MP3 poor format for podcast monetization

by greg on November 14, 2005

I was thinking about the Mitch Ratcliffe pile-on while doing laundry and still don’t quite get it. To recap: Mitch is a consultant for Audible, a downloadable audiobook company that’s been around since 1997 or so and does about $60M in revenue each year – no small change. Audible recently announced its Ratcliffe-designed Wordcast service – a monetization for podcasting suite which allows podcasters to (all optionally, I gather) dynamically insert ads, accurately measure listeners, and charge subscription fees, alongside the usual hosting service. The catch (and the controversy) – the podcasts for download are in Audible’s AA format instead of the MP3 format, and podcasters have the ability to protect them with digital-rights management. Over the weekend, Dave Winer, Doc Searles, Om Malik, and Jeff Jarvis have all been very critical of Audible and of Mitch for defending it.

Now, two things:

1) MP3 can’t effectively be used to monetize advertising, because there’s no way to audit listeners. That’s why Dave Winer likes the format – as he wrote:

By design, podcasting took a poison pill at the very beginning of its life that made it impossible for the corporate types to subvert it without fundamentally changing what it is. [...] Basically MP3 can’t be rigged up to serve the purpose of advertisers, and that’s why I love MP3.

Dave’s absolutely right – advertisers who try to work directly with MP3 podcasts will fail. Take an MP3-monetizing service like Fruitcast, which also inserts ads into audio files – it simply can’t accomodate advertisers who want to pay by the listen. Instead Fruitcast charges by the download, which is a pig-in-a-poke if there ever was one. It’ll make podcasters long for DRM (“please, folks, don’t share my show over BitTorrent – download it from Fruitcast instead,”) It bases revenue on an easily-gamed metric (“yes, my ‘bot network really does love my podcast – a few more of them each week…”) And performance is completely untrackable (“Boss: Hey, Marketing, how many additional sales did we get from that grand you spent on Fruitcast?” “Marketing: Well, our ad was downloaded 8,000 times….” “Boss: That’s not what I asked.”) Unless Fruitcast gets itself a raft of 1-800 numbers and starts charging on a cost-per-call basis – my free advice to the company – I think it’s toast.

As a corollary, just so we’re clear – when Jeff Jarvis says,

Let’s say that MP3s could ping their creators when they are played — at the creator’s option, with full transparency for the listeners. Then the creators could count and control their own stats without having to pay someone to do it via a proprietary system, and report those stats to sponsors. That’s the sort of thing I want to see.

– he means (maybe without knowing it) “I want an open format that’s not MP3,” since the MP3 format simply can’t be extended to enable accurate listener auditing. It’d have to be revised, and in the revision become something else.

2) Capitalism treats barriers to profit as damage, and routes around them. (With apologies to John Gilmore.) In other words, everything monetizable gets monetized. Poison pills – like the MP3 format – get thrown up and spat out. We’ve already seen this happen for regular music and audiobook downloads – this gives Audible’s .AA and Microsoft’s .WMA a reason for being; this is why Apple iTunes sells you a MP4 container holding a FairPlay-encrypted .AAC file. Podcasting’s no different. If the audience is large enough, and money can be made off it, then money will be made off it – the MP3 format will simply be replaced by a format that either allows DRM (if the monetization is done through a subscription or licensing model) or allows accurate measurement of listens and conversions (if the monetization is done through an ad-supported model).

I favor the latter, ad-supported model; it avoids obnoxious DRM and lowers barriers between podcaster and audience. It also allows people who’ve produced something of value to get paid – producing quality content takes talent, initiative, and hard work, and rewarding talent, initiative, and hard work is as American as apple pie and college football. If I were the producer of a popular podcast, I might be more than a little irritated that podcasting was intentionally designed to hinder commercialization. As an observer, I can’t help but wonder – if the format for podcasting was designed from the start to support important commercial metrics like audience size, based on the understanding that everything successful is monetized, perhaps the Audibles of the world would be happily using the open format right now rather than a proprietary one, and we’d be in a much better spot. Plus startups would be able to get in on the action – at the moment the only folks that can effectively monetize podcasts are the big guys with their more-easily commericalized formats (or little guys that become dependent on the bigger ones.) The MP3 format’s utter unworkability only helps shut smaller entrepreneurs out – while not doing much to hinder larger companies.

All that said – given that MP3 is what it is, and given that podcasting will be commercialized, the move by Audible strikes me as a completely natural step. Yes, it’d be nicer if the format was open and yes, I’d be happier if it left behind the DRM and focused solely on advertising injection. But on the whole Audible’s done something positive – it’s definitely not the devil everyone seems to be making it out to be.

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