Investors are spending big on podcasts. Is this a boom or a bubble?

As big money flies around the world of podcasting, so does one big question: where is the industry headed?

Venture capitalists have recently invested so much into the fledgling industry that some people are wondering what changes could come with such a major influx of cash.

Spotify recently acquired Parcast, the fast-growing studio behind the popular podcast Mythology.

Last month, the streaming music company also paid $230 million US for Gimlet Media, the company Alex Blumberg launched in 2014 — a price three times its internal valuation, according to New York Magazine books editor Boris Kachka.

With the announcement that they'll spend $500 million US in total on acquiring podcasts, Spotify has made it clear that this is just the beginning of a major push into non-music content.

Kachka told Day 6 host Brent Bambury that some are beginning to ask if all the money sloshing around the podcasting industry could be a sign that it's headed for a bubble.

Here's part of that conversation:

[Buying Gimlet is] a big gamble on Spotify's behalf, and podcasting is still arguably a fledgling industry. What do you think of the risk that Spotify is taking here?

The risk is that the growth that's been occurring over the last couple of years is not going to continue.

So the question is: what is the top number? Is it the number of people who listen to talk radio in America? Is podcasting going to start cannibalizing radio in much bigger ways than it has so far?

What they're gambling on is that the number of listeners will triple, and we don't know if that's true. 

People are starting to worry that advertising is not going to be the answer to how to monetizepodcasts going into the future.- Boris Kachka, New York Magazine

Spotify isn't the only corporate player who sees dollar signs in podcasting. Let's look at the model that Luminary is proposing. How are they hoping to monetize podcasts? 

Luminary is a company that wants to be a premium podcaster. The Netflix of podcasts. They want to charge $8 a month and they're going to have 40 shows — and ramping up from there.

You're going to be able to listen to those shows only on Luminary, and the gamble is that you'll want that premium content and that you'll pay them their eight dollars — no ads, just the premium content. 

People are starting to worry that advertising is not going to be the answer to how to monetize podcasts going into the future. Direct advertising, in particular, has been very lucrative for podcasts.

So what people are starting to wonder is: do we need a premium service? Because the advertising space is going to start to wear on listeners.

This American Life was made an offer by Luminary; they turned it down. What do you know about that proposal? 

Proposal is probably a better word. The reporting on whether it was a technical, official offer is a little bit hazy. 

But an agent comes and says: 'This is how much you could potentially make for three years, based on the numbers' — numbers which, of course, were provided by Luminary.

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So, that's the number that Ira Glass got from them — [he] can make $45 million in return for taking This American Life, probably off the radio though, he wasn't so sure what exactly the offer entailed. 

But that would mean nobody at NPR could listen to This American Life. He would still have an independent studio but he wouldn't be able to distribute it free to everybody.

He didn't want to take that gamble because he does not want to lose listeners. 

What I'm wondering, though, is as ... someone who loves podcasts — who maybe has been listening to them for free since since the beginning — should I be excited, or should I be worried about the fact that there's this huge influx of money right now that's going into the thing that I love?

The fact is that right now there's a mix of different content. And frankly the stuff that's behind paywalls is better, generally ... but as long as there is that free flow of content, things will be OK.

The only problem is if you have something like Luminary that has only the good shows — and all the good shows — and they're in the position of green-lighting those shows, your niche shows may not be able to get behind that Luminary paywall. 

And they won't be able to get the attention, which is especially an issue for a podcast because there are 660 thousand of them — and most people listen to about seven.

If venture capital sees that podcasts were a blip they're not going to want to spend money on it anymore- Boris Kachka, New York Magazine

Let's go back to what we talked about at the beginning: risk. People have speculated right now that the podcasting industry is actually heading for a bubble with this amount of money going into it. Do you think that's a real concern?

I think it's a concern if Spotify's mission fails, [or] if Luminary's mission fails.

The risk is that people won't spend more money on it in the future, so, I guess they'll never get this kind of investment — and that investors who are always looking for a high return will abandon the people that they're now starting to invest in.

So, if venture capital sees that podcasts were a blip they're not going to want to spend money on it anymore — so that money is going to go away. But this is still far in the future.

I talked to Roman Mars [host of 99% Invisible] ... and he said, 'If you ask me, [if] it's a bubble, maybe it's a content bubble. But it's not a bubble as far as I'm concerned because I get a million listeners a week.' 

'That's more than a lot of cable shows — and I'm not getting paid cable TV money.'

This transcript has been edited for length and clarity. To hear the full interview with Boris Kachka, download our podcast or click 'Listen' at the top of this page.