Preamble. A little over a month after Reply All went through its Test Kitchen-sparked online reckoning, the show apparently published an update earlier this morning primarily anchored by co-host Emmanuel Dzotsi, who walked listeners through his experience of how the last month played out, what’s been happening with the show, and what lies ahead.
To the extent that there were any tangible announcements in the dispatch, it’s this: Reply All is slated to return with new episodes on June 10.
However, a light curiosity: there appears to be some wobbliness around the distribution of that update. I listened to the episode this morning after spotting it in my Pocket Cast app when I checked it first thing after rolling to the side of my bed, as I do every morning. No problems there. But at this writing, it doesn’t seem to be listed on Spotify, and while there’s an entry for the episode on the show site, there’s no player embedded in the post.
That turned out to be a technical hiccup — sources say, “ingestion issue” — and I assume the episode will drop in proper within a few hours. In any case, here’s a link to the Megaphone feed, h/t to Lee R for hitting me with it.
Okay, let’s get to Spotify.
|SPOTIFY Q1 2021 EARNINGS |
Daniel Ek attempting a takeover of Arsenal sets the stage nicely for this issue of Hot Pod Insider, which will be a lot of Spotify. Of course that guy is an Arsenal fan. Anyway.
Fresh off a heavy news week — between unveiling podcast subscription support and the latest hubbub around Joe Rogan — Spotify announced first quarter earnings yesterday, delivering a performance report that’s predictably mixed in the face of a world that’s opening up in some corners and still deeply distressed in others.
The topline metrics, pulled from the shareholder letter:
Users. Total monthly active users (MAU) grew 24% year over year to 356 million in the quarter, which the letter notes finished within the company’s guidance range but “modestly below” internal expectations. Meaningful contributions to this metric were said to come from markets like the US, Mexico, Russia and India, while contributions from Latin American and European markets were described as being lower than expected.
The letter also mentioned that “global consumption hours continued to grow meaningfully” in the first quarter.
Premium Subscriptions. Paid subscribers grew 21% year over year to 158 million in the quarter, with the period seeing an addition of nearly 4 million subscribers. The growth was described as “fairly broad based,” with the North American market leading the way. New markets also accounted for some of this — Spotify had expanded to over eighty new regions over the reporting period — and the company singled out South Korea as being the biggest driver, which is interesting, given the brief licensing dust-up between Spotify and Kakao.
Revenue. Subscription revenue grew 14% year over year to €1.93 billion (slightly over $2.3 billion at the current exchange rate), while advertising revenue grew 46% year-over-year to €216 million (~$260 million). The latter development catches the eye here, as it suggests strong on-going recovery after the first half of 2020, when the pandemic fundamentally disrupted the expected flow of advertising revenue.
So that’s the top-line stuff. Here are a couple of podcast-specific details, pulling from a mix of the letter and beyond:
Catalogue. Spotify now has 2.6 million podcasts available on the platform, up from 2.2 million at the end of the last quarter. I don’t personally value this metric very much, because (a) the likelihood that a sizable percentage of these podcasts are probably inactive or the equivalent of “guy starts a Substack but never quite commits to a weekly drop,” and (b) this aggregate metric tends to be divorced from the concept of value/quality on a per-show basis. That said, the change over time does reflect some important things to know about Spotify as a platform; at the very least, it shows that Spotify steadily marches towards parity with Apple Podcasts as a default distribution point.
Quick point on the international angle: the company mentioned having released 55 new owned and operated podcasts outside of the United States, including a slate of 7 Spotify Originals in the Philippines. I continue to think the most interesting upside for Spotify lies in these non-US markets, where the podcast (slash digital on-demand non-music audio) industry is, in many ways, very much up for the taking from a platform standpoint
One more thing: The Joe Rogan Experience continues to be the platform’s largest podcast (more on that in a bit), though Renegades: Born in the USA was said to be the second largest show on Spotify in March. The latter was also described as the platform’s “most international show to date,” with listenership in more than 150 countries.
Podcast engagement. This chunk, from the Content section, stands out: “The percentage of MAUs that engaged with podcast content on our platform was consistent with Q4 levels. From a consumption standpoint, we saw a strong increase in Q1 podcast consumption hours vs Q4, with March activity driving an all-time high in terms of podcast share of overall platform consumption hours.” Human-speak: podcasts are being listened to on the platform more than ever before.
Content costs. This line, from the Gross Margins section, stood out to me: “While we continue to see strong revenue growth in podcast and non-music revenue, our non-music costs continue to grow at a slightly faster rate which is a modest drag on our Gross Margin.”
I’m guessing those non-music costs refer to some combination of content deals (which continue to be plentiful) and labor costs pertaining to its various in-house content divisions.
Locker Room. There wasn’t any mention of the acquisition price in the shareholder letter, and the financial report wasn’t posted on the investor relations site at this writing, but I doubt it’ll pop up there either: it’s my general understanding that it was a fairly modest sum. [Update: Turns out, the acquisition price was already public! Axios’ Dan Primack reported last month that the sum was about $80 million in cash. Whoopsies.]
