Spotify goes up against Apple in podcasting

NEW YORK • Spotify wants a nice, juicy bite of a new business even if it has to take on a big rival, Apple.

The No. 1 paid music streaming service has agreed to promote podcasts in its app and via advertisements on buses.

In return, the hosts of Reply All, Pod Save America and The Bill Simmons Podcast will talk up Spotify on social media and in their shows, which cover topics from Internet subculture to politics to sports.

Spotify is testing whether to devote more resources to areas other than music. Podcasts are a fast-growing field dominated by Apple.

By increasing the revenue from other media, Spotify could reduce the huge share of sales that goes to record labels.

Royalties accounted for more than 75 per cent of Spotify's costs last year and are based on the time users spend playing songs.

"The potential for Spotify is to introduce this calibre of storytelling to a much larger audience, who are already in a listening mindset," said Mr Matt Lieber, co-founder of Gimlet Media, which produces Reply All.

Spotify is experimenting in new media to increase the time customers spend with its app - and boost advertising sales.

Most consumers looking for music videos or podcasts leave Spotify for Apple and YouTube.

In a survey earlier this year, about 15 per cent of Americans older than 12 said they had listened to a podcast in the past week.

Almost a quarter listened to at least one every month, a number that has doubled since 2013, according to Edison Research.

Advertising revenue from podcasts is projected to grow by 85 per cent this year to US$220 million (S$298 million).

Apple dominates the market, but its share has declined to about 55 per cent from 70 per cent, said Mr Nick Quah, author of weekly newsletter Hot Pod.

Music services SoundCloud and Pandora Media have started hosting podcasts, as have TuneIn and iHeartMedia.

With more than 140 million users, including about 50 million paying subscribers, Spotify has an opportunity to steal share from Apple.

The company has already commissioned original podcasts about music and partnered Gimlet on a podcast series about the late Chris Lighty, manager of rappers Busta Rhymes and 50 Cent.

Spotify will fund a new batch of original podcasts in the coming months, said sources.

It has also created a tab for podcasts in its browse section.

"Spotify has the potential to do a lot for podcasting," Mr Quah said.

"It has a large user base and all it takes is a few tweaks here and there to put podcasting in the foreground for the daily listeners."

The question is whether the current effort grows beyond tests.

Outside its main field of music, Spotify has struggled to develop a consistent strategy.

Before YouTube, Hulu or Sony introduced online television services, Spotify tried to assemble TV channels for a live video service in Europe.

But it abandoned those plans after failing to line up all the channels it wanted for the right price.

The company later hired former VH1 boss Tom Calderone to oversee original video programming. He commissioned a dozen series from producers, including Tim Robbins and Russell Simmons.

Spotify has released a handful of those shows over the past year, but these were not heavily promoted and did not draw much buzz.

Music industry executives would like Spotify's video efforts to focus on music. That would bring more attention to their artists and new releases, and not divert royaltygenerating listeners to other content.

Thanks to Spotify, the music business is growing for the first time in almost two decades and record labels are not especially keen to see it diversify into other forms of online entertainment.

The company has tested seeding playlists with music videos and short documentaries, including Rap Caviar, the service's most popular playlist.

If Spotify's steps outside of music seem halting or uncoordinated, it may be that management has other priorities.

The company is planning to go public and needs to reach a new long-term deal with Warner Music Group, the third-largest record label.

Agreements with Universal and Sony, the two larger labels, were struck earlier this year.

"It doesn't seem like there's a concentrated, thought-out strategy," Mr Quah said.

"It is juggling a lot of things as a company and podcasting is an interesting, experimental channel for it."


A version of this article appeared in the print edition of The Straits Times on August 02, 2017, with the headline 'Spotify goes up against Apple in podcasting'. Print Edition | Subscribe