Why Spotify is Investing Heavily into Podcasting
Spotify started as a music streaming service 15+ years ago, but podcasts are the NEW frontier for them. They launched video podcasts, better discovery & a new podcast homepage. Why? Podcasts margins are much higher than music margins, and most podcasters are small garage operations who don't have the resources to monetize their content.
Rahul Mathur
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Have you ever wondered why Spotify has been investing heavily into podcasting?
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
In 2019 - it acquired two podcast networks - Anchor ($140M) & Gimlet ($200M). And, in 2022, they paid $100M+ to Joe Rogan for exclusive access to his podcast "Joe Rogan" show.. -
Spotify started as a music streaming service 15+ years ago, but podcasts are the NEW frontier for them - they launched video podcasts, better discovery & a new podcast homepage.
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
Why?
(1) Podcasts margins >> Music margins 💰 -
- Most podcasters are small garage operations who can't negotiate revenue split / royalty sharing like large music studios
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
- Result: Spotify collects same subscription / ad fees from customers; pays lower cost of content for podcasts
- Same revenue, lower cost == higher margins! -
(2) Podcasts -> New audience -> more freemium users -> more advertisement revenue 💸
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
- You will actually find people like me (Rahul) who hear podcasts primarily but not music.
- Podcasts are how I discovered Spotify; used their free / advertisement supported tier for ~3 months -
- They have 150M+ freemium users & you can bet many of them are like me!
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
(3) Podcasts -> Wider content library -> more paid users🎡
- For both Podcast & music listeners, Spotify paid subscription is more "appealing" since it bundles podcasts + music (in case you want a break?) -
- Also, the wider content library acts as a moat to prevent churn off Spotify to another music app (Apple Music?)
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
Key for Spotify with podcasting:
(a) Increase amount of exclusive content
(b) More tools for podcasters (e.g. interactive modes, video, captions, auto translate) -
(c) Provide more monetization for podcasters (e.g. discovery, native advertising etc)
— Rahul Mathur (@Rahul_J_Mathur) June 19, 2023
As podcasting goes mainstream to cover niches & AirPod equivalents become ubiquitous - podcast contribution to overall revenue at Spotify will rise a LOT. I hear ~1.5 hr of podcasts per day! 😅