Spotify hypes the revenue potential of podcasts and audiobooks

In its second investor day, streaming carrier spotify up to date the economic community approximately its ability for similarly increase and monetization, in spite of the general economic downturn impacting the tech quarter. The enterprise spent a good part of its presentation specifically centered on podcasts, which it said had been “in large part unchanged” for years earlier than its access into the marketplace, due to the restrictions of rss.

Spotify mentioned how unbundling podcasts from rss era has paved the manner for spotify to generate revenue through these famous audio applications — a sentiment that’s no longer universally cherished by folks that assist an open podcast ecosystem. Spotify has disrupted that market by means of bringing some podcasts in-house, in which they can only be heard on its carrier, and competition have observed. This has fractured the environment and left consumers at a disadvantage as a few suggests are no longer extensively to be had.

“we’ve been able to replace rss for on-platform distribution, because of this that podcasts created on our platform are now not held lower back by means of this old technology,” maya prohovnik, spotify’s head of communicate, told investors. The agency also highlighted the boom of podcasts on its service, noting that spotify nowadays has over 4 million podcasts, up from 500,000 in 2019. 1,000 of those are either operated or licensed as exclusives by the enterprise. It referred to, too, that its podcast advent device anchor has helped to make contributions to this growth, saying that the app powers 75% of the podcasts on spotify and every new show created on anchor brings in a further 2. Five million month-to-month lively users to the carrier.

Mixed with its different website hosting platform, megaphone, spotify says that indicates powered through its equipment account for forty five% of all podcast intake at the platform. But past the sheer wide variety of available shows, spotify highlighted the sales-generating potential of its investments in this medium — investments which can be over $1 billion whilst considering its acquisitions of equipment, advert tech, and studios, as well as inner development efforts.

Those efforts have also positioned spotify in a complex function with regard to which creators it chooses to platform and to what volume the content is moderated, because the joe rogan pr crisis confirmed. But spotify in large part weathered that storm, as its web hosting of the arguable podcaster didn’t effect its potential to grow paid subscribers. Spotify believes its long-time period revenue dreams with podcasts could be done as it similarly develops its advertising generation, grows its podcast subscriptions enterprise, and invests in new creator monetization tools. It stated the podcasting business generated roughly €200 million remaining yr, up three hundred% from 2020, and 125+ million customers listened to a podcast in q1.

In prepared remarks posted simply in advance of the begin of investory day, spotify ceo daniel ek spoke to the sales opportunities ahead for podcasts —- a $20 billion possibility, the enterprise believes — and noted that its continued investments in this vicinity of its commercial enterprise are what’s been flattening its gross margin. He stated that spotify’s standard gross margin is kind of 28. Five%, that’s behind the organisation’s longer-term said target of a 30-35% gross margin.

“what’s been dragging it down is our move into podcasting,” ek said. “we saw one of these significant possibility to expand our platform and our target market, so we decided to go aggressively after podcasting. And this intended making a big investment, which truely has brought more listeners to spotify and deepened the engagement,

However it additionally has impacted our basic gross margin.” ek then cited that spotify’s podcast vertical is “nevertheless largely in funding mode and not but profitable,” however he believes the market has a “forty-50% gross margin potential.” this isn’t always handiest associated with spotify’s capability to monetize podcasts with ads, however additionally new initiatives like its podcast subscriptions. The enterprise instructed traders it’s now offering podcast subscriptions — basically, paid podcasts — across 34 markets. Its on-platform subscriber retention fee for those is ninety% seeing that its 2021 release. It stated it’s partnered with over a hundred publishers and systems on subscriptions so far and is expanding.

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