Create a Paid Membership for Your Podcast

CHAPTER

7

How to grow your podcast business

If you have an audience and a paid membership, your podcast is a business. Here’s how to make it a successful one.

Treating your podcast’s paid membership as a business serves both your customers and your bottom line. Here’s how to do it in about five minutes.

Treat your podcast like it’s a business

At this point, you should be tracking:

  • Your podcast’s audience’s size (i.e. your unique listeners).
  • Your paid memberships conversion rate (i.e. the percentage of your podcast listeners that become paid supporters).

These metrics tell you how well your podcast is doing and you should always be monitoring them. 

To make sure your podcast succeeds as a business, there are a few other key metrics you begin to understand and track:

  • Average Revenue Per Account (ARPA) is the average of how much each paid member brings in each month.
  • Monthly Recurring Revenue (MRR) is the amount of money your paid membership generates each month.
  • Customer Churn is the percentage of paid supporters who ended their paid membership with you.
  • Lifetime Value (LTV) is how much each money each paid supporter contributes to your podcast over the lifetime of their membership.

These metrics tell you how much your paid membership is earning and how much it can grow. Here’s how to figure them out. ‍

Determining the value of a paid member (i.e. ARPA)

To determine your key metrics, you need to know how much money your paid membership is generating each month. On Supercast, you can see your membership’s monthly revenue in your dashboard. If you use Patreon or another platform, you should see similar monthly metrics in their dashboard. Note that Patreon takes 5-12% of the income you earn (in addition to payment processing fees).

Before you can calculate your MRR, you need to determine your Average Revenue Per Account (ARPA). It’s the average of how much money your members pay in a month. 

To calculate your ARPA, take your membership’s monthly revenue and divide it by the number of paying members from that month:

Monthly revenue Ă· Number of paid members that month = *ARPA Monthly revenue *ARPA Number of paid members that month

For example, if your paid membership generated $10,000 in February and you had 1,000 paid members that month, your ARPA for February is $10. 

$10,000 Ă· 1,000 = $10 per paid member in February $10,000 1,000 $10 per paid member in February

Just because your paid membership only has one price option (i.e., if membership always costs $10) doesn’t mean your ARPA will be identical to that figure. A certain portion of each membership sale will go to platform or payment fees. 

You can see how much platforms earn from each of your paid members by comparing your membership’s gross revenue and the amount that was paid out that month. For example:

  • If your monthly gross revenue was $50,000 via 5,000 paid members, your gross ARPA is $10/member.
  • If your payout was $45,000 via 5,000 paid members, your actual ARPA is $9/member.

In this example, Patreon is earning $1 for each of your paid members. That works out to about 10% of all the money your paid membership generates. 

You use your ARPA to track the value of your membership (i.e. if people are consistently paying for higher-tier memberships, it’s increasingly valuable) and calculate key metrics like MRR and LTV.

Determining how much money your membership generates each month (MRR)

Monthly recurring revenue (MRR) is the amount of money your paid membership generates each month. 

To calculate your MRR, multiply your ARPA by the number of paid members each month.

ARPA Ă— Number of paid members that month = MRR ARPA Number of paid members that month MRR

For example, if your ARPA was $5/person in April and you had 5,000 members, you have $25,000 in MRR in April.

$5/member ARPA in April Ă— 5,000 members in April = $25,000 in MRR for April $5/member ARPA in April 5,000 members in April $25,000 in MRR for April

You use your MRR to track the growth of your membership, forecast its revenue, and budget your business. 

Determining how many members you lose each month (i.e. customer churn)

Customer churn is the percentage of paid supporters who ended their paid membership with you over a period of time. This is a normal part of any premium subscription product, but you want to avoid it as much as possible.

To calculate your churn rate, divide the number of members you lost during a month by how many you had at the start of that month.

Number of members lost in a month Ă· Number of members at the start of a month = Churn rate Number of members lost in a month Number of members at the start of a month Churn rate

For example, if you lost 20 paid members in June and you had 500 at the beginning of the month, you would have a 4% churn rate. 

