With $40 Million, Podcast Upstart Luminary Media Builds a Platform

Author: Benjamin Mullen  Source: WSJ

A new heavyweight is preparing to enter the world of podcasting.

Luminary Media LLC, a venture-backed company, has raised $40 million to join the rapidly expanding realm of podcasting and audio.

Unlike most of its competitors, which support their businesses primarily through advertising, Luminary Media’s business plan includes signing users up for a subscription service granting them access to a portfolio of premium podcasts, according to people familiar with the matter.

The venture, which has offices in Chicago and New York, is being led by Matt Sacks, a principal at New Enterprise Associates. NEA has teamed up with other venture and high net-worth investors to back the venture, which is slated to launch some time next year, according to people familiar with the matter.

“Luminary intends to be a better Podcommunity for all,” Mr. Sacks said in emailed comments. “We want to be a better answer for creators and a better experience for listeners. We are podcast fans who love podcasts like the creators and listeners do, and our mission is to cultivate, amplify and elevate this special community.”

The company has begun approaching podcast creators including Wondery, PRX, HowStuffWorks and Cadence13 in recent weeks, and has already begun to strike licensing deals, according to people familiar with the matter. Luminary Media is guaranteeing podcast creators revenue up front in exchange for the rights to put their work on its platform, according to people familiar with the matter.

“This is the first well-capitalized attempt to create the ‘Netflix of podcasting,’” said a source familiar with Luminary Media’s business plans.

Current plans call for about 75% of Luminary Media’s content to be original within 36 months of launch, according to a person familiar with the matter.

The company’s philosophy touches on two trendy topics for media investors: audio and subscription-focused media companies. Audio companies such as Gimlet Media, Wondery and 60dB have raised millions from investors in recent years, riding a wave of exploding listenership in the U.S. and beyond. At the same time, subscription-backed media startups such as The Information, Stat and The Athletic have all found their footing in a digital advertising realm dominated by Google and Facebook .

The total audience for podcasting is growing. About 73 million Americans age 12 and up listen to podcasts at least monthly, according to a 2018 survey by Edison Research, up 17% compared with 2015.

Although most companies sell ads against their podcasts, some have tried subscription businesses. In 2016, the podcast syndication company Stitcher launched Stitcher Premium, a subscription service that charges users $4.99 a month. The subscription-backed streaming giant Spotify has also gotten into the podcasting game with Spotlight, which features podcasts accompanied by text, video and photos. Audible, a unit of Amazon.com , also operates a subscription service for audiobooks and podcasts.

Investors and entrepreneurs in the podcasting industry regard Luminary Media with a mix of apprehension and optimism. On one hand, the company’s subscription model presents an opportunity to make money by cutting licensing deals that could feature a window of exclusivity, according to a person familiar with the matter. On the other hand, putting podcasts on another company’s platform could disrupt their advertising-supported business model, they said.

“It’s good for us,” said one executive at an audio company. “It’s another buyer of premium content.”