In one of my newsletters, I shared a tweet from Jeffrey Morris Jr. that praised Spotify for adopting the “Netflix Playbook” as they have ramped up their podcast-related spending over the last year. To recap, in the last twelve months Spotify has spent well over half a million dollars to lay the necessary groundwork to position themselves as the leader in the incredibly lucrative podcast space. These purchases have included the acquisitions of Gimlet (podcasting network), Anchor (podcast creation platform), the rights to a slew of exclusive content such as The Joe Rogan Experience, Bill Simmon’s the Ringer, and future Kim Kardashian and DC Comics podcasts.
But why is Spotify so bullish on podcasting?
As of April 2020, there are over one million unique podcasts with 30 million episodes available. However, only half the US population has ever listened to a podcast. That’s a large untapped market and a promising sign for potential growth. With podcasting still a relatively new industry, here are a few of the ways that Spotify is aiming to gain an advantage:
Podcasting ad revenue is expected to bring in nearly $570 milllion growing 110% from 2019. By acquiring the exclusive rights to top-tier podcasts like the Joe Rogan Experience and the Ringer, Spotify is starting to build out their own content library that they can use to attract new customers. The Joe Rogan Experience alone brings in over 190 million downloads per month and surely not all of these downloaders are Spotify customers. Acquiring the rights to this existing content will result in more sign-ups, more listeners, and more ad revenue. It’s a no-brainer.
Music discovery has shown to be Spotify’s bread and butter. With a team dedicated solely towards discovery and popular playlists like Discover Weekly and Fresh Finds, Spotify is aiming to do the same with podcasting. The same way Netflix seems to know what you want to watch before you do, Spotify will use machine learning to identify and recommend new podcasts based on what you have previously enjoyed. This is a big value prop as Apple has proven to be notoriously bad at recommendation in the past.
With the acquisition of Anchor, Spotify hopes to become the go-to platform for those who want to launch a podcast themselves. There is a lot of value in user-generated content as can be seen from the success of Youtube, Twitch, and TikTok. By investing in both sides of the spectrum (user-generated and licensed) Spotify can increase revenue and gain valuable insights on up-and-coming creators. Additionally, those who excel on the platform could potentially earn a licensing deal directly from Spotify. By providing users with the means to easily start a podcast (Anchor) and extensively track how the content is performing (Spotify’s existing artist analytic tools), Spotify is positioning themselves as a one-stop-shop for podcast creation, curation, and distribution.