Spotify is the largest music streaming service in the world, with 113 million subscribers and nearly 250 million monthly users, who can choose from more than 50 million songs. Although the streaming music industry is very complex and despite competition from large and powerful companies such as Apple, Amazon and Google – all three with their own music streaming service – Spotify has always grown and in April 2018 went public on bag. To continue growing, occupying a sector other than music, Spotify now wants to focus heavily on podcasts.
In the words of its founder and current CEO Daniel Ek, Spotify – founded in Sweden in 2006 – wants to exploit podcasts to become “the first audio platform in the world”. As a detailed article in the Hollywood Reporter tells us, doing so means getting involved in a very different field from music, which in the future may evolve in a not very different way than that of streaming audiovisual content.
For at least a couple of years the success of podcasts has been repeatedly celebrated and told, and at the moment there are more than 500 thousand podcasts on Spotify. But the global turnover of the entire sector continues to be relatively small: according to an estimate made by PwC, in 2018 it generated total revenue of about 650 million dollars, equal to about 12 percent of Spotify's annual revenue.
In the podcast sector, however, there is a lot of room for growth, because it is expected that podcast numbers will continue to increase and because according to data cited by the Hollywood Reporter it is estimated that at the moment on Spotify play between 10 and 20 percent of total podcast audiences. Spotify therefore has a lot of room to grow, within a growing sector.
The numbers for the third quarter of 2019 show that between July and September the time spent listening podcasts on Spotify increased by 39 percent, and that at least 14 percent of users listened to at least one podcast during that time. 14 percent may seem like little, but in addition to being a growing percentage, it represents a percentage of users that Spotify is very interested in: the data at its disposal says, in fact, that it often happens – with values defined as “almost too good to be true. »- that listening to podcasts is crucial in convincing a significant number of users to switch from a free account (with advertising and some restrictions) to a paid one (something that obviously pleases Spotify a lot).
But there is also another reason why Spotify is interested in growing in the podcast industry: it has to do with the fact that, when it comes to songs, Spotify is limited to distributing controlled content. by others, where his income is only a small percentage of the total. In the case of songs, it simply happens that Spotify has to pay record companies a small amount for each listen to one of their songs. Consequently, the more ratings increase, the more money Spotify has to give to record companies. “It's hard to make a profit,” Bloomberg wrote, “when copyright owners take 75 cents of every dollar that comes in.” In the case of podcasts, however, Spotify can produce them itself, thereby changing the way it spends and earns money.
Spotify has been hosting podcasts on its platform for several years, but has begun to to be actively interested in it rather late, after the successes of podcasts such as Serial or The Daily, made by the New York Times. Ek said he didn't really believe in podcasting possibilities until after 2017, thanks to Germany. Together with his collaborators he noticed that the ratings in Germany had suddenly and considerably increased, without him or others being able to explain why. After some time it became clear that some German record companies had the rights to a lot of audio books and that, if they could, they had decided to upload those audio files to Spotify. It was those very popular files that improved Spotify's numbers in Germany, despite the fact that the platform was not yet designed for listening to that type of content.
In many other countries, audiobooks are not on Spotify, however, and therefore the company decided to focus on the thing that most resembled it: podcasts. In 2018, when there were already about 15,000 podcasts on its platform, Spotify began making the first contracts to have famous people make exclusive podcasts (for example with actress and comedian Amy Schumer) and hired Dawn Ostroff, former president. of Condé Nast Entertainment, as its chief content officer, i.e. as operational director with responsibility for the production of content. Up until that point, Spotify had been almost just a technology company, developing technologies to offer users content produced by others; from then on Spotify began to be a content company as well.
To become more and more a content company, from 2018 Spotify has mainly moved in two ways: it has acquired, spending hundreds of millions of dollars, major companies that produced and distributed podcasts (such as Gimlet, Anchor or Parcast) and contracted people who could create important content, to be offered exclusively. A few months ago, for example, he struck a deal with Barack and Michelle Obama, whose production company Higher Ground will make a series of podcasts exclusively for Spotify (in some cases featuring the couple's voices). As the Hollywood Reporter wrote, “many others then arrived, in the wake of the Obamas”: in fact, there is talk of about thirty similar agreements closed or in the process of being defined with personalities such as Jordan Peele, Paul Feig and Lele Pons (a youtuber whose channel has 15 million members). The Hollywood Reporter wrote that in the last year alone Spotify has spent $ 400 million investing in the production and technology aspects of podcasting.
Speaking to the Hollywood Reporter, Ek explained that ” for a long, long, long time, music will continue to be the most listened to “on Spotify, but at the beginning of the year he wrote in the Spotify blog that” over time, more than 20 percent of Spotify's total ratings would be done with non-musical content “. Looking even further – let's say in “a long, long time” – Hollywood Reporter writes that Spotify will also end up taking an interest in radio, an industry worth $ 40 billion. Ek said:
“Just as TV has moved from offline to online, so is the radio. If you look at the total time that people they pass by listening to the radio, it is similar to what they pass by watching audiovisual content. But the audio sector is about a tenth of the video sector. The question, then, is: are our ears worth a tenth of our eyes? In my opinion this is not the case and the more we go forward the more the audio will take on value. “
Spotify's interest in greater production and better reproduction of podcasts, possibly exclusively for its subscribers, should therefore be seen as a first move in a much larger game for the production and streaming distribution of audio content of all kinds. In some ways, it is reasonable to expect that something similar to what has been happening in recent months in the audiovisual content streaming sector could happen. In many respects, Spotify part in the lead in this match, thanks to its size and spread. But, like Netflix when it comes to streaming, Spotify is a relatively small company, which will most likely find itself increasingly struggling with huge companies like Apple, Google or Amazon.
The problem, writes the Hollywood Reporter, is that “Spotify's rivals use music [e i podcast] to sell more iPhones or buy more products on Amazon”, thus allowing themselves to operate at a loss in this sector to make money elsewhere. As analyst Kevin Rippey summed up, “Spotify has to make money in an industry where its main competitors can afford not to.” The most formidable competitor at the moment is Apple, due to its spending power and because it has 900 million iPhones around the world. For the time being, however, the Hollywood Reporter explains that Apple has made no move to invest in the exclusive production or distribution of podcasts, which it has done for music, film and TV.
