The Bull Case for Podcasting with DWNLOAD Media’s Chris Peterson

Jeff Umbro: This is Podcast Perspectives, a show about the latest news in the podcast industry and the people behind it. I'm your host, Jeff Umbro, founder and CEO of the Podglomerate. Today on the show, we're speaking with Chris Peterson of DWNLOAD Media. 

DWNLOAD Media is a podcast rollup. If you're unfamiliar with that term, it is the idea of combining a number of smaller companies, finding operational efficiencies, and creating one larger entity in order to help compete with bigger companies that are out in the space – think Spotify, Amazon, Sirius XM. Chris is in the early stages of this process, pitching investors and podcast companies alike on the validity of this idea. 

Before founding DWNLOAD, Chris worked at iHeart, where he helped develop their podcast network and worked on acquisitions like How Stuff Works. He also oversaw a ton of other acquisitions while he was at Kindred Media, which is a division of LionTree. 

To promote DWNLOAD Media, Chris recently released the 2024 DWNLOAD Report, where he argues that podcasting is undervalued, bucking a lot of the other coverage of the industry in 2023. Today, Chris and I chat about the points he made in the report to clarify the bull case for podcasting in 2024. So let's get to it.

So you are the founder and CEO of DWNLOAD Media. You just published a report called the DWNLOAD Report 2024 and I want to talk to you about some of the things that you included there. But just to get us started, what is DWNLOAD media? 

Chris Peterson: So DWNLOAD media, essentially it's a media rollup. We think that by combining a couple of companies, we can make them more efficient, we can increase the margins, make them profitable if they're not already, and really just build a profitable media company. And as a big believer in audio and podcasting in general. I think it's a fantastic way to not only prove IP and an efficient way to prove IP, but it's also completely undervalued still.

And so when we look at the entire media and digital media landscape, we want to focus on combining podcast companies in the hopes that as the industry grows, audience revenue, et cetera, we're in a great position to have, what will look like in the end, a profitable media company, just with an audio-first focus.

Jeff Umbro: I think most of our listeners are going to understand what you just said, but I do want to just really lay out like, what is a roll up [and] what is your vision of what this particular one will look like? 

Chris Peterson: So essentially we want to take majority stake positions in some podcast content companies at first. And that can be a company that is a small production studio that does mostly for-higher work, it could be a company that is focused on creating original IP and highly produced scripted content, it could be an ad network that doesn't really own any IP at the end of the day. So the goal is to combine those. 

Once you combine those companies they will have diversified revenue, diversified business models, which makes the company stronger as a whole, [and] also gives them a scale that they wouldn't have otherwise.

And then in the future, we hope to be able to expand into tech or a SAS business, anything that will help our portfolio companies. So we're not just focused completely on podcast content companies and studios for the long term. But certainly right now, that's what we're doing. 

Jeff Umbro: How's it going so far? 

Chris Peterson: It's going well. I think we announced DWNLOAD media in May of 2023. Prior to that, I had had conversations with a lot of potential investors about raising capital to do this idea. Most of them bought into the thesis, our experience in the space, but we're very concerned that we would overpay for assets – valuations would still be very frothy as we've seen in the past. 

And so they wanted us to go out into the marketplace and really figure out where the market is, where are these podcast companies at, how healthy are they really, and then come back and potentially be able to close capital. So we raised a seed fund to be able to go out and spend the last year with our partner, RockWater Industries, to really just spoil the ocean, as it were.

We've talked to hundreds of podcast networks from all around the globe. This is not just US-focused by any stretch of the imagination. We've done diligence in some capacity on like 60 plus companies. And we really dove in deep on about a dozen or so companies to really figure out what the right valuations would be if you were to acquire a company.

[With] a couple of companies we got to the finish line essentially to sign a deal. But of course, as I said, we only had our seed capital and the goal was to then go raise capital based on those deals. And that's what we're trying to do right now is go out and raise the capital.

To be perfectly honest – and what led to my word vomiting in the DWNLOAD Report – was a lot of the conversations I've had with investors over the last several weeks, I feel like I'm actually starting from behind where I was a year ago when I didn't have actual assets on the table to close deals on. They're citing, at least before this week, Spotify's challenges with podcasting. They're citing headlines that they've read from last year or two about bubbles bursting. And when I'm starting kind of behind the eight ball in those meetings, I don't even get the chance to really get to the future of podcasting. I'm just talking about where we are today.  And it just seems like there's a lot of misinformation. 

