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Spotify and Podcasts, 2019

CES, that fine mess formerly known as the Consumer Electronics Show, was held in Las Vegas last week, and I took in the proceedings the way I always have: from behind the comforting glow of my laptop, far away from dense crowds and parched #brands. As expected, the smart speaker was one of the more dominant storylines coming out of CES (CNBC: “Amazon and Google are going to be in every aspect of your life whether you want them to or not”), and to be frank, I headed into this news cycle planning to dedicate a whole column this week to the tech category du jour.

But interestingly enough, that didn’t end up capturing my attention this week. Instead, the more compelling topic turned out to be Spotify, which began pushing out a message around what appears to be its slowly emerging strategy around podcasts. We’re just going to have to revisit smart speakers some other time.

Last week, TechCrunch published a report on the Swedish music streaming giant’s plan to spend the next year allocating more of its focus on podcasts. We’ve heard this one before, but there’s enough meat in the writeup to suggest the actual shape of the gambit.

Here are the broad strokes from the TechCrunch report:

Having established itself as a top streaming service with now more than 200 million users, Spotify this year is preparing to focus more of its attention on podcasts. The company plans bring its personalization technology to podcasts in order to make better recommendations, update its app’s interface so people can access podcasts more easily and broker more exclusives with podcast creators. It’s also getting into the business of selling ads within podcasts as a means of generating revenue from this increasingly popular form of audio programming.

Two details in the report worth ingesting:

  • Spotify has been reportedly “selling its own advertisements in its original podcasts since mid-2018” and is currently deciding whether to build ad insertion tech itself or make an acquisition to that effect.
  • The company appears to be emphasizing a content strategy where it brings “voices in-house, or at least exclusively license their content.” We’re already accustomed to the deals: Amy Schumer, Joe Budden, and most recently, Jemele Hill, among others.

The second component strikes me as significantly more interesting than the first, which is probably table stakes for a big music streaming platform attempting to get involved in the podcast ecosystem at this point. On the face of it, Spotify appears to be pursuing a content-led differentiation strategy — i.e., as a podcast consumer, the reason you’d come to Spotify is the distinct flavor or brand of shows they’re assembling, and maybe you’d end up sticking around to use the platform as your default tool to explore the rest of the podcast universe. (Recall that Spotify no longer practices a strictly closed approach to podcast supply. The platform opened podcast listings to all in October.) More importantly, that differentiation will be also be wielded towards the goal of converting non-podcast-consuming Spotify users into podcast-consuming ones. Which is to say, the hope is to further grow the value of the platform for existing users in a bid to increase the cost of switching over to a competitor like Pandora, Apple Music, Tidal (I guess?), or Stingray (if you’re Canadian).

Spotify’s two-pronged podcast supply approach — directly curating unique show assets and opening up podcast submissions — should be recognized as a familiar one for the company. The move seems to be an inverted echo of an initiative that Spotify has been testing on the music side: first, quietly striking deals directly with independent artists (said to be relatively modest; “with advance payments of tens or hundreds of thousands of dollars, according to several people involved,” per The New York Times), and then, rolling out a new feature that allows independent artists to “upload songs and albums directly — without going through a single label company, distribution group or Spotify employee — and automatically receive royalty payments in their bank accounts,” as Rolling Stone described it. That latter feature, which is seen to be an upgrade to the listener-intelligence-oriented Spotify for Artists program, is in invite-only beta at the moment.

I reckon the shape of that initiative gives us a blueprint of what is likely to come with Spotify’s adventures in podcasting. The company will probably continue to sign more content deals meant to nudge more people to try out podcasts on the platform, and then it’s probably going to open up its podcast monetization tools to make the platform more appealing to publishers so that they don’t have to solely depend on their taste-making capacities in order to make the podcast side of the business work. (Hit-making is a hard, cruel business, after all.)

