Issue 302,  published April 27, 2021

Subscription Frenzy

Alright, let’s do the thing.

The past week was bookended by two major developments pertaining to the rise of podcast subscriptions on the platform level, between Apple’s head-turning announcement last week and Spotify’s big detail push this morning. There’s a lot baked into each piece on its own and in relation to each other — too much for me to go over comprehensively — so I’m only going to go over what I think are the most important beats.

Apple

During its spring event last Tuesday, Apple announced Apple Podcasts Subscriptions, a new set of features that will give podcast creators the opportunity to create premium or freemium subscription products for their shows over the Apple Podcasts platform, still widely understood to be a major driver of all consumption in the medium even as Spotify cranks up the competition for listen share. Creators can set their own pricing, and they’ll be able to sell subscriptions to individual shows or a group of shows. Those tools are expected to roll out to the general public next month.

No beating around the bush here: This is a potentially tectonic development, given Apple’s historical status as a highly influential though fairly hands-off ward of the podcast ecosystem.

From a platform standpoint, the story of the last few years was defined by Spotify actively taking a hatchet to Apple’s position as the default center of the podcast universe while Apple mostly stood still. Strategically, Apple Podcasts was thought to be in a tricky in-between space: Podcasting wasn’t big enough to warrant much focus from the trillion-dollar corporation housed in a spaceship, but the notion of Apple potentially losing its dominant position over an increasingly hot media category — one that it had inadvertently cultivated — is certainly troublesome.

The way I see it, Apple Podcasts’ push towards facilitating subscriptions is both a smart hedge and perhaps one of the few things the platform could do without directly distorting the balance of the open podcast ecosystem on the one hand and getting into an all-out podcast arms race with Spotify on the other. (Both companies are, of course, currently duking it out in other arenas, including music streaming and app store governance.)

However, Apple’s actual podcast subscription features are somewhat surprising in their shape and terms. To begin with, Apple will charge podcast creators $19.99 per year simply to use those features, and, on top of that, the platform will take an eye-popping 30% cut of revenue from each transaction that it facilitates in the first year of usage. The cut drops down to 15% the following year onward. That strikes me as a prohibitively high cut — doable and possibly worthwhile for established, diversified publishers but likely kneecapping for smaller shows or podcast creators just starting out. (The revenue cuts, by the way, mirrors the terms for the Apple App store, which, interestingly enough, is a key piece of the broader debate over said app store.)

Similarly tough is Apple’s stance towards who owns listener relationship. Put simply: Apple does, according to the Apple Podcasters Program Agreement, which means that creators and publishers who build strong premium or freemium subscription programs over the platform won’t be able to directly communicate with listeners other than through the podcast episodes themselves. This adds dramatically high friction for publishers who might want to migrate away from the platform for whatever reason, which, certainly, is part of the point if you’re sitting in Apple’s position.

Some podcast creators will likely find other points of concern in the offering. For one thing, paid podcast products built using Apple’s tools will only be limited to distribution over the Apple Podcasts platform, which means publishers that really want to build comprehensive subscription programs will have to replicate work to get those paid episodes distributed through other platforms. This isn’t necessarily a biggie, given that some alternatives, like Supporting Cast and even Spotify (which we’ll discuss in a bit), tries to make it easy to deliver premium feeds to listeners on whatever app they use, but it’s still annoying, especially if you’re a publisher thinking about Android as much as Apple. Furthermore, open-podcasting advocates might feel uncomfortable with the fact that the distribution of paid episodes through the Apple subscription feature will not be done over RSS, but through a closed system that’s specific to Apple Podcasts. Plus, there are mentions in the Program Agreement about things like the platform potentially creating automated transcripts of episodes for machine-learning purposes, which might spook some people, though, frankly, worse things probably happen all the time in every other digital platform you use.

