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.

{ 7 comments… read them below or add one }

Matthew Gertner November 14, 2005 at 9:17 am

Greg,

You totally failed to convince me that MP3 is in some way incompatible with either the subscription/pay-per-download or advertising model.

As far as advertising is concerned: consider broadcast TV/radio and AdWords/AdSense. In the first case, there is an auditing process that is statistical and based on very loosy-goosy metrics (how many TVs with Nielsen boxes are on and at any given time). No reason why this couldn’t work for MP3s. In terms of clickthroughs, there isn’t a direct equivalent but you could use promotional codes (mention “ademporium.com” for a 20% discount) to track response.

I was equally baffled by your assertion that DRM is necessary to monetize MP3 through non-advertising means. The jury’s out on this, of course, but I’ve yet to see any serious attempt to offer mainstream media for sale sans DRM, so we have no way of saying what effect it would have. Personally I believe iTunes, for example, would sell considerably more and make considerably more money if they didn’t use DRM. Who can prove me wrong?

Matt

Pete Cashmore November 14, 2005 at 2:16 pm

Greg, I completely agree with you. This is the kind of thing I was looking for when I posted this over the weekend:

http://mashable.com/2005/11/13/does-podcasting-need-better-measurement/

Om Malik said that we don’t need Audible when Fruitcast will do – completely missing the point that pay-per-download is an easily gamed metric and you can’t study what happened after the download. By the same token, though, I think the systems which solve this problem should be as open as possible.

tim November 14, 2005 at 5:48 pm

Hmm I think you missed the point slightly – I podcast *because* it’s not DRM and it’s unsellable – and I know of quite a few people who feel the same. We pioneers built the market that commercial entities are not trying to exploit – the reason that podcasts even existed other than Dave’s or Adam’s is the ease of entry, the open source nature and popularity of the MP3 format made it attractive to amateur indie podcasters.

We built this city…and not just on rock n’ roll ;-)

Closed systems usually fail in the end – users will find a way to break out or go elsewhere frustrated…unless it’s a monopoly. I think building sch things into it at the start would have been a barrier to entry for the early adopters – you’d not have gotten the Dawn and Drews or Madges or Bicyclemarks – just re-fried old media…really this needs a new approach, the old advertising media model is the one that’s outdated and wrong, not podcasting.

It would be cool to know how many plays you have tho – I agree as podcaster that would be nice to know, as long as it’s open source and transparent. But maybe that could be built in the MP3 header and player? Ultimately tho, you’ll always have unconnected devices that won’t tell you who played what – most players are not connected via Wifi or mobile networks…if they were, you could use something like Audioscrobbler but it’d have to be in every player – either a sneaky Sony style DRM or open source and thus optional? Hmm…

tim November 14, 2005 at 5:49 pm

in the post above, 3rd line “not” should say “now” – oops!

Anonymous November 14, 2005 at 5:53 pm

Why can’t mp3 files use embedded tags to indicate to the player that it should accumulate a “listen count”, and have it talk-back to some server when it’s next online (or sync’d or whatever)?

Sure, since the format is completely open, some tech-types could easily rip out the listen-count-tags, but so what? That’s hardly gonna be a majority…

After all, this isn’t really a *format* problem, but a *platform* problem…

Anonymous November 15, 2005 at 2:02 am

Tim – clearly anyone who does not want to sell their work or sell inband advertising with nominal statistics can live within the current system. Why does that matter?

willc2 November 15, 2005 at 5:24 am

I listen to podcasts.

I don’t care to be tracked whenever I play something on my iPod.

It’s creepy, like someone reading over my shoulder.

MP3 works fine for me, so why would I switch.

I can email it to a friend, or send a link to it. Anybody can play it.

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