What Spotify's recent acquisitions could mean for the future of podcasting
Spotify has acquired Gimlet Media and Anchor, and the company has plans to spend up to $500 million this year on acquisitions alone. Why is this significant? It signals the beginning of a new era for podcasts, in terms of discovery, distribution, and monetization.
If there was a doubt that Spotify is embracing the Netflix model, it just disappeared. Last year, Spotify signed exclusive deals with at least two podcasts and ramped up hiring for their Original Content team.
It's been nearly 15 years since Apple invented what we know if as podcasts. Though the industry has grown tremendously and has become more professional, the underlying support infrastructure has not changed very much. Podcasting is something of an artisanal craft, and that's about to change.
Discovery and distribution
Podcasts are primarily discovered through iTunes. As the largest and predominant podcast directory, the majority of shows are listed here. Though other smaller directories exist, most of them pull their data from iTunes. Content creators publish their shows to directories, but distribution is a direct transaction between the podcaster and the listener, by means of the RSS feed which contains the podcast.
As platforms like Spotify increase their investment in original content, discovery and distribution will become more fragmented and locked-in to ecosystems. The benefit is that content creators would receive more exposure and promotion of their content within those walled gardens. IT
The trend towards platforms will change the monetization model. Today, podcasts rely primarily on three sources of income:
- revenue from advertising
- donations and listener contributions
- selling premium content
The emergence of platforms like Patreon has made it much easier for independent content creators to engage in a direct financial relationship with their audience, reducing the reliance on sponsors for some.
In locked-in ecosystems, content creators relinquish control of monetization to platforms but increase their opportunities for sustainable revenue. This could go in different directions:
- ad-based monetization (à la YouTube)
- royalties (à la Spotify)
- direct monetization
In the third hypothesis, platforms like Spotify chose to embrace the spirit of podcasting and acknowledge the direct relationship content creators have with their audience. They could offer built-in Patreon-like tools and take a cut of revenues. Of course, this could only work on platforms with large network effects.
It's too early to say but I would argue that podcasting will go the way of TV series. Over 20% of people on Spotify listen to non-musical content, and podcasting has grown to a $300+ million market in the US alone (not to mention $7.3+ billion in China). Platforms are beginning to see there is more here than just guys streaming from their basements. And this will bring a lot of money into the industry.