Anyway, I’d be remiss if I didn’t highlight the upsides, which are potentially considerable. Over at Stratechery, Ben Thompson predictably did the best job I could find laying out what exactly publishers stand to gain competitively from using Apple Podcasts Subscription. In short: The ease with which payments are facilitated over the closed Apple architecture — combined with the sheer number of people already locked into the Apple ecosystem — has the potential to drive more sales and reduce the level of churn. In the past, existing direct podcast revenue options were generally contingent on listeners being tech savvy enough to navigate RSS feed uploads. Things are better these days, with some vendors offering smart-linking solutions, i.e. tap the icon of the app you use and we’ll automatically set it up. Still, there’s better flow, and then there’s butter flow, which is what Apple is offering here.

One semi-counterargument to consider at this point. There’s something to be said about the differences between a listenership built out of people who would crawl through the unpleasant experience of navigating RSS feeds to access your show and a listenership built out of people converted from a more frictionless experience. From that standpoint, I’m willing to argue that Apple Podcasts Subscription tools seem well positioned to convert casual listeners into paid subscribers or members — which is to say, fans at the margins. Shrewd publishers would presumably benefit from mixing things up a bit to figure out the casuals and the more engaged.

Okay, so, that’s Apple and its subscription play. Let’s move on to the Swedes.

Spotify

It’s funny: Spotify had previously announced its own premium subscription tools during the Stream On event back in February, but Apple received the lion’s share of the buzz around podcast subscriptions following its announcement last week, making it seem like Spotify was on the back foot with this particular frontier.

Which maybe they are, at least to some extent. After all, Spotify’s the insurgent working to wrestle dominance away from Apple, and then there’s the whole thing about the audio-streaming app still being pretty much beholden to Apple’s app governance. (I’m generally afraid of Scott Galloway, but his take on Spotify needing to vertically integrate into hardware at some point in the future strikes me as a right one. On a separate note, the Car Thing looks pretty interesting.) Plus, Spotify’s been fast and furious with new podcast-related announcements and roll-outs, so I wouldn’t blame anybody for missing or under-counting this subscription tool thing the first time around. They throw out a lot!

Anyway, Spotify released key details around its own podcast subscription tools earlier this morning, and they make for a fascinating contrast to Apple. First and foremost, those features will be made available to podcast publishers through Anchor, deepening that division’s position as the central creator hub for the company’s growing podcast play.

Like Apple Podcasts Subscriptions, these tools will give podcast creators the opportunity to build premium or freemium subscription products for their shows. However, in a key point of differentiation, Spotify’s tools will let creators distribute those paid listening experiences to other podcast platforms in addition to Spotify. (This means, interestingly enough, that Spotify more directly competes with the likes of companies like Patreon and Supporting Cast than Apple does.)

There are three other key points of differentiation worth noting. The first is price-setting. Podcast creators will only be able to choose from one of three monthly price points to set for their subscription products: $2.99, $4.99, or $7.99. That’s pretty constraining, frankly, and in contrast, Apple offers more flexibility.

The second is the fees. For the next two years, Spotify won’t be charging podcast creators a fee to use its subscription tools, and creators will be able to pocket full subscriber revenues minus payment transaction fees. However, the company plants to introduce a 5% fee for access to these tools starting in 2023, which is still considerably lower than Apple’s 30% cut in the first year and 15% cut in subsequent years.

One quick additional detail on this: The Wall Street Journal reported last week that, in regard to these tools, “users of Spotify’s iOS app who subscribe will be routed to a website for the transaction, meaning that Apple won’t take a cut of that revenue.” This was confirmed this morning. Since subscription fulfillment won’t happen within the app itself, it potentially introduces some friction to transactions — and may give some edge to Apple Podcasts here.

The third has to do with listener ownership. It’s my understanding that podcast creators using Spotify’s subscription tools are expected to be able to control and maintain direct relationships with their listeners. I haven’t been able to get much detail on this, so it remains to be seen whether this means control over the subscriber roll, but either way, this seems to suggest a level of portability there that isn’t present with the Apple Podcasts Subscription option. The company also says that it’s building out something called the Open Access Platform, which will give publishers with a paid subscription base managed on other platforms — say, Patreon or Supporting Cast — the option “to deliver paid content to their existing paid audience using Spotify,” something that wasn’t previously possible.

