Spotify wants to be the industry’s No. 1 distributor of podcasts — and it’s willing to forgo some revenue in order to counter Apple’s push into podcast subscriptions.
Next week, Spotify will launch its podcast subscription option for partners. But the company will be letting content creators keep 100% of the subscription fees: Spotify, at least initially, will not take a cut of podcast subscription revenue, sources confirmed. The news was first reported by the Wall Street Journal.
By contrast, Apple will keep up to 30% of podcast subscription fees under its program, which is launching next month. Most creator platforms, including YouTube, Twitch, Facebook and Patreon, also take a cut of subscription fees and/or fan payments.
Currently, Spotify doesn’t allow customers to pay for subscriptions through Apple in-app purchases — and Spotify has been a very vocal critic of Apple’s App Store policies, which included lodging a formal complaint with the European Union alleging anticompetitive behavior. Similarly, you won’t be able to purchase Spotify podcast subscriptions through Apple (or via Google Play, either).
Spotify has said it was going to test paid subscriptions for podcasters to allow them to offer exclusive content to subscribers, officially announcing that during its February “Stream On” event. But it has not yet provided details on how that will work.
Meanwhile, in conjunction with Spotify’s podcast subscription rollout, Facebook plans to launch an integrated version of Spotify’s audio player — a project called “Project Boombox” — starting next week to provide access to songs and podcasts directly within the Facebook app. That’s part of a broader embrace of social audio and audio-messaging features that Facebook announced Monday.
With Apple Podcasts Subscriptions, as is the case under existing App Store policies, the tech giant will keep 30% of podcast-subscription fees in the first year and 15% in subsequent years. On top of that, creators must pay $19.99 per year to gain access to the Apple Podcasters Program, which includes tools required to offer premium subscriptions on Apple Podcasts. Pricing is set by creators (and billed monthly by default). Podcasters also can select which perks included with each plan — for example, ad-free listening, exclusive bonus content, and early or exclusive access to new series.
Why is Spotify going to let podcasters keep all the coin from premium subscriptions on the platform? At a high level, Spotify wants to make it as attractive as possible for creators to make Spotify their preferred platform — and to dissuade them from participating in Apple Podcasts Subscriptions.
Spotify’s bet is that the move will keep its podcast flywheel spinning by attracting more total listeners (which it monetizes through ads and Spotify Premium paid plans). Also unlike Apple, Spotify is spending big bucks for exclusive podcast programming, ranging from Joe Rogan to Prince Harry and Meghan Markle. Spotify can sweeten the pot for those partners by letting them keep all the money from any premium subscriptions they offer on the platform.
According to Spotify, as of the fourth quarter of 2020, it had 2.2 million podcasts on the platform (up from 1.9 million podcasts the prior quarter and up more than threefold year over year). Despite some skepticism on Wall Street that the podcast investment is paying off, Spotify insists the data shows the strategy is succeeding. “We now feel reasonably confident that we can prove out that causality of having podcast and the benefit it is having on user growth and retention, and then having podcast is a positive contributor to [long-term value] per subscriber,” CFO Paul Vogel said.
In reporting Q4 results, Spotify said 25% of its total user base engaged with podcast content in the quarter (up from 22% in Q3 and 16% in the fourth quarter of 2019). In addition, podcast consumption hours in Q4 nearly doubled year-over-year, according to the audio streamer.
Spotify kicked off its podcast-growth initiative in early 2019, buying podcast studios Gimlet Media and Parcast along with podcast self-publishing platform Anchor — paying nearly $400 million for them, with additional potential payouts over four years. Last year Spotify bought Bill Simmons’ The Ringer podcast and media startup in a deal worth up to nearly $200 million and spent $235 million in cash to buy podcast publishing and ad company Megaphone.