Issue 294,  published February 23, 2021

Stream Until Your Stream Come True

Well, I guess we should talk about the big “Stream On” livestream presentation.

It’s been just over two years since Spotify cannonballed into podcasting, marking its spendy February 2019 acquisitions of Gimlet Media and Anchor as a splashy first step in the company’s expansionary transition from a music streaming platform towards something that’s significantly more than that. It was a scaling up of ambition, one that founder and CEO Daniel Ek conceptually outlined in a blog post titled “Audio-First” published at the time.

As has been chronicled at length in this newsletter, that transition went on to include a string of further acquisitions (Parcast, The Ringer, Megaphone), a steady drumbeat of buzzy content partnerships (Joe Rogan, the Obamas, Kim Kardashian, etc.), and a bevvy of product experiments that poke at the edges of the current on-demand audio experience (playlists, vodcasts, talk-music mixes, etc.).

The past two years are abundant with Spotify-filled headlines, and they collectively exert the feel of a show of force. But the piecemeal nature of the story also sometimes led to a lack of clarity over how the company intended to structurally reshape the digital audio business as we know it and reinvent itself as a platform that, in Ek’s words, will “begin competing more broadly for time against all forms of entertainment and informational services, and not just music streaming services.” I keep seeing the shiny individual pieces, but I’m curious as to how they think it’s all supposed to fit together.

Yesterday’s hour and a half-long livestream presentation didn’t quite give me that full picture I was hoping for, but it does feel like we’re getting closer. Plus, the event also gave me the opportunity to jump on the phone with several executives at the company who I could pelt a few questions at.

There was a lot that was announced yesterday, but I’m going to organize this write-up around three main buckets and lump a bunch of remaining threads in a miscellaneous section.

The Purpose of Original and Exclusive Programming. Spotify’s already rich with — and has spent a fortune on — original and exclusive content, and yesterday’s presentation deepened the bench with a slew of new details and announcements: the DC Comics partnership will cover multiple interconnected shows; there’s a new scripted content partnership with the Russo Brothers (most known for their work directing Marvel movies, but will be forever cherished for their work on Community) via their studio AGBO; two new projects from Higher Ground, one being a dad-duet between Barack Obama and Bruce Springsteen (out now) and the other being the acquisition of Tell Them, I Am; the deal with Ava DuVernay’s studio, ARRAY, will soon yield an unscripted project; and The Ringer is going international.

Speaking briefly with Spotify’s Head of Studios Courtney Holt after the livestream yesterday, I asked about how he views the relationship in value between original and third-party content on the platform. (And by the latter I mean shows that are owned by Spotify, hosted on Anchor, and created out of a partnership.) I understand that, for the most part, it’s probably a “why not?” kind of situation, in the sense that if you can make the space to pursue those two strategies at the same time. But I wanted to get a better sense of how their values relate to each other within the company’s worldview.

Holt, who emphasizes new users and overall engagement in his own analysis, responds from the standpoint of being able to meet a wide universe of needs and preferences. Original content that comes out of strategic partnerships does have the value of leading to certain creative and commercial advantages — I’m guessing he means, at least in part, generating shows that can turn the heads of the listeners, advertisers, and the press alike — but he notes, “The goal with original, exclusive content is not to service everyone’s needs across the board.” It’s the combination of the two content types that, in his words, makes the platform offering “so special.”

The Spotify Podcast Advertising Network Looms. I’m a little iffy on Ashley Carman’s argument over at The Verge last week that the “podcast wars” will probably come down to ad tech, not exclusive content, but Spotify’s advertising network piece will most certainly play a fundamental role in shaping the company’s prospects for success over the long run.

On that front, we were introduced to something that has long been expected: the unveiling of the “Spotify Audience Network.” It’s essentially a consolidated podcast advertising marketplace that’s powered by its Streaming Ad Insertion technology, deepened by the Megaphone acquisition, and plugged into the company’s existing sales and creative studio infrastructure.

This is the vessel through which Spotify will embark on its effort to become the dominant advertising layer in the podcast ecosystem, but don’t expect the marketplace to open up to every podcast creator just yet.

Right now, advertising through the Spotify Audience Network is only available for Spotify’s original programming portfolio, Megaphone clients, ad-supported music, and very soon, a select group of Anchor creators. Jay Richman, Spotify’s head of Global Advertising Business & Platform, tells me that the pool of qualified content and creators will be opened up progressively over time, but the pace will be relatively slow due to his team’s insistence on being “super controlled” over the experience. This, he emphasizes, is a strategic consideration, as they hope to scale up in a way that’s careful and intentional.

“We’re essentially trying to scale quality as opposed to attacking it from the other lens, which is to take a bunch of radio-style ads and force them into the inventory,” said Richman, which he notes is an approach that can leave you vulnerable to problems regarding quality, effectiveness, and brand safety.

He assured me that they’re not lacking in advertiser interest for both Megaphone and Streaming Ad Insertion, claiming that the latter in particular has been sold out since the third quarter of last year and that it’s been growing “at triple digits.” The big lift, as it stands, is to steadily match the demand with the supply, which, again, they say they’re trying to be careful about.