And so instead of waiting for someone else to write the article, I just decided I'm going to do it. And here's my two cents from where I sit and what I've learned from looking at the actual financials of companies for the last several years.

And it's been impactful thus far. I think we're getting a lot of traction with it. Investors are reaching out now, the investors that had closed the door or said not right now are reaching back out. And so it's working, I think, knock on wood.

Jeff Umbro: So I'm going to say something that's probably very obvious to most listeners. Chris is looking to raise capital from various parties in order to reinvest that in the podcast space. And his job is to convince people that their capital is going to go further in this endeavor than it would in a 401k or any other kind of investment. 

You have done diligence on about 60 different podcast companies.From your point of view, and don't share anything that you're not comfortable sharing, how healthy is the industry based on what you saw?

Chris Peterson: What happened was we had a lot of money pouring into the space – that happens in the investment world. They have FOMO and it really catches on and people are more than willing to put money into the space. We've seen it not only with podcasting, but a year or so ago with NFTs. We saw it with blogs. 

And so what I would say is that before we had any kind of tightening on the marketplace, we just had unchecked business models. If I go back and look at decks that I saw in 2019 or 2020, podcast companies [we’re] trying to raise money, [and] they would just have these crazy projections of like, “we're gonna go from $1 million in revenue this year to $50 million by 2024.” I put this in the DWNLOAD report as an example. 

Jeff Umbro: Must be nice. 

Chris Peterson: Yeah, and it didn't happen. And I'm not singling out anyone. I'm just saying it didn't happen. I know that. I will bet anything on that. It did not happen because it wasn't a realistic business model. You cannot just put in hockey-stick growth and expect it to never have any kind of market correction.

And so we entered this time period where not only was investment coming into the space very easy to get, that meant the money was very easy to spend. And so people were spending way too much money on production, they were signing minimum guarantees, and not just to like high-profile celebrities, but people were spending a ton of money that never made sense, because they thought that they could then raise more capital in a year or two when they needed to pay the utility bills essentially, right?

And when the overall ecosystem of capital markets, interest rates, and everything like that tightened up, all of a sudden it was like, “wait a minute, your company's not profitable. And you don't have a plan to be profitable.” That becomes a huge issue, right? And so you can't get that money anymore without taking a huge cut on your valuation and potentially losing, as a CEO or founder, a ton of equity in your company. That's not the case for every company, but it is the case for a few. 

But then we also have headwinds.You've got quite frankly, a lot of CEO and founders for the production side that are very creative people, and they kind of found themselves to be CEOs when they started their own company. And don't get me wrong, that's not a knock on anything, but there are very few people in the world that can do both creative and business awesome.

It's very hard to operate a business that you need to pivot. You need to change. You need to do things that are different because the industry is changing around you. And that's what we've seen happen in the last couple of years: when your business is a production studio, that’s your main businesses, just producing content for one of the major platforms, Audible, Spotify, Sirius XM, and all of a sudden, Sirius XM doesn't hit their subscriber numbers, or Spotify or Audible, whoever, they now are tightening the belts because of one bad quarter across the board. And that means that outsourced production work for podcasts is also going to be affected.

And so it just becomes a matter of not having diversified revenue or opportunities makes you very vulnerable to market conditions. 

Jeff Umbro: I did just want to flag that we're recording this in early February, and there's been at least two production shops that have shut down and stated that it's because they lost a big contract with a big organization that had layoffs. It's the nature of the beast if you're not diversifying your revenue streams, or if you're too exposed in a certain area.

But the question initially was how healthy is the industry based on these 60 PnLs that you've seen?

Chris Peterson: What we've seen is – I can look at a PnL right now, look at the last couple of years, and pretty accurately, I think, forecast where that company's gonna be next year. And that comes down to seeing where the leadership was able to refocus priorities.

That can mean many different things. But if you start to see the change of where they're starting to invest in different opportunities, you're then able to start to see, and if those things are working and then you see them doubling down on them, or if you see them just kind of business as usual, the market's got to come back, you know? We're just going to wait for that phone call from the platform to green light this true crime series so we can get back up and running. You can tell which ones are able to adapt to the new market. 

