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(19.05.19) Spotify's Podcast Strategy

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This was originally recorded as a podcast and posted on Medium on 19 May 2019

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Spotify’s continues its foray into Podcasts. Specifically it’s acquisitions of Podcasting companies and the launch of new features geared toward podcasters & podcasting. Let's look at some of the motivations and potential strategic components around why Spotify is making a play for podcasts.

Soundtrap for Storytellers

Most recently, Music Business Worldwide had a story titled: “Spotify Launches Cloud-based Podcast Studio, Soundtrap for Storytellers”

Source:
Source: Soundtrap for Storytellers Website

What is Soundtrap for Storytellers?

It’s an online tool for recording and editing podcasts. This is a paid tool costing just over $14 U.S. if you pay annually, and a little more if you prefer to be non-commital and pay monthly.

One of Soundtrap for Storytellers’ main features is that it automatically transcribes your audio after you’ve recorded. And actually let’s you edit your podcast as if its a document. So if you delete a piece of transcribed text, it removes the corresponding audio for you. I haven’t tried this myself, but it sure looks nifty.

Another feature is remote interviews, and not restricted to just one guest. Similar to tools like Zencastr, Soundtrap for Storytellers let’s you share a conference call style link with your guest where your conversation takes place and is recorded.

It also includes other tools like a library of audio resources and sound effects from FreeSound.Org, and it lets you upload directly to Spotify. This is interesting and I will touch on it in a minute.

So why am I telling you about Soundtrap for Storytellers?

Spotify makes moves in podcasting

Well not too long ago, Spotify’s founder and CEO, Daniel Ek, said that

“over time, more than 20% of all Spotify listening will be non-music content.”

From what I can tell, he’s expecting a chunk of that to be in the form of Podcasts and Soundtrap is just the tip of the iceberg.

Source:
Source: Spotify for Podcasters Website

In October last year, Spotify launched “Spotify for Podcasters” in beta. In Q1 2019, Spotify said that “more than 20,000 podcast teams are now using the platform on a monthly basis”. Also in Q1 Spotify launched 15 originals and exclusives along with a daily news podcast in Brazil.

Earlier this year Spotify made two major acquisitions buying up Gimlet Media, a podcast production company, and Anchor, a podcast recording and distribution platform, spending €300 Million Euros for the pair. And said that it would likely spend another $400 — $500 Million on Podcast acquisitions in 2019.

That was in February. In March Spotify announced another acquisition, that of Parcast, another Podcast content studio

Then early this month we learned that Spotify was testing placing podcasts into personalized playlists and alongside music recommendations.

And again this month, Spotify posted “Do you need your own podcast” a blog post encouraging artists to create their own podcast.

I think it’s really interesting to speculate on Spotify’s motives here. And I don’t think they’re that hard to see. I’m not going to go super deep here, so if anyone is interested in discussing this in more detail, please reach out.

Three key strategic take-aways

The first piece which I’ve seen a lot of people pick up on is related to costs. At the moment Spotify pays a portion of its revenues to labels, artists, and distributors based on how much that music gets played relative to other content. But until now, pretty much all time spent listening on Spotify meant listening to music. So 100% of that pool of funds was going to those music industry suppliers (Artists, labels, and distributors). Now, if Spotify can provide other content that they own or that is less costly — in the case of Podcasts, often free — then that portion of listener time and therefore listener revenue, does not have to get paid out and stays in Spotify’s pocket. This is not the place to talk about whether this is right or wrong or for who it’s right or wrong, but it sure is interesting.

Another piece of the puzzle is on the revenue side. If Spotify can provide more reason for people to spend time on the platform, even if it’s for free content, maybe they are more likely to then upgrade to a paid subscription to get the ad-free music. Or by having content and features that other platforms don’t have (aka. Podcasts), perhaps they can move subscribers over from Apple, Deezer, Tidal and Spotify’s other competitors. Spotify knows people are spending time listening to something, the majority of that time is music, podcasts, and some audio books. So if Spotify can be a single platform where you can get more of the things you want to listen to, this becomes an attractive proposition rather than having to switch between apps.

And finally, Podcasts provide a nice low-cost testing ground for Spotify. I first came across this idea from Denisha Kuhlor who wrote a really great Medium post titled “The Record Label of The Future is no Record Label at All”.

