Costs and pricing
Part of How podcast advertising pricing is built, and what sits outside the media rate
Podcast advertising budget sums for England: the formula, 20% VAT and three worked totals
How to budget a podcast ad test in England: the CPM formula, production and contingency lines, 20% VAT, the VAT threshold and three illustrative totals.
What to take away
- Media cost is thousands of downloads multiplied by the CPM, then multiplied by the number of episodes.
- Production, measurement and a contingency are separate lines on top of media.
- The standard VAT rate is 20% on most goods and services, so check whether a quote is net or gross.
- Whether VAT is a real cost depends on your VAT registration. Ask your accountant before you compare quotes.
- Every figure in the budgets below is an illustrative input, not a market rate.
How is a podcast ad price worked out?
Most podcast slots are quoted as a cost per thousand downloads, or CPM. The formula has three inputs: expected downloads per episode, the CPM, and the number of episodes you book.
Media cost = (downloads per episode / 1,000) x CPM x episodes. With 8,000 downloads, a CPM of £20 and three episodes, that is 8 x £20 x 3 = £480. Treat the inputs as examples and replace them with the figures in your own quote.
Different pricing models change the arithmetic. A flat fee per episode or a payment on results replaces the CPM step but not the lines that follow.
What do three budgets look like once everything is added?
Each budget below adds production, then a contingency of 10% of media, then VAT at 20%. Production fees and CPMs are illustrative. Totals are rounded to the penny.
| Budget | Media | Production | Contingency | Ex VAT | VAT at 20% | Total |
|---|---|---|---|---|---|---|
| First test: 8,000 downloads, £20 CPM, 3 episodes | £480 | £150 | £48 | £678 | £135.60 | £813.60 |
| Steady run: 15,000 downloads, £20 CPM, 6 episodes | £1,800 | £300 | £180 | £2,280 | £456 | £2,736 |
| Host-read run: 15,000 downloads, £30 CPM, 6 episodes | £2,700 | £600 | £270 | £3,570 | £714 | £4,284 |
The step from the second to the third row shows the effect of a higher CPM and a bespoke read. Media rises by £900, and the VAT line rises with it. A budget template keeps these lines separate so you can see which one moved.
Who pays the VAT?
The GOV.UK guide to charging VAT says a VAT invoice must display the VAT separately, and that the usual rate is 20% on most goods and services. So a sound quote shows net price, VAT and total as three figures.
Registration decides what that 20% means to an English buyer. Under the VAT registration rules, a business must register once its taxable turnover goes over £90,000, and registering below that figure is voluntary.
HM Revenue and Customs (HMRC) is owed any VAT from the date of registration. A small buyer below the threshold may not be registered, and then VAT is a cost on the invoice.
A VAT-registered buyer should ask an accountant whether the VAT on the invoice can be reclaimed. If it can, compare quotes on the Ex VAT column. If it cannot, compare them on the Total column.
Example: from quote to total in six steps
- Ask for downloads per episode and the period used to count them.
- Multiply downloads in thousands by the CPM, then by the episodes booked.
- Add production, ad operations and measurement as named lines.
- Add a contingency for re-records and make-goods.
- Add VAT if the quote is net.
- Compare quotes on the same basis, gross or net, never mixed.
For a test, book the smallest buy that gives readable data. Judge it by cost per result and check the return on investment before you renew.
What about payment terms?
Payment dates affect cash flow, so settle them in the contract. When a payment date is agreed between businesses, it must usually fall within 60 days. Put the invoice date, the due date and the make-good rules in the commercial contracts clause list.
Use sponsorship negotiation to trade a longer commitment for a lower CPM, then rerun the table with the new rate. The wider costs and budget guide shows how a rate card is built.
Common questions
Is the CPM the only cost?
No. It prices media only. Production, measurement and VAT sit on top, and a contingency covers re-records.
Should a first test include a contingency?
Yes. A small buffer, 10% of media in the examples above, stops one re-record from breaking the budget.
Do quotes include VAT?
Check each one. Ask for net price, VAT and total as separate figures, then compare on the same basis.
