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Spotify credits podcast explosion for netting 74 million subscribers in 2020

Spotify credits podcast explosion for netting 74 million subscribers in 2020

Spotify ended 2020 on a high note by adding a record 30 million premium subscribers over the year, along with a further 44m who signed up for a lower tier of service.

The influx saw the audio streaming platform - including casual listeners on its free advertising-supported tier - grow 27% to reach 345 million members in the fourth quarter.

Spotify attributes the surge to a strategy that prioritised podcasts alongside music.

Podcasting focus pays off for Spotify

  • The figures are music to the ears of Spotify execs who have seen their bet on podcasts pay off handsomely, with a doubling of listening hours for the medium in the fourth quarter alone as lockdown listeners gathered to hear the words of famous figures including Michelle Obama and the Duke and Duchess of Sussex.

  • Such is the lure of the spoken word that a full quarter of Spotify's entire userbase of 345m listeners engaged with podcast content in one form or another in the final three months of 2020.

  • The scale of this shift in listening habits contributed to a 24% year-on-year increase in paid subscribers to 155m, comfortably outstripping analyst expectations.

  • Daniel Ek, founder and chief executive of Spotify, remarked: “We are confident that podcast usage has been a factor in the accelerated net additions. We have increasing conviction in the causal relationship between growth in podcast consumption driving higher [value] and retention among our user base.”

  • Catering for this newfound enthusiasm the volume of podcasts on offer has more than tripled 700,000 in the final quarter of 2019 to 2.2m a year later.

  • This burst of activity has translated into a 29%year-on-year rise in advertising income to €281m as advertisers cast aside an abundance of caution from the start of the pandemic.

  • Ad revenues tied to podcasts specifically grew over 100% year-on-year with a 50% increase in the number of advertisers competing for the ears of listeners.

  • The upshot of this growth is that advertising accounted for 13% of Spotify's total revenues in the fourth quarter.

Anything else?

  • The bread and butter of Spotify's business remains subscription income, which rose 15% year-on-year to hit €1.89bn. On the back of this total revenues grew 17% year-on-year to €2.17bn.

  • Spotify's sales and marketing expenditure jumped in tandem by 25% to reach $1.18bn (€1.03bn), the first time the metric has crossed the billion-dollar barrier.

  • Voice has been embraced by both business and technology giants as a new channel to carry advertising to consumers who have become accustomed to voice assistants in their day-to-day lives.

  • Spotify first realised the potential podcasts held in 2018 when it acquired Gimlet, Anchor and Parcast as well as voice talent in the form of Joe Rogan and the Obamas.

  • A potent combination of early adoption, an established audience base and exclusive content has positioned Spotify well to corner the disembodied market.

  • This golden period may not last forever, however, with tech rivals looking on enviously. Apple harbours ambitions of its own, with plans to claim market share for itself in the form of its premium podcast content.

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