The TLDR here is that Spotify’s Acquisition and other steps in the world of Podcasting demonstrate it’s strategy to control everything audio which I mention above. However, the important bit here is captured well in a direct quote from Denisha’s article

“Spotify is using podcasts to validate their ability to use technology to disinter-mediate the process of producing, distributing, and optimizing music in a way that is cost effective and provides the least points of friction given their current reliance on record labels.”

Did we all catch those two points? One — to disintermediate the process. And Two — Spotify’s current reliance on record labels.

In the past, spotify ruffled some feathers with Major labels when it did direct deals with artists. So I think Denisha is spot on here.

With Podcasts, Spotify can test going directly to the source of creation and see if that’s a viable business model, without upsetting the major label apple cart. But ultimately, and here’s another quote from Denisha’s article

“The larger play is to centralize the fragmented intermediaries creating bottlenecks in the music industry and become the sole gatekeepers to talent.”

Let’s keep these strategies in mind, especially that of disintermediation.

Just recently, Spotify started testing a feature called Storyline.

Storyline seems a lot like Snapchat or Instagram stories, but the idea is to allow artists to insert a little story — in the form of an image overlaid with text — into the listener experience to tell them something about the song they’re currently listening to. Perhaps the artist’s motivations behind the song for example.

This isn’t entirely new. Spotify already has a feature called “Behind the Lyrics” which does something very similar but is delivered in partnership with a third-party called Genius. Whereas Storyline is Spotify’s own in-house feature.

This is a nice feature, but what’s key is that it’s another step toward disintermediation and direct Artist contact for Spotify.

Going right back to the beginning of this newscast, I talked about Spotify’s new Soundtrap for Storytellers. But take a look at this wording directly from the Soundtrap website

“With our feature interactive transcript, you can record and automatically transcribe your voice. Edit your recording as you would a text document. Then you can upload to Spotify and improve your discoverability, or just download your podcast and distribute it wherever you want.”

I'll focus in a bit here

“Then you can upload to Spotify and improve your discoverability, OR just download your podcast and distribute it wherever you want.”

Podcasts are traditionally distributed via RSS feed. They’re a generally open and free resource. When you distribute your podcast via RSS, anyone with an RSS reader can access it.

I don’t know, but my guess is that when you choose Soundtrap’s option to “upload to Spotify and improve your discoverability”, your podcast is not then being distributed through normal RSS channels. Meaning it will then only be available on Spotify. Soundtrap, is playing a nice little word game here, because they are implying that if you upload from Soundtrap to Spotify you will get better discoverability presumably because it will also have the transcript, although they don’t say why. What they also don’t say is that if you distribute your recording through normal podcast channels, it will actually also be made available on Spotify too. I want to emphasize this point. Spotify’s version of improved discoverability means within Spotify, not in general. Because, my understanding is that if you take their improved discoverability route, you can’t be discovered on Apple Podcast, Stitcher, Overcast, or other podcast platforms. BUT you have a better chance on Spotify.

Alright, I think that’s enough about Spotify for one day. Interestingly, Spotify was not the only one in the podcast slash music news sphere this week.

Sony Music is also dipping its feet into Podcasting. Sony announced that it has entered into a joint venture with Adam Davidson, the founder of NPR’s Planet Money and a contributor to This American Life, and with Laura Mayer, a producer who’s worked for Stitcher, Panoply Media, and WNYC. I’ll link to the full press release in the show notes, but here’s an intro snippet describing the project

The joint venture will create and distribute original scripted and unscripted programming across multiple podcast genres and subject matters. Based in Brooklyn, NY, Davidson and Mayer will lead the yet-to-be-named company and focus on cultivating dynamic talent and unique storytelling using Sony Music’s expertise in content creation and supporting new technologies for monetization.

There’s not a ton of specificity there, so I’m not 100% sure what it actually means, but you can be sure I’ll be keeping my eye on it to see how it develops.

I don’t think it’s a secret that Podcasts are looking forward to continued huge growth in the near future so I wouldn’t be surprised if we keep seeing startups popping up in the space, and big incumbents looking for ways to get a piece of the pie.

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