Spotify Acquires Podz: Expanding Podcast Discovery

Spotify Acquires Podz to Enhance Podcast Discovery

The popularity of podcasts continues to grow, however, locating new and relevant shows remains a significant hurdle for many listeners. Recently, Spotify announced the acquisition of Podz, a company focused on improving the podcast discovery process.

According to a company statement, Spotify is dedicated to developing a leading and highly personalized podcast discovery experience. They believe Podz’s technology will significantly contribute to and accelerate their ongoing efforts. This includes delivering the right content to listeners at the optimal time and fostering growth within the podcasting industry globally.

The Challenge of Podcast Discovery

Podcasts typically have longer durations, often exceeding 30 minutes. This makes it difficult for potential listeners to sample new content. Trying out a podcast episode isn’t as straightforward as previewing a song from an unfamiliar artist.

To address this, Podz created what they termed “the first audio newsfeed.” This feature presents users with concise, 60-second clips extracted from various podcast episodes. Podcasters frequently utilize tools like Headliner to generate clips for promotion on social media platforms, and Podz operates on a similar principle.

However, instead of relying on podcasters to manually select promotional clips, Podz employs a machine learning model to automatically identify compelling segments. This model was trained using over 100,000 hours of audio, developed in collaboration with journalists and experienced audio editors.

Funding and Early Traction

Prior to being acquired by Spotify, Podz secured $2.5 million in pre-seed funding. Investors included M13, Canaan Partners, Charge Ventures, and Humbition. Notably, prominent figures such as Katie Couric and Paris Hilton also participated in the funding round.

Latif Peracha, a General Partner at M13, shared with TechCrunch that the average podcast listener subscribes to seven podcasts but actively follows nearly 30 on Podz. These initial indicators suggested the potential for Podz to create a truly innovative product within the podcasting space.

Spotify’s Expanding Podcast Ambitions

This acquisition underscores Spotify’s commitment to dominating the podcasting market and the broader audio entertainment landscape. Just recently, Spotify launched Greenroom, a direct competitor to Clubhouse’s live audio platform.

Currently, Spotify and Apple are closely competing in the realm of podcast subscription revenue. Apple announced its entry into podcast subscriptions in April, followed by Spotify’s rollout of its own subscription platform shortly after. Apple’s model involves a 30% revenue share in the first year, decreasing to 15% in the second.

In contrast, Spotify’s program will not take any commission from creators until 2023, at which point it will implement a 5% fee.

Implications for the Podcast Ecosystem

Podcast creators may find it more advantageous to contribute 5% of their subscription revenue compared to Apple’s 30%. Ultimately, listeners will likely gravitate towards the platform offering the most user-friendly experience.

If Spotify’s investment in podcast discovery proves successful, it could challenge Apple’s established leadership in the podcasting industry.

Update: A subsequent SEC filing revealed Spotify’s total acquisition cost for Podz, Inc. The purchase was completed for €45 million, comprising €36 million in cash paid upon closing and a further €9 million in deferred consideration.