Spotify’s tools are expected to roll out to creators in the U.S. and internationally in the coming months, but an initial group of twelve podcast creators will have access to the tools starting today. The company has also set up a waitlist to gradually open access to more creators and publishers moving forward.

At face value — and this read should be open to revision as more details come in and I get to see more of the actual experience flow — Spotify’s subscription offering may well come off as being more creator friendly relative to Apple. But I imagine podcast creators already worried about Spotify’s broader effects on the open ecosystem will see these seemingly creator-centric terms and be compelled to ask: What’s the longer-term trade-off here? What does a podcast-creator ecosystem that’s more dependent on Spotify from a facilitation standpoint mean for the open standard?

Indeed, those are the right questions to ask.

Big Picture

As much fanfare as there may be around Apple and Spotify’s push into premium subscription tools, it’s important to note that direct revenue is far from a new concept in the podcast world.

Today, it’s easy to identify several podcast publishers with robust membership programs, including Slate, Maximum Fun, Radiotopia, and Relay FM. (Fun fact: Gimlet Media tried building one out in its earlier years, which I believe came with the benefits like a dedicated Slack group and merch.) It’s similarly easy to identify successful individual podcasts operating off membership support, a prominent example being Chapo Trap House. Furthermore, in recent years, there was an increasing sense that the direct-revenue-driven podcast category was only poised to naturally grow further, as evidenced by a growing class of new solution providers like Supporting Cast and Glow, the latter of which was recently acquired by Libsyn. (Another fun fact: The newsletter platform-publisher Substack is technically part of this cohort, since it has very minor private-podcast-distribution capabilities.)

It’s not immediately apparent to me if Apple’s and Spotify’s podcast-subscription tools will radically reshape the podcast industry, at least in the somewhat revolutionary terms these developments were discussed in certain corners over the past week. A few reasons apply. Podcast advertising seems likely to remain the dominant revenue channel for the industry. Not all podcasts or podcast publishers are built for direct revenue. Most operations with strong existing paid listener bases will probably look at these new options and won’t see much reason to transition over; you can still distribute premium RSS feeds to Apple Podcasts, and Spotify’s upcoming Open Access Platform feature means that premium feeds can soon be distributed over the closed platform. The general queries lobbed at the growing glut of VOD streaming services and paid-newsletter businesses apply here: Will there be enough consumer dollars to go around? In any case, both Apple and Spotify seem to be largely framing these subscription pushes as being complementary additions to everything that currently exists.

But I do think they will bring change, likely of a more incremental or iterative sort. At the very least, they’ll inject a nice level of newness and novelty to the way the podcast business is currently conducted. Podcast advertising isn’t going anywhere, but its opportunities are also thought to be getting increasingly commoditized and removed from smaller shows, so having more integrated subscription tools around may be a catalyst for more upstart businesses and new kinds of business formations. A true subscription-first podcast business remains elusive, for example, but it might have a better chance at surviving now. Maybe these tools can help The New York Times more directly drive digital subscribers with its audio division. Apple and Spotify driving more attention to subscription tools may well shift consumer expectations, normalizing the notion of paid podcasts — and further growing the pie as a whole.

There are tons of new possibilities here now than were there before, and that only strikes me as chiefly being a good thing on aggregate.

A few more things…

  • Spotify also announced that the platform will begin opening up its Spotify Audience Network, the audio advertising marketplace powered by its Streaming Ad Insertion product, to select independent creators using Anchor starting May 1.
  • Subscriptions weren’t Apple’s only podcast-related announcement of note last week. It also announced a big redesign to the baked-in Apple Podcasts app pegged to the iOS 14.5 update deployed yesterday, which includes a new look, new features, and some quality-of-life improvements meant to modernize an app experience that has long been stuck in the 2000s. (Having spent some time playing around with the refreshed app yesterday, I’d say: still needs more modernity.) There was one other Apple Podcast development that stood out to me: a new taxonomical aspect on the platform directory called “Channels,” which emphasizes show groupings on the publisher level.
  • Very small thing: One curious detail in the Apple announcement is the fact that Luminary will be a launch partner when those subscription tools roll out. A lifeline, perhaps?

One last thing on Spotify…

I run this thing.