And I think that those companies that have had a tremendously difficult last 12 months or so – lot of times reducing workforce, unfortunately – they have to reprioritize their content slate a lot of the times. Because at the end of the day, you have to have a PnL that makes sense, which is not always fun when you're trying to be a creative and create great content. But the ones that have done that, there's so much more optimism in the space and their financials are actually backing that up.

Now let's not get overly confident. When these companies – that some of them probably could have had the light shut off last year pretty easily – are now seeing profitable months and seeing the pathway to profitability overall, let's not be over optimistic. These are little wins at this point. But what we've learned is you've got to have a solid foundation for your business. That's the important thing. And then build off of that. 

Jeff Umbro: If you were put in the devil's advocate position to talk about why podcasting is a bear market right now, what would you say?

Chris Peterson: What I hear [are] the concerns from the investment community: a lot of these companies are still not profitable, especially the ones that are original IP focused, and that's a huge concern. And then when you also start to talk about how you value these companies, we're still kind of valuing off of revenue because so many aren't profitable. 

We see this, again, like when all money rushes into a space and it's growth at all costs, you can run a company and just put as much money as you want into it to just grow with no path to profitability. I mean Spotify is still not an overall profitable company, right? So it's not necessarily a bad thing. But in the current climate of capital markets, still just trying to trade on this revenue-only and not necessarily seeing the path to profitability, that's where I think we're trying to bring in a different conversation, of if this company is not profitable yet, it doesn't mean it's a bad company. It just means we need to do something a little bit different. 

And we won't move forward with a company unless we see the path to profitability in the very near term. Because at the end of the day, if DWNLOAD Media were to exit at some point in time, we know it will not be on a revenue base. Those days are going to be gone. It's going to be on a very solid business, a good foundation, and making sure that it's profitable.

Jeff Umbro: It is no secret that there are a lot of these conversations happening right now, because a lot of people feel like you do Chris, that the podcast market is actually undervalued today. I will say that most of those conversations are really interesting because everybody has similar ideas as to how to do this, and [that’s] basically make one large company in order to compete with the other large companies. But I don't know that anybody really has anything that's going to totally shift the way in which these companies are run beyond the idea of operational efficiencies.

So what are your plans in that regard to create a profitable company?

Chris Peterson: Yeah, I'll try to keep this under 10 minutes. The way we view it, and I can't speak to how everyone else necessarily views it, but the way we view it is this is a puzzle that we're putting together. This is not us [saying], “hey, let's just go get some assets, we'll try and make them more profitable,” and we're just putting chips on a board hoping one of them becomes the next Wondery. It's not that. 

We're building something cohesive. So the first acquisition, if it's a large company, then we view everything else as a bolt on to see how we can make things more efficient. If it's two to three similar sized things, it's like what unique thing do each of these assets bring to the table.

The next step of it, create a profitable company. I think you do that through new business opportunities. So when you look at just the audio: what are we doing to maximize ad revenue and sponsorships? What are we doing to dive into subscription? Because yes, it may be lagging in the US, but internationally there are a lot of positive signs for subscription, and I think that's going to continue.

Jeff Umbro: You also see subscription working really well elsewhere in other media industries. Substack is, depending on who you ask is like a media darling.

Chris Peterson: And if you just think about [it], there are a ton of podcasters that have large subscription businesses running through Patreon or whatever. There's a couple networks I think that are doing it pretty well through Apple and Spotify and I've seen them hiring for those positions, so they believe in it. Do I think it's a major driver of revenue today? No. But they see the opportunity. 

Also, how do we increase the margins on those? How can we take a project [and] make the production more efficient? And I'm not saying lower the quality. But if, let's say one of the companies we were to acquire was in Europe and they can do production for cheaper, why wouldn't we run at least some of the production through Europe? Maybe it's not for our big tentpole series, but maybe it's for any branded content or any for-higher production work. We run it through there to just maximize the profits and margins on those individual projects, so then we can justify the bigger budget for the original IP.

Just as an example of [creating] new business opportunities off of the back of audio, my co-founders [are] brothers, Chris and Kevin Balfe, they own a company called Red Sea Ventures. They basically white label digital services for talent, brands, et cetera. That's a fancy way of saying they go in and build businesses for people. 

