Spotify’s Podcast Aggregation Play

I can see a similar future for podcasts: Spotify, if they are successful, may end up being the biggest player, but that doesn’t mean new and different business models that directly link suppliers and consumers won’t emerge. It will, in other words, look like everything else touched by the Internet: very large winners on one end, and small niche win... See more

Gimlet Media fits the bill in both cases. While the company’s current roster of podcasts will remain freely available, future podcasts will almost certainly be exclusive to Spotify.

All of this is critical context for understanding Spotify’s strong interest in the podcasting space. Spotify needs (1) a way to differentiate its service from Apple Music in particular, and (2) content that it does not have to pay for on a marginal cost basis.

The current state of podcast advertising is a situation not so different from the early web:

Music generated $8.7 billion in revenue in the U.S. in 2017; podcasts generated only around $300 million in the U.S.

Music can only be played legally through licensed services or via licensed downloads; podcasts can be played by anyone

Music is primarily controlled by three large labels; podcasts are controlled by individual podcasters

From a value chain perspective, though, music and podcasts could not be more different:

This is the Aggregator’s advantage: particularly when it comes to media, whether it be print, video, or audio, suppliers are often motivated to simply reach the most people and make a living doing so. It is a fundamentally short-term outlook that is entirely understandable and defensible. That, though, leaves the Aggregator with an arbitrage advant... See more