Spotify follows Apple with an ad-free podcast subscription service

The podcast wars heat up

• Spotify’s latest salvo comes mere days after Apple confirmed it was spearheading a global ad-free podcast subscription service in 170 nations, where creators enjoy the freedom to set rates for premium content in return for a £17.99 annual fee.

• By contrast, Spotify’s equivalent venture is far smaller in scope, focused entirely on the US market with only a vague aspiration to roll out to additional territories.

• Crucially Spotify has set a two-year grace period where it will not charge a commission for any subscriber revenue, tempting 12 different podcasters to take the plunge.

• Among these is NPR Radio, which will have five shows available from May 4.

• On the user end listeners will be able to search for premium paid podcasts in the same manner as they would regular content, with a prominent lock symbol differentiating what content languishes behind a paywall and what can be accessed for free.

Why it matters

• The music streaming provider has led a podcast renaissance on the back of quality, exclusive content to command the attention of listeners who are unable or unwilling to use a screen.

• This pivot has seen Spotify double its podcast listening hours in the fourth quarter of 2020 as listeners flocked to hear what the likes of Michelle Obama and the Duke and Duchess of Sussex have to say.

• Such success contributed to a 24% year-on-year increase in paying subscribers with the audio subscription service boasting 155 million paying customers, bringing its total monthly userbase up to 345 million when those on its free ad-supported tier are included – a 27% increase year-on-year.

• Sensing an opportunity, Amazon has financed a series of originals and exclusives for Amazon Music and Audible, while Facebook harbors ambitions of its own to embrace audio content.

• Away from the big fish, smaller deals have been taking place to solidify the emerging sector, such as a collaboration between the NFL and iHeartMedia and the acquisition of Pocket Casts by a public radio group.

• The rush of activity follows on from the launch of Spotify Audience Network, an advertising marketplace where brands can reach the ears of listeners across ad-supported music and premium podcasts.

• With its latest initiative, Spotify is opening up additional revenue streams for itself and creators, who have previously relied on third-party services such as Patreon to offer exclusive content in return for a monthly fee.

• The new arrangement offers listeners the opportunity to dip into their pockets within Spotify in exchange for early access, additional content and behind-the-scenes recordings.

• Today’s announcement falls on the eve of Spotify’s financial results for the first quarter, with the expectation that subscriber growth will moderate following a pandemic-related surge.

• Big tech is enthusiastically embracing the medium of podcasts, with only YouTube seemingly ambivalent to the format – with top podcasters ending up on the format largely by default and only some stock or cam footage to differentiate from dedicated platforms.