Spotify again signaled its interest in developing new ways to monetize its investments in podcasts. In the company’s fourth-quarter earnings, chief executive Daniel Ek suggested the streaming media company foresees a future where there will be multiple business models for podcasts, including, potentially, both ad-supported subscriptions and à la carte options. We understand Spotify’s plans for these expanded monetization models around podcasts could be introduced in some capacity later this month at its forthcoming “Stream On” livestream event.
The company revealed during earnings its podcast catalog has grown to now 2.2 million programs, said it’s seen increasing demand for the audio format in recent months.
For example, 25% of Spotify’s monthly active users now engage with podcasts, up from 22% just last quarter. Podcast consumption is also increasing, with listening hours having nearly doubled year-over-year in the fourth quarter.
Today, podcasts on Spotify’s platform are available to both free and paid users and are monetized with ads. This is still a key focus for the company — Spotify even recently acquired a podcast hosting and monetization platform, Megaphone, to help make streaming ad insertion technology available to its third-party publishers while also growing its targetable podcast inventory.
Spotify buying podcast hosting and ad company Megaphone for $235M
But Spotify recently put its feelers out about different means of monetizing podcasts, too.
Late last year, for instance, the company was spotted running a survey that asked its customers if they would be willing to pay for a standalone podcast subscription, and if so what would it look like and how much would it cost?
At the time, the survey offered a few different concepts.
At the low end, a subscription could offer ad-supported exclusive episodes and bonus content for $3 per month. This would be similar to Stitcher Premium, which today provides exclusives from top shows and other bonus episodes. But Spotify’s suggested version included ads, while Stitcher Premium is ad-free.
A middle option suggested a plan that would be even closer to Stitcher Premium, with exclusive shows and bonus material but no ads. This even matched Stitcher Premium’s price of $5 per month. And at the high-end, subscribers could get early access to ad-free interviews and episodes for $8 per month.
Looks like the premium podcast plan would be ad-free and some mix of exclusive extra content at price points somewhere between $3-$8. pic.twitter.com/ArK8xYg0CM
— Andrew Wallenstein (@awallenstein) November 6, 2020
A survey, of course, is only meant to gauge consumer demand for such a subscription, and doesn’t indicate that Spotify has a new product in the works. (Spotify said the same when asked to comment on the news at the time.)
However, it’s clear that investors also want to know what Spotify is thinking when it comes to recouping its sizable investments in podcasts.
Asked if Spotify thought customers would be willing to pay for podcasts, Ek on the earnings call responded that he believed there were several new models that could be explored.
“I think we’re in the early days of seeing the long-term evolvement of how we can monetize audio on the internet. I’ve said this before, but I don’t believe that it’s a one-size-fits-all,” he said. “I believe, in fact, that we will have all business models, and that’s the future for all media companies — that you will have ad-supported subscriptions and à la carte sort of in the same space, of all media companies in the future.”
“And you should definitely expect Spotify to follow that strategy and that pattern,” Ek added, more definitively.
The answer seemed to indicate that Spotify is considering some of the ideas in that recent survey — of getting consumers to pay for some podcasts, instead of accessing them all for free or having them bundled into their music subscription.
Of course, that would change the meaning of the word “podcasts,” which today refers to freely distributed, serialized audio programs that get distributed via RSS feeds.
If Spotify chooses to paywall podcasts behind subscriptions or à la carte payments, then they’re no longer really podcasts — they’re a new sort of premium audio program.
This is an area where Spotify has plenty of room to grow, considering the significant investment it has made in podcasts over the years. To date, that’s included buying up content producers like Gimlet Media, The Ringer and Parcast, as well as signing top creators like Joe Rogan, Addison Rae, Kim Kardashian West, DC Comics, Michelle Obama and The Duke and Duchess of Sussex, among others. Spotify also bought podcast tools like Anchor and other ad technology and hosting services.
Spotify signs ‘The Joe Rogan Experience’ to an exclusive multi-year deal
The advantage with podcasts is that Spotify has the ability to monetize them in multiple ways at once — with ads and subscriptions or direct payments, if it chose. And, of course, there are no licensing fees or royalties to contend with, as with streaming music.
Spotify could also adjust the podcast payments model as needed to fit its different geographies and the way customers around the world prefer to consume and pay for podcast content.
None of this thinking was about near-term launches, Ek also clarified.
“I think it’s early days, though, to specifically kind of look at how that could play out,” he said, talking about how the different models could take shape. “But, obviously, if that were to be the case, that revenue profile would be different than how we do music.”
After initial publication of this article, Spotify also released a new episode of its existing company-produced “For The Record” podcast, where Ek, CFO Paul Vogel, and Head of Global Communications, Dustee Jenkins, recap the Q4 earnings and talk about Spotify’s plans for a live-streamed event later this month, “StreamvOn.”
In the podcast, Ek again reiterated the company’s plans for new monetizations models, noting that Spotify has historically focused on achieving revenue growth by expanding its product offerings and entering new markets. Now, he said, Spotify will begin to “play around with monetization and pricing.”
“We have plenty of levers there as well. So it’s not just price increases — we can increase our ads monetization, which you’re going to see us do, as well. And over time, you’re going to see us move from this one-size-fits-all to the combo of subscription, advertising, and à la carte.
We understand the latter may also be introduced at Stream On later this month.
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