The introduction of the Spotify Audience Network is likely to spark concerns over the fate of the host-read ad, long considered to be podcasting’s premium ad unit and noted point of advantage over other media. Will Spotify’s newly unveiled ad marketplace offering commoditize away that beloved ad format over the long run? When asked about the company’s commitment to the host-read ad, Richman said that, while he expects other ad formats like voiceover to factor in, the host-read approach remains central to the way his team is thinking about the network.

Not unlike Holt’s position on original and third-party content, Richman expresses the belief in being able to have the best of both worlds. “I believe in preserving the host-read ad — it’s one of the best ad formats out there — while layering onto it data, insight, and audience scale,” he said. “I think that’s going to be the winning combination.”

Future Formats, Points of Control, and the Shift to Streaming. Spotify also had a litany of other podcast-related product announcements in yesterday’s presentation. They include:

  • Support for paid podcasts… of a sort. Specifically, creators using Anchor will soon be able to create paywalled podcast experiences that can be published out to other listening apps. But you can’t go the other way around: If you were, say, a paid podcast creator using Supporting Cast or Patreon, you still won’t be able to distribute those feeds over Spotify. Instead, you’d probably have to duplicate your efforts and start a parallel Anchor profile in order to have your paywalled podcast reach listeners using Spotify. Anyway, this feature is expected to roll out in the spring.
  • A new partnership with Automattic’s WordPress platform around a tool that converts written content directly into podcast experiences. (Shout-out to the New York Times’ acquisition of Audm, which is now shaping up to be the “high-end” version of this commoditized content unit.)
  • Some new podcast discovery tools, including topic-based search and machine learning-based recommendations… come on, it’s 2021, we’re talking about The Algorithm, you know what we’re looking at here.
  • Some interactivity tools facilitated over Anchor, including to do stuff like polls and Q&A sessions. Personally, I’m not a big interactivity guy — I like my media experiences passive for the most part — but listen, maybe folks will get into that sort of thing, okay?

The big picture to internalize here, I think, is to focus on the fact that Spotify is dedicating some considerable effort towards building out consumption experiences that will be unique to the platform, in part as a way to create a differentiated value proposition for listeners. You already see this on the music side with offerings like “enhanced albums” and sceney-looking video loops accompanying individual tracks. And to be sure, we’re already seeing some efforts at this on the podcast side, including that product announcement from a while ago about a new format that lets creators stitch together music and spoken word segments into a semi-contiguous experience.

All these unique product experiences are rolled up into something Spotify is calling “future formats” — or so I was told yesterday, when I spoke to Nir Zicherman, the company’s Head of Podcast Formats. (Zicherman co-founded Anchor, by the way.)

For the record, I’m iffy on whether these “future formats” will actually be meaningful in the long run, but I’m open to the possibility that I’m just showing my age. In any case, I have a feeling I know what I’m looking at: a class of media experience signifying Spotify’s attempt to supersede podcasting’s broader RSS infrastructure. Which is to say, these products are among the purer expressions of Spotify working to engineer the podcast ecosystem’s break away from the download paradigm and towards the streaming paradigm, which is its basis, and where it currently holds a considerable advantage and stands to exhibit a good amount of power over.

That said, I didn’t tell Zicherman what I was thinking, and when we talked about the impetus for these formats, he offered a diplomatic interpretation of where Spotify is coming from. “We embrace RSS, and we want to leverage the fact that RSS gives creators broad distribution,” he said, noting Anchor’s support of the format. But he also went on to say that they want to innovate on listening experiences, and in order to do that, he argues, they need access and control over the point of distribution as well as the point of creation.

“We believe these formats can sit on top of traditional podcasting,” he said.

We’ll see. Anyway, since I had him, I asked if he had any thoughts about Clubhouse, the social audio app/conference simulator that has been heralded by some as the end of the good times for podcasting.

Again, a diplomatic answer. “I think the growth of Clubhouse speaks to the fact there is an appetite for creating and consuming new types of content in the audio space,” he said. “We think Live is interesting, we talk about it a lot, and we’re going to be watching Clubhouse closely.”

Fair enough. Though, I think if Spotify is really serious about becoming an all-consuming audio platform, maybe they should really have a go at this Live thing.

Miscellaneous. Some other things that should be flagged as relevant, because everything is relevant at this point:

  • Along with everything else, Spotify also announced an aggressive international expansion push yesterday, folding out to more than eighty new markets. From a podcast standpoint, this is not immaterial, as Spotify’s direct and intense global reach is an edge it has over iHeartMedia and SiriusXM, and we know for a fact they’re fairly active in building out podcast operations that are specific to certain non-US markets.
  • Spotify announced a new “high-end subscription,” which would give listeners access to music that adheres to “CD-quality, lossless audio format.” Not directly-related to our interests, but it sure is interesting. Shout-out to Neil Young.
  • Something that stood out to me in the presentation: Anchor powered eight out of ten new podcasts launched on Spotify?
  • Another thing that stood out to me: very brief mentions of Reply All and The Joe Rogan Experience. Kinda awkward, I guess.
  • Speaking of The Joe Rogan Experience: check out Peter Kafka’s interview with Spotify Chief Content Officer Dawn Ostroff, which covers a fair bit of ground, and includes a quick bit where Ostroff is asked about Rogan blowback.

I run this thing.