Spotify's push into podcasting

It’s hard being a music streamer. Not only are music rights complicated but it’s hard to find ways to properly compensate artists when there isn’t much money being made from every streamer. When Spotify went public, the world got a picture of how hard it is to make money in music streaming. Having a strong brand in the audio business, Spotify decided to venture into the podcasting business in hopes of better fortunes.

In early 2019, Spotify was reported to have acquired two podcasting businesses: Gimlet Media and Anchor. Gimlet Media is a podcast network and Anchor is a platform that makes it easy for anyone to start a podcast. On a side note, I use Anchor for my podcast. A few days after acquiring Anchor and Gimlet Media, Spotify acquired The Ringer, one of the biggest podcasting companies in the industry.

What makes podcasting more attractive than music streaming? In Spotify’s case, it’s more profitable than music streaming. Most of the money earned from music streaming is gone in royalties. For podcasting, Spotify doesn’t have to deal with any third parties. Owning podcast brands allows Spotify to reap more profits from their ad revenue.

To further cement its dominant position in podcasting, Spotify decided to secure exclusive deals with many prominent people. In May of 2020, Spotify made a deal with Joe Rogan to have his podcast exclusively on Spotify. A month later, Spotify made a deal with Kim Kardashian West to create a podcast exclusively on Spotify as well. And a few days ago, Spotify inked a deal with Michelle Obama to create her own podcast exclusively on Spotify. Having many famous people creating their own podcasts exclusively on Spotify makes the platform a lot more valuable. If people want to hear Joe Rogan, Michelle Obama, or Kim Kardashian West, then they’ll need to go to Spotify. These podcast deals create a moat for Spotify.

Overall, Spotify is looking to not only venture into podcasting but to also maintain its dominant position in audio, specifically podcasting. Because podcasting is a lot more profitable than music streaming, Spotify’s aggressive moves into podcasting will give investors huge returns in the coming years. When looking at some of Spotify’s competitors like Apple, Google, and Amazon, none of them have made aggressive moves in podcasting to the level Spotify is moving. Spotify is the king of audio.