Spotify is the biggest music streaming platform in the world. But in the last few years, it has shifted much of its focus to podcasts, and has made investments that accept fabricated it the biggest podcast app in the Us.
Why is this happening? What’s driving Spotify’s apparent obsession with podcasts? Let’southward find out…
How Much Is Spotify Investing in Podcasts?
The answer to this question is a lot. In 2019, Spotify pivoted to podcasts past launching an initiative called Audio Offset, as announced in a mail on For the Record. Audio Beginning has seen the company invest over $i billion in podcasts, as revealed past The Guardian.
That coin has gone into buying exclusive rights to podcast content from superstar creators such as Michelle Obama, Joe Rogan, and Dax Shepherd.
Spotify has also acquired podcast-related platforms and companies such every bit Gimlet, Anchor, Betty Labs, Chartable, Podsights, and Whooshkaa, amidst many others.
Why Is Spotify Obsessed With Podcasts?
Big tech firms like Spotify survive and thrive by either adapting to modify or creating it themselves. Apple was initially ahead of the curve in audio, just in 2019, Spotify read the writing on the wall and pivoted to podcasts. In the process, Spotify’south podcasts catalog and subscriber numbers both surpassed Apple’s, leading us to where we are today.
Hither are the five things we think influenced Spotify’s deep dive into podcasts…
one. Podcasts = Profits
Spotify hasn’t made a profit since it was founded in Sweden in 2006. In 2021, for example, the company lost a staggering $42 1000000 (according to Statista). But why?
Well, every time you stream a song for free, Spotify has to pay royalties to the copyright holders of the song. Nevertheless, since not every song played comes with an ad, Spotify doesn’t make coin from every stream. Therefore, it actually costs Spotify money when its users stream music for gratuitous.
On the other hand, each podcast is embedded with ads. In the case of Joe Rogan, an infamous podcaster Spotify paid hundreds of millions of dollars to secure, the company earns advert revenue based on audience size. Thus, equally Rogan’s audience grows, Spotify’s revenues too abound.
Meanwhile, Spotify has locked Joe Rogan in, and doesn’t take to pay him an extra cent for the elapsing of his contract, no thing how big his audience becomes.
Podcasts are, therefore, a potential cash moo-cow for Spotify, which is presumably why it chose Joe Rogan over Neil Young.
2. Podcasters Bring Fanbases
Superstars like Joe Rogan and Michelle Obama bring some other benefit to Spotify; they attract a significant chunk of their fans to the platform.
And as these glory podcasters bring fans to Spotify, Spotify is better able to fend off the challenge posed by Apple Music.
three. Keeping Up With the Contest
Spotify’s biggest competitors, namely Apple tree, Google, and YouTube, were already hosting lots of podcasts. Apple was actually the biggest podcast platform earlier Spotify made its pivot to Audio First. Now Spotify has overtaken Apple.
If Spotify hadn’t made the switch to Sound First when it did, its rivals would take left it in the grit, and Spotify may take found it impossible to catch up.
iv. More Control Over Content
Spotify is in a tight spot with the music information technology carries on its platform. Neil Young’southward withdrawal from the app highlighted the fact that information technology doesn’t own the music it is carrying, and is entirely at the mercy of musicians and their labels.
With podcasts, still, Spotify is purchasing the sectional rights. This means that Joe Rogan cannot merely wake upwardly and remove his podcast from the platform, since he is contractually obligated to Spotify to proceed it there.
5. The Tech Was Already There
Spotify already had the engineering science. If the app could stream music, information technology could certainly deliver podcasts.
Diversifying into podcasts was therefore a rather elementary choice, both technically and in a concern sense.
Podcasts Could Be a Game Changer for Spotify
Podcasts appoint listeners for hours on end, and advertisers just honey that. The advertizement spend on podcasts is growing year-on-year, and is predicted to hit $2 billion in the Usa in 2023.
Since Spotify has 25% of the US podcast market, this ways that, in theory at least, Spotify could bring in approximately $500 million in podcast advertising revenue each twelvemonth.
Considering Spotify fabricated losses of $42 million in 2021, it seems podcasts will finally tip Spotify over into turn a profit making territory for the first time in its history.
If that is truthful, and so its investment in Audio Kickoff has already paid off, and will continue to do so for years to come. Unless nosotros all all of a sudden fall out of dear with podcasts.