It hasn't necessarily been a coup, or a Godfather-esque consolidation of power, but Spotify has made mega-moves in recent years to become the top dog in podcasting. Acquisitions of Anchor and Megaphone served to bring literally over one million podcasts to the streaming music service and help growing podcasters earn revenue. A deal struck in May 2020 made "The Joe Rogan Experience," the most popular podcast in the U.S., exclusive to Spotify in December of the same year.
But, it's not game, set, and match just yet. Spotify's podcasting crown could still switch heads, as Citi analysts suggested in January that the company's investments had not yet resulted in an increase in new paying subscribers. Here are six things the company needs to do to keep itself at the top.
1. Get more people to listen to podcasts – Spotify has invested heavily in podcasting, but the share of total listening hours going to podcasts instead of music is still relatively low. Spotify hasn't released exact numbers, but Edison Research shows that podcasts now account for 6% of total listening time in the U.S, up from 2% in 2014.
Lydia Polgreen, head of content at Gimlet Media, which Spotify purchased in 2019, told Vox's Recode that it wants to develop the "'60 Minutes' for audio," a weekly news show that becomes "appointment-listening" for many Americans. Gimlet has already seen success with "The Get Up," a morning show combining news and music pulled from Spotify's recommendation algorithms, resembling a traditional drive-time commute show.
As product manager Kay Singh pointed out on his blog, the number of monthly active users (MAUs) on Spotify engaging with podcasts on some level is increasing, though it's still only about one out of every five subscribers.
An increase in listeners may take care of itself if Americans go back to working in offices in 2021. Listenership decreased substantially in March 2020 as Americans cocooned themselves at home in the early days of the COVID-19 pandemic. (After all, many Americans working from home can listen to music as they work, but podcasts require a level of focus that only a solitary commute can provide.) Podcast listening bounced back as the pandemic wore on, but they could get an even bigger bump and help close the podcast-to-music gap if workers go back to offices next year.
2. Become the podcast search engine – Spotify needs to force the retirement of the phrase "wherever you get your podcasts" from hosts and ads. There is no more "wherever." There is only Spotify. The service features 1.9 million shows, nearly 70% of which are powered by Anchor, but if people don't know this, they may still go to Google and search for "mindfulness meditation podcast" instead of doing so on Spotify.
That high ratio of mostly small podcasts from Anchor indicates how indie podcasting could be a big win for Spotify. Third-party content that isn't exclusive to Spotify makes up a huge chunk of listener time, even if the majority of those shows don't bring in that many listeners individually. If people know to use Spotify to find those shows, and those small podcasters can generate revenue, it'll create a positive feedback loop where hosts will tell their audiences: "Listen to us on Spotify." Which brings us to the next point:
3. Don't do to podcasters what you did to indie musicians – It's been covered to death, but in case you need a refresher, it's nearly impossible for anyone but the biggest musical artists to make much money from Spotify. Here's a simplified version of how the company pays out royalties:
- Spotify compiles all the revenue it makes monthly into a giant digital pot.
- Spotify then distributes a percentage of that money in accordance with an artist's percentage of total tracks consumed. For example, if 1% of all songs listened to in 2020 were by Taylor Swift, then Swift (and/or whomever owns the publishing rights to those songs) would get 1% of what's in the pot.
Many have argued that Spotify should instead pay out royalties based on a user-centric structure. That is, if I pay $10/month for a Spotify premium account and Bob Dylan accounts for 50% of my songs played, then $5 (or a 50% cut of the royalties from my subscription) should go to Dylan or, as of December 2020, Universal Music Publishing Group. Doing it this way would likely distribute more money to smaller artists based on what individual subscribers are listening to. As of 2019, Spotify said it pays out between $0.00331 and $0.00437 per stream.
Of course, this is not how podcasters will make money off the platform. Whether it's through Anchor or utilizing Megaphone's tools, podcasters will get more revenue from sponsors if they can show a greater number of listeners. As we explored previously in our interview with Bryan Barletta, Streaming Ad Insertion (SAI) and Dynamic Ad Insertion (DAI) should connect Spotify listeners with more relevant ads to provide a better overall experience for both sponsors and listeners.
Spotify has to make sure these tools provide a solution to keep podcasters happy and promote their content on the service. Otherwise, they'll have to take the same route most indie musicians take: use Spotify for exposure, but earn a living through live performances.
4. Fight off competitors – Listeners are used to podcasts being an open-source commodity, hence the "wherever you get your podcasts" phrasing. The acquisition of "The Joe Rogan Experience," and making that show exclusive to Spotify, has ended that. The top podcasts will soon be exclusive to specific providers just as TV shows are exclusive to the streaming service that owns them.
Amazon and Apple have shown signs of trying to play Spotify's game. In September, Amazon announced a new podcast service integrated with its existing Amazon Music streaming service featuring exclusive shows. Apple has sought to acquire original podcasts to be exclusive to its service and cross-pollinate with Apple TV+.
Soon, the podcasting landscape may resemble the streaming landscape, where the top few services battle it out to have the most original content (and viral hits) every year to justify subscription fees and keep themselves relevant in the industry. What's yet to be seen is if smaller podcast subscription services (like Stitcher, recently acquired by SiriusXM) will be able to survive if they aren't connected to one of the podcasting/media giants.
5. Get people to pay just for podcasts – Spotify may consider launching a subscription podcast service that would provide all its podcast content, including exclusive originals, for a monthly fee. The service would likely be cheaper than a current Spotify Premium account, which includes all content, both podcasts and music, without ads.
Spotify indicated that such a suggestion was only in a user survey and is not part of any concrete plan. However, if the company finds that a significant number of individuals want to listen to Michelle Obama and Joe Rogan, but don't want to pay the fees associated with hosting 50 million songs, it would be in its best interests to push such a service to market.
6. Provide the best data – Spotify already has a boatload of data about our listening habits, data which just became even stronger due to its acquisition of Megaphone. Spotify needs to continue and expand its existing strategy of providing quality analytics to podcast creators.
Spotify for Podcasters launched in October 2018 to help creators track podcast performance. It provides general metrics about listener demographics and helps podcasts track their followers over time. With the amount of data Spotify is collecting, it should give more data to podcasters on its platform and be transparent about how SAI and DAI are functioning on individual shows. Creators want to provide the best product to their audience and Spotify's incredible vault of data can help them get there.
