Spotify Explores New Podcast Monetization Strategies

Spotify has once again indicated its intention to develop innovative methods for generating revenue from its podcast investments. During the company’s fourth-quarter earnings report, CEO Daniel Ek posited that the streaming platform anticipates a future featuring diverse business models for podcasts.

Potential Monetization Models

These models could encompass both advertising-supported subscriptions and individual, à la carte purchasing options. Spotify’s plans for these expanded monetization approaches may be unveiled later this month at the upcoming “Stream On” livestream event.

The company reported a substantial growth in its podcast catalog, now boasting 2.2 million programs. Demand for the audio format has demonstrably increased in recent months.

Growing Podcast Engagement

Currently, 25% of Spotify’s monthly active users are engaging with podcasts, a rise from 22% in the previous quarter. Listening hours have nearly doubled year-over-year during the fourth quarter, showcasing increasing podcast consumption.

Podcasts on Spotify are presently accessible to both free and premium subscribers and are monetized through advertising. This remains a central focus for the company.

Acquisition of Megaphone

Spotify recently acquired Megaphone, a podcast hosting and monetization platform, to enhance streaming ad insertion technology for its publishing partners and expand its inventory of targetable podcasts.

Exploring Alternative Revenue Streams

However, Spotify has also been investigating alternative methods for monetizing podcasts. Late last year, the company conducted a survey to assess customer willingness to pay for a dedicated podcast subscription and to determine preferred pricing structures.

Survey Findings on Subscription Preferences

The survey presented several potential subscription tiers. A basic option offered ad-supported exclusive episodes and bonus content for $3 monthly, similar to Stitcher Premium, though Spotify’s version included advertisements.

A mid-range plan mirrored Stitcher Premium more closely, providing exclusive content without ads at $5 per month. A premium tier offered early, ad-free access to interviews and episodes for $8 per month.

It’s important to note that surveys are primarily used to gauge consumer interest and do not necessarily indicate an imminent product launch. Spotify confirmed this when initially questioned about the survey.

Investor Interest in Podcast Monetization

Despite this, investors are keen to understand Spotify’s strategies for recovering its significant investments in the podcast sector.

Ek responded during the earnings call that he believes multiple new monetization models are viable. He stated, “I think we’re in the early days of seeing the long-term evolvement of how we can monetize audio on the internet.”

A Multi-Faceted Approach

He further elaborated, “I don’t believe that it’s a one-size-fits-all… I believe, in fact, that we will have all business models, and that’s the future for all media companies.” He affirmed that Spotify will adopt this strategy.

This suggests Spotify is considering the ideas explored in the recent survey – potentially charging consumers for specific podcasts, rather than including them in music subscriptions or offering them freely.

Redefining the Concept of a "Podcast"

Such a shift could alter the traditional definition of a “podcast,” currently understood as freely distributed, serialized audio programs delivered via RSS feeds. If Spotify implements paywalls for podcasts, they would effectively become a new form of premium audio content.

Significant Investment in Podcast Content

Spotify has substantial opportunity for growth in this area, given its considerable investment in podcasts over the years. This includes acquisitions of content creators like Gimlet Media, The Ringer, and Parcast, as well as securing prominent talent such as Joe Rogan, Addison Rae, and Kim Kardashian West.

Advantages of Podcast Monetization

Podcasts offer Spotify the flexibility to monetize content through multiple avenues – advertising, subscriptions, or direct payments. Unlike music streaming, podcasts do not incur licensing fees or royalties.

Spotify can also tailor its podcast payment models to suit different regions and consumer preferences worldwide.

Early Stages of Development

Ek clarified that these considerations are preliminary. “I think it’s early days, though, to specifically kind of look at how that could play out,” he said, adding that the revenue profile would differ from music streaming.

"For The Record" Podcast Recap

Following the initial publication of this article, Spotify released a new episode of its “For The Record” podcast, featuring Ek, CFO Paul Vogel, and Head of Global Communications, Dustee Jenkins. They reviewed the Q4 earnings and discussed plans for the “StreamvOn” event.

Ek reiterated the company’s plans for new monetization models, emphasizing Spotify’s historical focus on growth through product expansion and market entry.

Leveraging Multiple Monetization Tools

He stated that Spotify will begin to “play around with monetization and pricing,” noting the availability of “plenty of levers” including increased advertising monetization. He envisions a combination of subscription, advertising, and à la carte options.

The introduction of the latter may also be previewed at Stream On later this month.