And this is where they really plug into DWNLOAD media. Just as an example, they own CrimeCon, which is the largest true crime convention. And so anything that fit into that realm, that was under the DWNLOAD media umbrella, we have an unfair advantage to tapping into that community. And not only showcasing it at CrimeCon, but then using the entire network that they have built from newsletters, paid subscribers, et cetera, to promote new podcasts. And that's just one small example, but I hope that paints the picture of the types of things we're thinking about, in ways to really grow the IP and use what we already have infrastructure for.

And because of that partnership with Red Seat Ventures, any company, if we bought a company tomorrow, has access to the live events team, a team that can turn on a newsletter, a subscription business, et cetera, very efficiently without having to go out and build that entire team from scratch or raise the money to do so.

Jeff Umbro: So I agree with you. I think that there are a lot of different opportunities for every podcast company to expand, to collaborate, to do things differently, and do more of them. [But] also – I'll just pick one at random of the things that you mentioned – just to play my own version of devil's advocate, subscription businesses have been around in podcasting for years. You have Apple, Spotify, Supporting Cast, Patreon, and several others that have run these paywalled systems to access exclusive, early, or ad free audio. As I understand it, a lot of these companies and organizations are doing well, but not fantastic when it comes to the actual revenue that's coming from that.

Why is that? Do you think it's that we're too early? Do you think that we're doing it incorrectly? Why is that going to change in the future?

Chris Peterson: I think it's a mix of both. I think one is you have networks that maybe have an identity to the hardcore podcast listener, but from the casual podcast listener, maybe it's not so much of an identity, to the need of, “let me go pay this podcast network five bucks a month or whatever.” 

We do see though that like there's individual personalities that have tremendous businesses doing this. And whether it's like you don't get access to any of my content, or you get bonus content, there's a path there. What I think the sort of delta between the two is, is that there's very few brands in the podcast space that elicit such loyalty that I need to go pay for that. 

Jeff Umbro: So again, I agree with everything that you're saying. The one pushback I have is that to do that well requires somebody, or somebodies, who are going to spend a lot of time thinking about – the brand, the strategy, the marketing endeavors, somebody to actually produce all of the stuff that lives behind the paywall. And I know that there is a formula that will work to make this cost effective, but initially, and usually, this means more expensive productions. And that's the thing that I just think doesn't always square with the idea of bringing all of these parties together for these operational efficiencies.

I don't even know why I'm arguing against this because I agree with you. I think that it will be done really well in the future, but I also recognize that it requires a ton of work, effort, and the right people to do it. And that's not an easy thing. It's why people haven't done it yet. 

Chris Peterson: Totally fair point. And that I think is sort of back to the case of let's unify and build basically the best team in audio that we can, to figure out this problem. Because it's not going to be a one-size-fits-all blueprint. For every single genre and every single whatever, you're going to have to figure out what works for them. But if you have some scale behind it, you're going to have a better opportunity to make it work. 

And to me, it's a matter of time, but if you're all doing it independently – like a network right now that's just barely recovering from 2023, doesn't know if they can raise money at their last valuation, is not going to be able to put the resources into it needed to grow this.

And so for us, it's like, “okay, how can we put together a couple of these companies? Give them working capital so that part of this can be also devoted to building a subscription. Because a company that has a successful subscription model has a much higher valuation than a company that's just trading on ad revenue.”

Jeff Umbro: It's really interesting to hear you talk about all of this stuff. Because there are good examples and counterexamples for everything that you mentioned. In a weird way Joe Rogan is kind of a counter argument to that, because Spotify just put him in front of their – I mean, not in front of their paywall, but allowed access widely, as opposed to just on their platform.

Chris Peterson: Spotify is an ad network. Spotify has realized what they're supposed to be an ad network. 

Jeff Umbro: Yep. 

Chris Peterson: It's great. It's digital radio. Have it everywhere you could possibly have it. And that's what they're all going to do. I mean, we're even seeing that now in video. Amazon Prime is putting ads in unless you pay an extra, I don't even know how much per month, but the point is they've now hit a scale that with all of that, “let's just grow at all costs, how do we monetize it?” [It’s like], “oh, advertising, duh.”

They see the numbers of Joe Rogan. They know what the numbers are just on-platform. They're not offering him a stupid deal. That doesn't make sense in my opinion. Because I'm sure it's really just at the end of the day, a profit share. They're saying, “Joe, you can get this much money guaranteed, or you can do this deal.” 

