When Spotify entered into a podcasting deal with the Duke and Duchess of Sussex in late 2020, the streaming giant displayed an unabashed pursuit of celebrities. has reached its zenith.
«They're using the incredible power of podcasting on Spotify,» one executive said of the royal couple in an expansive press release.
However, two and a half years later, Spotify was quickly brought back to reality. The company has confirmed that Meghan's Archetypes podcast, which featured dignitaries including tennis star Serena Williams and singer Mariah Carey, will not be renewed for a second series.
The move is an unfortunate setback for The Duchess, who reportedly won't get the full payoff of the $20 million deal.
But it's also the latest sign that Spotify's big bet on podcasting has gone to waste. The company has spent huge sums on talent such as the Sussexes and Joe Rogan in the hope that advertising dollars will follow.
That didn't happen, and now the streaming giant is scrambling to cut its losses.
Spotify isn't extending Meghan's archetypes. podcast for Season 2
«Spotify just couldn't grow its podcast consumption,» says Alice Enders of Enders Analysis. «It didn't have a significant impact — in fact, it had a very detrimental effect on their bottom line.»
Spotify's drive towards podcasting skyrocketed in 2019, when the Swedish streaming platform spent more than $400 million on studios Gimlet and Parcast, as well as distribution software maker Anchor.
The company has been successful. saving the music industry from piracy, then spent hundreds of millions on exclusive celebrity deals, most notably the outspoken American commentator Joe Rogan.
In 2021, Spotify's ambitions were cemented in the form of Pod City, a dedicated campus in the heart of Los Angeles teeming with studios, a stage and a piano once used by singer-songwriter Norah Jones.
So far, expansion has collided with difficulties. Archetypes initially topped the charts, but by November it had dropped to number 22. Meanwhile, the company has been surrounded by controversy surrounding Joe Rogan after the host spread misinformation about the Covid vaccine and used racial slurs.
Joe Rogan's podcast has been criticized for spreading misinformation about the Covid vaccine. Photo: SYFY/Getty Images Contributor. a freemium model.”
Just four years after launching podcasts, Spotify is changing course. In January, the company parted ways with Don Ostroff, the chief executive who devised the podcasting strategy, as part of a wider layoff that affected 600 employees.
Earlier this month, the company laid off 200 employees in a second round of layoffs and said it would merge Gimlet and Parcast, cutting back on source programming and relying more on third-party deals.
The dream of podcasting now seems , in disarray. Even Daniel Ek, co-founder and CEO of Spotify, admitted he was «a little carried away.»
For Spotify, podcasts offered a new way to attract listeners to their platform, as well as impactful marketing. branding opportunities.
The company hoped that podcasts would help diversify its business model by reducing its reliance on costly music licensing deals with record companies.
In fact, these benefits have not been implemented. There has been no noticeable reduction in music licensing costs. In fact, recent calls from record companies to rethink the streaming model increase the likelihood of further cost increases.
There has also been no significant growth in Spotify's user base, which reached 515 million in the first quarter but is increasingly leaning in favor of ad-funded listeners over paid subscribers.
Spotify insists podcasts have helped. to maintain revenue at a level supported by advertising. Yet advertising made up just 11% of the company's total revenue in the first quarter. Losses at the beginning of the year had narrowed compared to the previous three months, but still stood at a solid €156 million.
According to Enders, the podcast promotion “has been strikingly short of the expected financial rewards for shareholders.”
< br />Weak earnings raise the question of whether Spotify was wrong.
While the streaming platform has boosted podcast listeners to 100 million, getting paid from that audience has proven more elusive.
Spotify has a proprietary music advertising technology platform that is designed to make adding ads to shows simple and profitable. However, podcast producers who distribute their shows on Spotify are already using third party providers like Acast to monetize their shows by carving out the platform.
It also cannot play Apple's format, which separates podcasts from music. Apple allows publishers to set their own price for individual subscriptions or downloads before taking a commission. This ensures that Apple will generate a steady income without the need to spend significant amounts on the best specialists. Spotify is struggling to fit this model as it sells its platform for a single upfront monthly fee.
Annie Langston, an analyst at Midia Research, adds that Spotify's platform is «oversaturated», making any show harder to become a hit.
Spotify's hectic foray into podcasting has also highlighted some of the limitations of the audio format itself.
Incredibly expensive celebrity deals focused on the premise of exclusivity, depriving competitors of content and forcing listeners to come to Spotify. However, the most noteworthy revelations made on podcasts are quickly picked up by other media, which defeats the purpose.
And, unlike music, people tend not to listen to podcasts repeatedly. Shows, unlike artists, also often fail to replicate their success outside of their home market.
“Podcasts don't spread very well,” Enders says. “This is a cultural product. Joe Rogan is not a big star here, but he is a big star in the US. He had Elon Musk and they were smoking weed… It's one of those things that probably won't do much here.»
For some industry observers, Spotify's troubles are symptomatic of the larger problems facing podcasting, an industry that has always been promising but has never quite reached its perfection.
Nick Hill, co-founder of podcast production company Podot, wrote about it in his blog last year: «Every year in the media it's been talked about as 'the next big thing.'
«At what point should you just call and say it's not » big deal» pending, but just a mediocre «medium deal».
Ultimately, this can be quite a sobering moment for Spotify after its significant investment in the audio format.
Spotify' Under the leadership of founder Daniel Ek, the number of listeners has grown to 100 million, but the company is struggling to monetize its customer base. Photo: Shannon Stapleton/REUTERS
However, there are signs that this is not a concern. Earlier this month, the company signed an exclusive deal with Louis Theroux, poaching the documentary star from the BBC and proving its celebrity acquisition strategy is not dead.
But the heady days of $100 m podcast deals seem to are long gone and any future deals are likely to be on a much smaller scale.
Instead, Spotify will focus on making more money from its podcasts in an attempt to attract investors. Central to this is Megaphone, the podcast advertising company it bought for €235m in 2020.
Bosses are also more relaxed about exclusivity, preferring instead to distribute shows to competitors, including Apple.
Langston says the platform needs to make it easier to find its shows in order to create great hits and attract loyal listeners.
At this stage, Spotify is unlikely to give up on its dream. fully. But as shareholders begin to question whether Daniel Ek's big bet will make any profit, the company will have to prove that podcasting can be profitable, not just advertising.
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