Will podcasts be Spotify’s “exclusive content”?
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Will podcasts be Spotify’s “exclusive content”?

Streaming music service Spotify has a problem: loads of people love it, but most of them are only signed up for the free service. To be fair to Spotify, this is a problem that plagues streaming music services generally – and it’s something that analysts have been saying for a long time. The consensus in some parts of Wall Street is that Spotify’s free service is simply too good – why should customers pay the extra?

The other side of that, of course, is that Spotify is in competition with people like Apple and Amazon: it needs to be this good to get people onto its platform in the first place. What’s the answer when it comes to greater monetisation? One route that the company looks to be considering is a replication of the strategy that’s worked so well for Netflix in the streaming video space: original, exclusive, content. For Spotify, that could mean podcasts.

27 02 Spotify

Source: Yahoo Finance

Spotify has made headlines in recent weeks due to the acquisition of two podcast companies (Gimlet Media and Anchor). That’s surprised some people, because Spotify has always been a music company – podcasts do appear on the platform, but they’re just a tiny part of it. And in relation to the music industry, the podcast industry is tiny and poorly monetised. However, with millions upon millions of subscribers on its platform, could Spotify change all that?

Moving into podcasts signals Spotify’s evolution into an audio company, rather than just a music streaming service. That could be a good move. At present, Spotify relies on licensing content from other parties… but now, it could make its own. Arguably, this strategy – the production of top-class original, exclusive, content – is what propelled Netflix from a big name into a market-leader. In Netflix’s case, the company offered generous amounts of this content for free via its 30-day free trials. Users would get hooked and need to sign up so they could watch the next series. Spotify’s business model is different, but it could still do something similar: for example, making the first five podcasts in an exclusive series available via its “freemium” plan, and keeping the rest for its premium subscribers.

There are challenges here: the podcast industry is an open book (people can listen for to podcasts free all over the net), and some of its competitors have a stake in it. Apple Music, for example, hosts some podcasts. But don’t be fooled – these hurdles might be jumpable. After all, when Netflix announced House of Cards, no one saw the impact original content could have on its business. Is Spotify in a similar place today?

Disclosure

Dominion holds Spotify in its Global Trends Luxury Fund.


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