates. Most will be directly employed in the IT business and all have a deep and abiding interest in IT. This is a highly motivated group with larger than normal shares of disposable income. In addition, these are industry leaders, managers, innovators and leaders. Many of the listeners to ITConversations have direct impact on product/service design and purchase decisions. All of that being said this is a really small group of professionals, maybe too small for traditional advertising agencies to figure out. This group is smaller than a comparable Canadian trade magazine by about 50% to 100% -- that's small. Forget about comparing this audience to U.S. trades. Now, that sounds bad, but the upside is that this is a new business using a new medium and it has no national barriers to audience growth; so it is not inconceivable that active listenership could grow to 50000 within the next year. (Why 50000? Ask Adam Curry. By the way, do you think he really has hit 50000 listeners? I would love to see the numbers; I remain skeptical but hopeful.)

What percentage of the content can be charged for and what should be advertiser supported? Perhaps the better question is; what revenue model will work? This has to be a mixed model of revenue. All of the ITConversations web pages should support ads. (Forget the Goooooooogle stuff, those ads are too generic and often are so contextually wrong that your audience will never click through.) You will need to embed RSS ads in your "free" feeds. Place traditional radio-style advertising in all of your streaming feeds and consider clearly identified "bought" time on your podcasts. (ie: If Carly Fiorina wants to buy 5 minutes to talk about the State of HP then that might be interesting to your users. Just make sure that they are creative, truthful and informative. Info-ads of that sort should also not use any of the editorial and content personnel from the main shows, that would seriously compromise their editorial legitimacy. But what would be wrong with Microsoft buying a 10 minute intermission by Robert Scoble for inclusion in a podcast once a week as part of the "Gilmour Gang"? What is that worth? If the Gilmour Gang remains as "free" content for download then you have to cover the cost of distribution, bandwidth and overheads. What does each show cost you to make Doug? If Marc Canter can pay bloggers, why not offer him time to wax eloquent for 5 minutes once a week and allow him to introduce the "Marqui Interview of the Week". TV and radio shows were supported by that style of sponsorship 50 years ago, it would work with podcasting.

And now for a mini-soapbox stump...

It is time for the technology and IT industries to step up and support podcasting and targeted streaming. Now. Microsoft, where are you? Sponsorship support of professional podcasters like Doug Kaye would be a marketing and PR coup. A home run. Make and produce content that can be distributed through channels like Doug's. Support diverse content in the podosphere with commercials and sponsorship notes. The money spent here would leapfrog Media Player ahead of iPod and iTunes. Just a thought.

Now let's look at revenue. A real business plan will have to address this, but I am going to make some guesses. I'll bet that ITConversations will initially not be able to raise enough money from advertising in the first year to be self-sustaining. Advertising revenue can grow dramatically, but a great deal of long-selling is going to have to be applied to make this a true advertiser supported medium. Doug, you will need a rain-maker to front your marketing and sales efforts. Oh, and also, someone untainted by the Bubble, the valley or the usual PR crap of the tech industry. Start experimenting now with sponsorship-type announcements, formats and creative; even if the stuff is offered for free. You have to start now so that listeners can provide feedback on what works, what doesn't and what is just plain BS. In the meantime the company has to survive on user subscriptions. Pick a flagship show and keep it "free", but front-end load it with support and sponsorship notices. Do one other podcast per week on the "Best of ITConversations" and offer that for free. Everything else should be available by way of subscription or pay-per-download.

What have your most loyal listeners been telling you about a subscription rate? An average of the low ranges on the wiki  (adjusted to US$) is $23.75 and the high range average is $40.00. It looks like an annual subscription of $29.95 would be a good fit. Assuming a high rate of continued listenership, target 5000 subscriptions in the first year for a gross subscription revenue of $149,750.00. You won't be buying a fighter jet for your family with that amount, but then again that would be an excellent start. As you have noted the wolf is not at your door yet and 150 Grand moves your site out of the hobby category.

Can you do this by yourself? I don't think you have a chance if you do... Well, you do; but you will get poorer doing it. I think you need at least 2 more people; a marketing guru and maybe a techie that understands audio production and website design (but also someone who understands deadlines). Clearly this effort is going to require funding and I'm guessing you are thinking this way too. So in all likelihood you have a business plan idea and are working on it now. There is enough interest in podcasting and specifically, in your concept, that I am sure a micro-capital raising could be accomplished within the community. You need at least $1000 from 250 people. Outside of political campaigns, very few organizations have gone this route. I was involved with a start-up 15 years ago that had 25 people chip in an average of $10,000 each -- but now it's time for the Deaniac types, a la Joe Trippi, to step up and show how to raise money for an enterprise like yours.  

Well people? Things have moved fast. Podcasting has gone from 0 to 100. Now what? Does this "community" exist and can we build an industry or is this just a hobby for Internet millionaires and retired VJ's?