The devil, as always, will be in the details. And there are millions and millions of questions on that front:

  • How will Spotify position itself as a revenue opportunity for non-Spotify-exclusive podcast publishers?
  • How will Spotify’s podcast advertising solutions compare with the experience of putting together podcast advertising deals more generally? Will Spotify’s podcast advertising solutions be designed to better benefit bigger networks or smaller independents, or will they attempt a one-size-fits-all route?
  • What will Spotify’s cut be? Also, what will the policy be on ads that are already being served in a podcast outside the platform? (That, I imagine, would depend on both Spotify’s ad insertion technology and the integration between Spotify and the publisher’s hosting platform.)
  • Will Spotify’s podcast advertising experiences actually be any good? Will those spots sound exactly like the advertising spots they have now for non-Spotify Premium subscribers? (In which case, strong pass from me.)
  • Speaking of Premium: Will you hear ads on podcasts if you’re a Premium member? If the answer is no, why should podcast publishers upload their shows onto the platform if one of the platform’s goals is to convert more Premium subscribers — i.e. convert more people who won’t hear podcast ads?
  • If advertising isn’t the only revenue path for podcasts, will payouts also be based on listens more generally?
  • Will podcast publishers have to jockey for curatorial page placement in the manner that they’ve always had to with Apple?
  • Given Spotify’s content-led strategy, what are the odds it’s going to straight-up acquire one or more podcast content companies in the near future? (If I were a betting man, I’d probably take that bet.)
  • That Spotify is both the platform and a competitor — between its exclusive shows and branded podcasts — is a complicating factor. Does that change the appeal of the platform for publishers? That is, for publishers, does the prospect of building your audience development strategy around Spotify’s platform change when you know you’re going to have to fight against Spotify’s own assets for real estate? Especially when Spotify would be incentivized to maintain their relationships with their signed talent.
  • To that end, how will Spotify balance its efforts in making the platform appealing to both the high-end talent they’re bringing on and the wider universe of publishers?

…and so on, and so forth.

Spotify’s slow-emerging bid to become a meaningful podcast distributor comes at a time when rival Pandora is displaying similar ambitions. The latter has planted its flag on a significantly different approach to the market: the Podcast Genome Project, which is a commitment to a discovery-led differentiation strategy — i.e., as a podcast consumer, you come to Pandora for a more lean-back experience that does the ecosystem-scouring work for you, and you hopefully internalize Pandora as your default listening tool because the “radio, but better”-esque experience is just that good. (Side note: Pandora complicates its distinction against Spotify with the fact it is, also, experimenting with original content à la Questlove Supreme. Everybody loves making original content, huh?)

It’s interesting to put Spotify and Pandora’s podcasting gambits up against the obvious fact of Apple’s current centrality to podcast distribution. Apple Podcasts’ biggest strengths — a mix of default packaging through the iPhone software (in technology as in life, the power of the default is overwhelming), historical incumbency, and near-synonymous levels of brand affiliation (i.e. you can’t talk about podcasts without talking about Apple) — are fascinating and significant, and I think they’ve all held strong to this point even though the app’s actual user experience is widely, and increasingly, groaned about. Spotify and Pandora have access to none of those advantages; the question, of course, is whether that will matter.

An aside: This is just a feeling strongly held, but I suspect that nothing is going to change the fact that Apple Podcasts will be the default podcast listening platform for most people for a long time. This is strictly a testament to the fact that distribution, not user experience, tends to outweigh everything else: as long as you control the terms of the vessel — i.e. the iPhone — you control the priorities of the internal experience, and so as long as the iPhone is a thing, I won’t be dismissing the centrality of Apple Podcasts in the ecosystem. That’s probably why I’m never going to write off Google Podcasts; so long as Google is literally the company that facilitates the existence of Android phones and the Android operating software, the possibility of Google Podcasts echoing Apple’s historical arc is always there.

Which brings me to another aside: Between the resource-intensive efforts of existing streaming platforms like Pandora and Spotify, and the distributive-primacy of platforms like Apple and Google, what are the prospects for every other third-party podcast app in existence? What does a good, realistic future look like for podcast startups whose core experience is an app? More on that question at a future date. But for now, I’d say that the problem isn’t dissimilar from the problem of media companies more generally, which is also to say, a podcast app can, and perhaps should, be thought of as a media company.

Anyway, that’s all I got on the subject for now.