And this is how network radio typically works, is that the radio company you work with will put you on as many radio stations as possible. They sell the inventory, and then the business gets a percent of that. And that's what they're doing now. We're not doing anything new with this type of deal, but it's an overall positive sign for the podcast base because that's how confident they are. The ad revenue is going to continue to grow and audience is going to continue to grow.

Jeff Umbro: Yeah and that's really the crux of this whole conversation: none of the rest of this stuff matters if audience and ads don't continue to grow, because those are the most sustainable models. I think it's good to have multiple revenue streams that do a lot of different things, but the ad model is not going anywhere.

Chris Peterson: It's the foundation for it. And it's the foundation for all media. And that's fine. That's a good, that's a good place to be.

Jeff Umbro: So today we're introducing a new subject called Bearish or Bullish. We are going to mention a podcast company and we are hoping that Chris will tell us if they are over or undervalued. 

The first company that we are going to mention is Spotify.

Chris Peterson: I'm still bullish on Spotify. 

Jeff Umbro: SiriusXM?

Chris Peterson: Bearish because I don't know what the future is of in dashed satellites.

Jeff Umbro: Interesting answer. Audacy? 

Chris Peterson: Bearish. 

Jeff Umbro: Cumulus?

Chris Peterson: Bearish. 

Jeff Umbro: iHeart? 

Chris Peterson: Oh boy. I'm going to plead the Fifth on that one.

Jeff Umbro:  Tough question. Amazon?

Chris Peterson: Just as an overall entity? 

Jeff Umbro: All of these questions are specific to the audio aspect of the company. 

Chris Peterson: I think bullish because, again, they have capabilities of being an ad network that very few do.

Jeff Umbro: Also three different platforms to work from. Apple?

Chris Peterson: Oh, bullish.

Jeff Umbro: So we're going to ask you about a bunch of podcast deals. And you are going to let us know if you think that they were good or bad investments. First one is New York Times and Autumn?

Chris Peterson: Yeah. I mean, I think that was a good one.

Jeff Umbro: James Corden and SiriusXM? 

Chris Peterson: Not a good one. 

Jeff Umbro: Call Her Daddy and Spotify?

Chris Peterson: I think it's probably a pretty good deal. Licensing deals for Spotify I think have worked out. 

Jeff Umbro: Kim Kardashian and Spotify?

Chris Peterson: No.

Jeff Umbro: Alright, James Van Der Beek and SiriusXM?

Chris Peterson: Didn't he end up losing that case? 

Jeff Umbro: He never signed the contract! How do you sue somebody for not holding the contract when you didn't sign it? 

Chris Peterson: He needs a new team. That's all I'll say. 

Jeff Umbro: Smartless and Amazon? 

Chris Peterson: Well I mean, I think this Smartless and SiriusXM deal is interesting. The question is, how much value is SiriusXM putting in, in having the window of moving people to a digital platform, versus what they think they can make off of just the ads? My guess is SiriusXM is probably overvaluing the digital part of it. So we'll see. But I think that it's a great deal for Smartless.

Jeff Umbro: Thank you, Chris, for joining us. Is there anywhere that you want us to plug outside of the article?

Chris Peterson: No, the article is it. You can see the full picture of what DWNLOAD Media is, where we think the space is and where, [and] where it's going.We're just putting it all out there. So read that and if you disagree, or agree, let us know.

Jeff Umbro: Thank you to Chris Peterson for joining us on the show. You can find him on LinkedIn at Chris Peterson and a bunch of his recent posts are the DWNLOAD Report that we mentioned on the show, and we'll link to it in the show notes. You should check it out. It's definitely worth reading. If you're listening to the show, you are going to care about what's in there.

For more podcast related news info and takes, you can follow me on Twitter @JeffUmbro. Podcast Perspectives is a production of the Podglomerate. If you are looking for help producing, distributing, or monetizing your podcast, you can find us at thepodglomerate.com. Shoot us an email at listen@thepodglomerate.com, or follow us on all social platforms @podglomerate.

This episode was produced by Chris Boniello and Henry Lavoie. And thank you to our marketing team, Joni Deutsch, Madison Richards, Morgan Swift, Annabella Pena, and Vanessa Ullman. And a special thank you to Dan Christo. Thanks for listening, and I will catch you next week.