20 members left this month Ă· 500 total members at the start of the month = 0,04 or 4% churn rate 20 members left this month 500 total members at the start of the month 0.04 or 4% churn rate

Even if you’re gaining members faster than you’re losing them, it’s always a good idea to try and reduce your churn rate. It’s always easier to retain existing members than it is to attract new ones.

You can reduce your churn by:

  • Reaching out and asking members why they left (and then making changes based on their feedback).
  • Analyze when members typically leave to identify issues and put in preventative measures (e.g. A podcast was wondering why so many members left after a single month. It turns out they weren’t delivering about half of their membership’s premium content.).
  • Showing members you care before they leave (by regularly recognizing them and asking for feedback on ways to improve). 
Determining the lifetime value of a paid member (i.e. LTV)

A paid member’s lifetime value (LTV) tells you how much money a paid member generates over the entirety of their membership. The longer someone is a member, the higher their LTV.

You need to determine the average lifespan of a paid membership before you can calculate your LTV. To calculate the average length of a paid membership, add up the length of all member’s lifespans and divide it by the number of paid members you’ve had. 

Sum of membership lifespans Ă· Total number of paid members = Average length of a paid membership Sum of membership lifespans Total number of paid members Average length of a paid membership

Once you know the average lifespan of a paid membership, you can determine a paid member’s LTV by multiplying that figure by your ARPA.

Alternatively, you can calculate the average length of a paid membership by dividing 1 (as in, the number one) by your churn rate. 

1 Ă· Churn rate % = Average length of a paid membership 1 Churn rate % Average length of a paid membership

For example, if you have a monthly churn rate of 4%, the average length of a paid membership is 25 months. (If you use a weekly churn rate, the average length is measured in weeks. If you use an annual churn rate, the average length is measured in years.)

1 Ă· 4%/month = 25 months is the average length of a paid membership 1 4% / month 25 months is the average length of a paid membership

To calculate the LTV of a paid membership, multiply the average length of a paid membership by your ARPA.

Average length of a paid membership Ă— ARPA = LTV Average length of a paid membership ARPA LTV

For example, if your ARPA is $10/member and your paid memberships average 25 months, a paid member’s LTV is $250.

25 months Ă— $10/member each month = $250 LTV 25 months $10/member each month $250 LTV

That means you can expect to earn $250 for every paid supporter that signs up for your paid membership. 

You can use LTV to determine how much you should be investing in acquiring new paid members. For example, if your LTV is $250 and you determine it costs $30 to turn a listener into a new paid member, that’s an easy investment to make. By spending $30 now, you can expect to get that money and $220 in profit from that newly minted member. 

Putting all the pieces of your business together

Understanding how to calculate and use all this information can be confusing. We’ve included a cheat sheet for key metrics and formulas for calculating them. 

These are the two most important metrics to know about your audience:

  • Size
Number of episodes downloads a week after lunch Ă— 0.5 = Approx number of unique listeners Number of episodes downloads a week after lunch 0.5 Approx number of unique listeners
  • Conversion rate
Number of paid supporters Ă· Total listeners = Conversion rate Number of paid supporters Total listeners Conversion rate

These are the most important metrics to know about your business:

  • ARPA (Average Revenue Per Account)
Monthly revenue Ă· Number of paid members that month = *ARPA Monthly revenue ARPA Number of paid members that month
  • MRR (Monthly Recurring Revenue)
ARPA Ă— Number of paid members that month = MRR ARPA Number of paid members that month MRR
  • Churn rate
Number of members lost in a month Ă· Number of members at the start of a month = Churn rate Number of members lost in a month Number of members at the start of a month Churn rate
  • LTV (Lifetime value)
Average length of a paid membership Ă— ARPA = LTV Average length of a paid membership ARPA LTV

Note that Supercast users have all these metrics calculated automatically in their dashboard.