The Good, The Bad and the “Who Knows” of the Spotify Deal.

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Last week’s acquisition of Gimlet Media and Anchor by Spotify feels like a seminal moment for a business that has been playing Triple A ball for a while and gets called up from the minors.

Lets break it down:


A triple win for Spotify– Spotify looks to keep users in their world longer, so moving beyond music streaming to spoken word makes a great deal of sense. We already know the bet is a calculated one.  Current Spotify users listening to podcasts stay on the platform twice as long.  No small factor. The increased engagement happens without having to pay hefty music royalty fees and potentially builds a new high CPM ad revenue business.

CEO Daniel Ek is looking for 20% of all Spotify listening to be “something other than music.”

More time on the platform, less money out, more money in — that’s an appealing triple win. 

This is the first vertical integration in the business of podcasting – This deal is not so much about Gimlet’s current content portfolio - it draws somewhere around 12 million monthly downloads - but the structural capacity to produce great original content Spotify can own. Right now, as a music streaming service, they don’t own any of the content.  That’s a big differentiator.  

 Add to the mix, ad sales and this becomes a “full-stack” integration.

Combining original content with Spotify’s built-in audience of 207 million active users worldwide has the potential to turbo-charge podcasting’s reach

A catalyst to grow podcasting - Combining original content with Spotify’s built-in audience of 207 million active users worldwide has the potential to turbo-charge podcasting’s reach.  Midroll/Stitcher has many of the pieces, but Spotify has the reach and scale.

Metrics for everybody –Spotify is rich in metrics.  What they have goes beyond the Fred Flintstone download numbers most podcasters live with. Combining a user’s identity and history (anonymized please) with actual data about when people listen and how long they listen will aid in improving content development (“they aren’t listening to your whole podcast”) and the industry’s appeal to brand advertisers who seek the kind of metrics they have with other media.

Knowing a user’s past listening also fosters more relevant recommendations, a top lament in podcast discovery.

What will Apple do? – This is the first real challenge to Apple’s dominance in podcasting.  Spotify had already become the second most popular app (7%) for podcast listening behind apple (64%).  Will Apple share more metrics with producers?  Will they fix many of the complaints about the marginal app experience?  What else might they do to protect their podcast franchise? 

What will Google do? – Something.  Anything.  There are 2 billion Android phones out there waiting for a native app and the synergy of Google’s awesome search power and massive footprint.

Is the secret sauce in this deal Anchor? – I’m not sure it is a fair comparison, or even the right one, but Google bought YouTube in 2006 and has been the undisputed engine for growth of all kinds of video.  Is Anchor the YouTube of podcasts, or does it get written off in a few years? 

Will Spotify’s paying customers have a different experience than non-paying?

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How will podcasters benefit? - Let me count the ways. Wider distribution, integrated ad sales, potential compensation based upon actual listenership (Think how YouTube compensates video producers based on viewership, though many would say there is tension and stinginess in that relationship).

Things we don’t know yet:

  • How much content will be exclusive? Windowed? Ek says “exclusives is definitely an important part of our strategy.”

  • Will Spotify’s paying customers have a different experience than non-paying? New subscribers with credit cards are worth alot.

  • Did this just mess up Luminary’s impending subscription service?

  • Pandora just launched its own podcast initiative. Sirius/XM just purchased them. One has to think the engines are revving.

  • What is Himalaya all about for $100 million?

This deal could help mitigate a portion of Spotify’s high fees to the labels and at the same time, differentiate itself in what is a commodity-based business.

Potentially, it also address some of podcasting’s biggest pain points - for users and content creators.

The next wave in podcasting is happening right now. Buckle your seat belt.

  

I will be at the Barrett Sports Media Summit talking about Podcasts and smart speakers

I will be at the Barrett Sports Media Summit talking about Podcasts and smart speakers

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Steven GoldsteinComment