Why Choose Spotify? Podcasts Are the Answer of the Future

Spotify announced they are spending $200 million+ to purchase both Gimlet Media and Anchor. This is the most real investment in podcasting by an established company I can think of. Why spend so much money on podcast production? Spotify spends next to nothing on music production, the main focus of their company. Podcasting is not known for its ability to monetize. Most podcasts are passion projects. For professionals, they are used to supplement content, monetization in another way and build a relationship with their fans. Gimlet is one of the few podcast producers who can support more than their hosts. Spotify could increase potential revenues from both Gimlet and Anchor by integrating them into the platform, but that isn’t the main reason Spotify purchased them. Spotify is creating necessary differentiation for survival.

Differentiation in music is difficult. Apple required physical devices, such as the iPod, in order to differentiate and still didn’t win. Once smartphones took over, it was anyone’s game again. Both Spotify, Apple Music, Tidal and Google Play Music try a variety of tactics in order to differentiate from one another. Both Apple and Google can bundle music streaming with their other products and services. Spotify is stuck with only music subscriptions. No matter what platform you choose, the music you want is likely there. You will probably pay the same wherever you get it. No platforms (other than maybe Soundcloud or Bandcamp) are able to differentiate via content. Music labels always own the content. They are large and powerful. Labels are willing to put music wherever it pays. They are not loyal to any specific platform. Often, labels are actively hostile towards platforms.

Podcasts similar and different than music. Both are audio mediums which don’t require your full attention. Both are also created by individuals or small groups of individuals. The difference is podcasts are control by the creators rather than music labels. Individual podcast creators control their content publishing. Platforms cannot encroach on music labels by signing artists because labels will take their music off the platform. People can always find music somewhere else. Platforms can encroach on podcasting. Podcasts are published into an RSS feed and are accessible by anyone. They are given away for free. The landscape is scattered, with no “network” owning enough content to have power over publishers. Spotify is able to buy a podcast network with no repercussions.

By buying assets in the podcasting space, Spotify can create real content differentiation. They create a reason for someone to choose one platform over another: content. Content is king, as the streaming video wars show. Spotify now controls Gimlet Media which is responsible for some of the most popular ongoing podcasts. They also control new content created by the talented team at Gimlet Media. On Anchor’s side, Spotify can help Anchor better monetize. It links Spotify with many small and medium sized podcast creators reliant on Anchor for podcast creation and management. The ability for Spotify to build a relationship with up and coming podcasters using Anchor will help them develop the content of the future. It is likely Spotify will begin to close the podcasting industry off, begin to produce exclusive podcasts for their platform. These exclusive podcasts, if done correctly, will draw subscribers.

Podcasting benefits from Spotify as well. Production and listening have never been linked to the same platform. It is difficult for creators and advertisers to truly understand who is listening, what they are listening to, and other analytics. The better analytics come from a first party platform help Spotify native podcasts. Spotify can also use it’s proven ability for recommendation to increase the listenership of small and medium podcasts. They better match podcasts with listeners. Both these unique benefits of Spotify help the podcasting industry grow and improve as a whole.

Spotify making aggressive moves into the podcasting space is important for them to survive as a company. Google and Apple are able to use music and podcasting to make money indirectly by bundling subscriptions to their other platforms or attracting customers to their overall ecosystem. Spotify is entirely reliant on music subscriptions. Podcasts are the key area Spotify can differentiate from its competitors. They need to succeed in podcasting to keep subscribers from the ever-growing competition from music streaming competition from Apple and Google.

Let me know what you think on Twitter: @IanVanagas

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