Some Models Are Useful

Goalhanger Podcasts and The Rest is History

"All models are approximations. Assumptions, whether implied or clearly stated, are never exactly true. All models are wrong, but some models are useful. So the question you need to ask is not "Is the model true?" (it never is) but "Is the model good enough for this particular application?"

-George P Box - Statistical Control By Monitoring and Adjustment

I love what Gary Lineker, Tony Pastor and Jack Davenport have done in getting Goalhanger off the ground. Goalhanger is a Podcast Producer, (a network in my view) in the UK that has eight shows under its aegis. Most of them are using the branding "The Rest is ..." The Top shows are: The Rest is History, The Rest is Politics, The Rest is Football, and The Rest is Entertainment. All are in the top ten for the UK podcast charts.

A few weeks ago I went on a modeling journey. We’re not talking Sports Illustrated in the tropics, but some basic financial modeling. I wanted to build insight on what a podcast operating model could look like, using what I could glean on The Rest is History. It's such a great show.

But here’s the deal—I wasn’t exactly thrilled with my first stab at it. I mean, I could’ve dug a bit deeper into the nitty-gritty of my assumptions. And by deeper, I’m talking about hitting the books and fine-tuning the details. It’s like this with modeling, right? You’re never really done; it’s more of a lather, rinse and repeat kind of thing.

Now, when you’re dealing with companies or big names that are out there in the public eye, you’re bound to catch wind of something. We usually think of that as information leakage. Even private companies will talk in the press to help build their business. Their message in the press is normally geared to building brand, audience, and advertiser relationships. Where there’s chatter, there’s usually a nugget or two of juicy info slipping through the cracks.

I did some deeper research and here is what I could find to help make my model better.

June 2024 ?

The Rest is History was started during the pandemic in 2020. As of the time of the article that had served about 200 Million downloads, 450 episodes and 200 subscriber only episodes. Thirty to forty percent of their audience is based in the US.

August 2023

Goalhanger Podcasts was created at the start of 2022 and has 17.5 Million Downloads a month. This was largely due to it’s two flagship shows, The Rest is History and The Rest is Politics.

The Rest is History has 20,000 subscribers to their "‘club’, paying for ad-free content.

July 2023

Goalhanger’s most popular podcast is The Rest Is History, co-presented by historians Tom Holland and Dominic Sandbrook. Launched in 2020, it has covered everything from the killing of Julius Caesar to the rise of the Nazis. The show is downloaded more than 6mn times a month, with more than half of its listeners hailing from outside the UK.

Refinement

Let's break it down:

In July 2023, there were 13 episodes total, with 4 exclusive to club members. In June 2023, of the 13 episodes, 5 were club-only. This means, over two months, 17 episodes were open for ads, and 9 were for club members.

With 20,000 ad-free subscribers, around 520,000 downloads didn't show ads. So, each ad-supported episode got roughly 675,000 downloads.

Keep in mind, this is a rough estimate. It doesn't factor in older episodes still getting downloads, and it assumes all 6 million monthly downloads are for new episodes only. I combined June and July to get a more balanced monthly average based on the latest data from July '23. If we wanted to get fancy we’d estimate downloads from the back catalogue as part of the total 6 million number. For a model like this I don’t think it provides additional value at this point. Simpler is better.

The Model

I updated the model to include the new data I uncovered. User-adjustable inputs, marked in yellow, allow for custom assumptions. I inputted podcast-specific information and isolated club member downloads to determine ad placement availability. I also fine-tuned the effective CPM based on ad count and average CPM per ad.

Additionally, I estimated listener numbers using a 'listen rate', which assumes each listener may download more than one episode monthly. This influences the monthly listener calculation. While most podcasts have rates between 1-2, I hypothesized that history enthusiasts might have a higher average rate. In this case five.

This is a learning process, and this revenue model seems realistic. With an estimated annual revenue of $10 million for 104 hours of content, it's a profitable venture. Goalhanger takes a third of the revenues. After accounting for production, ad sales, and distribution costs of $1.5 million (my estimate), there's $8.5 million left. This amount is split between Goalhanger and the hosts, resulting in $2.8 million for each party in a three-way split.

You may dispute my estimates or assume higher costs, but the logic aligns with business operations. Many modelers seek excessive detail, which often isn't necessary. Reviewing, experimenting, and questioning a simple model provides better business and industry insight. Simpler models require more thought as they should only include meaningful elements, and not every possible detail.

Things to think about - refining operating costs especially as it refers to commissions or revenue sharing with ad networks. My plug is just that a plug, as you learn you want to refine assumptions but the key is to be concise and simple. THAT IS WHERE LEARNING TAKES PLACE.

Bottom Line - If Goalhanger can run every property near these levels - it's a good business opportunity given their platform. Remember your mileage may vary.

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