Spotify’s Big Bet on Podcasts

Feb 9 2023  |  Ella Sagar

Spotify is now talking more about ‘efficiency’ and less about expanding its sizeable exclusive content trove of podcasts and audiobooks to diversify from music streaming. The company insists there is no change in strategy, but industry watchers disagree.

When asked by an investment analyst whether Spotify’s previous podcast acquisition strategy and making 2022 “a year of investment” was “a mistake”, founder and CEO Daniel Ek replied “no and yes”.

This was quite an admission, given how Ek had challenged his audio streaming business to significantly increase its income from advertising relative to other areas of revenue, which mostly come from Premium subscribers and music streaming.

Spotify’s financials revealed last week that ad-supported revenue for Q4 2022 grew by 14% year-on-year to €449m, which the report said was “led by podcasting gains”.*

For the full-year 2022, ad-supported revenue reached nearly €1.5bn euros, up 22% year-on-year and making up 13% of total revenue.*

While this ad-revenue share is an improvement by historical standards, 13% is still well short of the 20% Ek mandated in 2021. And, instead of talking about investing to grow, Ek told investors that Spotify would be “shifting to focus on tightening our spend and becoming more efficient”.

This drive to cut costs in a tougher economic climate “doesn’t mean we’re changing our strategy,” Ek clarified.

And yet it does appear to industry analysts that there has indeed been a shift in Spotify’s podcast strategy: away from exclusive originals, and potentially even podcasts completely. Insiders at the company, meanwhile, insist this is not the case.

Spotify’s podcast strategy since 2019 has been based on acquisition and exclusive original content.

The most well-known names still on the platform include Joe Rogan, Meghan Markle and, soon, Louis Theroux. There have also been high-profile departures from the platform, including Barack and Michelle Obama.

Since then, the streamer has acquired three podcast studios; Gimlet Media, The Ringer, and Parcast, and several podcast tech, hosting and measurement companies including Anchor, Megaphone, Chartable, and Podsights.

Meanwhile, its Q4 2022 global podcast revenue grew “in the mid 30% range” year-on-year, which its earnings said “reflected healthy double-digit year-on-year growth” in impressions sold and pricing.*

For the full year 2022, Spotify’s ad sales from podcasts (both from growth in impressions sold and cost-per-thousands, or “CPMs”) via its self-serve platform Spotify Ad Studio contributed €123m to its  revenue.*

At the same time, its global music advertising revenue grew in mid-single digits year-on-year as a result of double-digit year-on-year growth in impression sold, but was affected by “softer pricing” because of the macroeconomic environment.