Is Spotify planning to create a new ad market with podcasting?
Streaming music market leader Spotify made waves in the entertainment world earlier this year with the announcement it had acquired two major podcast companies. Those acquisitions rocketed it into position as the world’s largest podcaster, and now it’s announced a third acquisition as of last week: this time of crime, mystery and sci-fi genre podcaster Parcast. We’ve previously commented on the possibilities that this move could unlock (see here), and now, advertising industry publication The Drum has speculated what Spotify’s evolution could mean for marketers.
Spotify’s share price has appreciated by 26% so far this year
Source: Yahoo Finance
Spotify founder and chief Daniel Ek says that the company will spend an “additional” $500 million on original content in 2019. But it’s not like Spotify operates a record label. So, the chances are a significant portion of that cash will wind up being spent on podcasts. If so, then Spotify will almost certainly start revolutionising the industry: podcasts are skirting the line when it comes to popularity, and have been for a while. With the rise of audiobooks and streaming music platforms, the opportunity could be ripe for a kind of combination of the two to take off in popularity. If that’s the case, then Spotify could quickly become an audio-Netflix. But, unlike Netflix, Spotify monetises itself, in part, through advertising.
There are two ways that podcast advertising could work on Spotify. First is what we might call the “traditional” model: you’re listening to a podcast, halfway through there’s a 15- or 30-second break which features a short audio advert (just like you’d hear on the radio). The second, which is more ambitious, might involve brands creating their own podcasts, or using an audio-equivalent of product sponsorship. In this case, the brands would have an active role in creating content – whether that was as much as producing its own series about the good cause brand X is supporting, or as little as stipulating the hero’s favourite drink. Either way, if Spotify can supercharge the world of podcasting, monetising it could become a big deal.
We’ll leave you with a tantalising quote from Mr. Ek: “Consumers spend roughly the same amount of time on video as they do on audio. Video is about a trillion-dollar market. And the music and radio industry is worth around a hundred billion dollars. I always come back to the same question: Are our eyes really worth 10 times more than our ears? I firmly believe this is not the case.” Quite so, Daniel, quite so.
Dominion holds Spotify in its Global Trends Luxury Fund.
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