In any case, live audio was all the rage on the earnings call, as one would expect, given the explosion of interest around Clubhouse and, consequently, its growing band competitors over the past quarter. When asked about the strategy around live audio, Ek didn’t say much we didn’t already know: the acquisition of Locker Room, and its upcoming expansion and rebrand to whatever it’ll be called in the future, is chiefly centered on the one-to-many/creator-to-audience experience. The potential metaphors for what this product will actually be continue to run the gamut: next-generation call-in live radio, next-generation MTV Unplugged, next-generation stand-up/improv nights, next-generation mosh pits, whatever and so on. Point being: there’s a ton of potential around social/live group audio in general, but when deployed within Spotify’s specific context, that potential could get really interesting indeed.
One other thing about the Locker Room stuff that popped up yesterday: Lucas Shaw at Bloomberg had a nifty piece reporting that Spotify plans to “hire more than 100 people to work on the effort, and has begun talking to talent about exclusive shows.” (The effort being Locker Room, in case I haven’t made it sufficiently clear.) A few more details from the piece worth clocking: Courtney Holt, the company’s Head of Video and Audio; Max Cutler, the founder of Parcast; and Bill Simmons are all actively involved in overseeing the programming for the live audio push, and some talent are expected to be paid several hundred thousand dollars to do stuff for the feature.
If I were Clubhouse, I’d probably pay close attention and try to cop some moves here, particularly since the startup seems to be privileging the creator/media moment route, as evidenced by the recent NFL partnership. But hey, I’m no buzzy tech founder, so don’t listen to me.
One last detail from the Bloomberg piece that caught my eye: Max Cutler is in charge of audiobooks for the company? Speaking of which, I’d keep a close eye on that category. Been hearing things…
Quick Thing on Subscriptions. We’re going to be talking about paid podcast subscriptions for many, many months to come, but one thing to flag right now: I noticed some amount of surprise in the readership when Spotify announced the Open Access Platform (OAP) product as part of the direct revenue push, which will give publishers with paid subscription bases managed on other platforms the option to “deliver paid content to their existing paid audience using Spotify,” something that wasn’t possible before. (I.e. If I used Patreon to manage paid podcast subscriptions, my Patreon supporters will now be able to use Spotify to access paywalled content.) This, of course, seems to run counter to a common point of suspicion held by many skeptical of Spotify’s big podcasting push revolved around a potential future in which the company pushes for the closing up of the podcast ecosystem, forcing creators onto its platform where they’ll be directly governed and taxed of value.
On the earnings call, Ek briefly spoke about the OAP angle:
Ek appears to be laying out his version of a rosy future, one where podcasting can remain open — or at least somewhat open, or open but differently so compared to today – and Spotify can still derive tremendous value from it. We shall see, of course.
Podcasting’s openness has typically been associated with the prominence of the RSS feed within the ecosystem. To the extent that open podcasting advocates hold strongly to this, they should also know: as Stratechery’s Ben Thompson found yesterday, premium episodes delivered over the Open Access Platform product will do so using another open technology — OAuth, not private RSS.
The Joe Rogan Experience. Let’s end on this.
Based on the earnings report and call, signing The Joe Rogan Experience to an exclusive deal appears to be continuing to pay off for Spotify. “The Joe Rogan Experience performed above expectations with respect to new user additions and engagement,” the shareholder letter noted. On the call, Spotify CFO Paul Vogel talked about December being a particularly strong month in terms of podcast consumption on the platform, which he ties to that month being when the podcast went finally exclusive on Spotify. Additionally, the show was also framed as being a key asset driving advertising interest around the company’s Streaming Ad Insertion products.
This all comes disclosed during a week that saw yet another bump in frustration around Rogan, when the podcaster gave air to misinformation around COVID-19 vaccines — a point of opinion, on his part, with potentially severe and dangerous repercussions not just for his legions of listeners, but for everyone else who lives in an integrated society with those listeners. Which is to say, literally everyone. (By the way, Rogan’s comments were contained in an episode published last Friday, but was picked up and spotlighted by the watchdog group Media Matters earlier this week. Also, his stance on COVID-19 and vaccines aren’t exactly new.) This, of course, is far from the only controversy sparked by The Joe Rogan Experience, and far from the only one since Spotify signed the show to exclusivity for a fuck-ton of money. But I think this is the first one where Rogan is getting direct pushback from the White House itself.
The last time I wrote about a Rogan controversy, last fall, Vulture published it with the headline: “Joe Rogan is Already a Headache for Spotify.” Similar sentiments of Rogan giving the platform a headache bubbled back up again in the various publications that picked up the Media Matters push.
Honestly, I don’t know for sure if it’s actually generating headaches or concern for Spotify brass. Sure, it’s causing consternation among at least some Spotify employees — this was certainly the case in the fall, when employees brought Rogan-concern up to execs during a town hall — but when it comes to the decision-makers themselves, I have doubts. The podcast is paying off for them, generating more listening time and more advertising interest. To the extent subscriptions were lost because of Rogan, it hasn’t yet been detectable. Daniel Ek hasn’t yet been compelled to weigh in, and to the extent the management team has responded to concerns, it’s chiefly been about defending moderation policies that continue to come off, at least to the wider public, as either inadequate or obtuse. (Which, of course, isn’t the point: as Rogan’s publisher, moderation is at best a secondary point of issue here.)
Will anything compel Spotify to move on the point of Rogan, ever? Probably not, at least under current conditions, given everything’s aligned with their backing of Rogan at this moment: engagement, advertising, subscriptions. (And for what it’s worth, I don’t think public outcry is a particularly valuable variable here.) The only interesting lever at present that I can think of, really, is maybe those unions that just got contracts in there.