Spotify's Venture into Podcasting: The Gamble that Didn't Pay Off
Spotify, the world-renowned music streaming giant, embarked on an ambitious venture to revolutionize podcasting in the late 2010s. Armed with billions of dollars and a seemingly insatiable appetite for audio content, Spotify aimed to dominate the podcasting space much like it had conquered the music streaming market. This audacious foray involved acquiring podcast networks, signing exclusive deals with high-profile podcasters, and producing original content. The goal was clear: to become the world’s go-to platform for podcasts and diversify its revenue streams beyond music.
However, despite the significant investments, Spotify’s podcasting gamble did not pay off as expected. Many of its high-profile deals and original shows underperformed, failing to attract the massive audience and profitability it had anticipated. As a result, the company faced financial setbacks, struggled to generate the expected returns, and ultimately had to retool its approach to podcasting to mitigate losses. This article explores how Spotify’s podcasting ambitions evolved, where it went wrong, and how the company is adapting in the wake of its failed bet on becoming the dominant force in podcasting.
The Bold Vision: Spotify’s Entry into Podcasting
Spotify’s foray into podcasting began in earnest around 2019, though its interest had been brewing for a few years prior. The streaming giant, founded in 2006 by Daniel Ek and Martin Lorentzon, had already established itself as a dominant player in the music industry. With over 100 million paying subscribers and an extensive library of music, the company was looking for new avenues of growth, primarily as profitability in music streaming remained elusive due to high licensing costs paid to record labels.
Podcasting seemed like the perfect solution. Not only was the podcasting market proliferating—with listener numbers and advertising revenues rising year over year—but podcasts also offered a different financial model. Spotify wouldn’t have to pay royalties for podcasts like it did for music, and owning or controlling the content could lead to a higher profit margin. Furthermore, by venturing into podcasting, Spotify could offer more to its existing users, keep them on the platform longer, and attract new listeners who prefer spoken-word content over music.
In 2019, Spotify began making significant moves in the podcasting space by acquiring key podcasting companies. These acquisitions were strategically aimed at giving Spotify control over both podcast creation and distribution:
• Acquisition of Gimlet Media: One of Spotify’s first significant podcasting acquisitions was Gimlet Media, a premium podcast network known for producing high-quality narrative podcasts such as Reply All and StartUp. Spotify reportedly paid $230 million for Gimlet, signaling its intent to become a major player in the podcast production space.
• Anchor Acquisition: Spotify also acquired Anchor, a podcast hosting platform that allowed users to create, distribute, and monetize podcasts with ease. Anchor’s acquisition, which reportedly cost around $140 million, was a play to dominate the distribution side of podcasting. With Anchor, Spotify gained access to a massive community of independent podcasters.
• Parcast Purchase: Spotify further expanded its podcast portfolio by acquiring Parcast, a podcast network specializing in true crime and mystery content. This acquisition was part of Spotify’s effort to offer a diverse range of podcasts, particularly in popular genres that consistently attracted large audiences.
The Exclusive Content Gamble
One of Spotify’s most significant and controversial moves in podcasting was its investment in exclusive content. The company sought to differentiate itself from competitors like Apple Podcasts by signing high-profile podcasters to exclusive deals that would only make their shows available on Spotify. This strategy aimed to draw listeners to the platform and drive subscription growth, all while boosting advertising revenues.
Spotify’s headline-grabbing exclusive deals included:
• The Joe Rogan Experience: Spotify’s most famous—and most expensive—deal was the exclusive licensing agreement with Joe Rogan, host of The Joe Rogan Experience. Reportedly worth around $100 million, the deal brought Rogan’s massively popular podcast to Spotify in 2020. Rogan’s show, known for its wide-ranging interviews and loyal fanbase, was expected to bring millions of listeners to Spotify.
• The Obamas and Higher Ground: In another high-profile move, Spotify struck a deal with Barack and Michelle Obama’s production company, Higher Ground. The deal included producing and distributing exclusive podcasts from the Obamas, including The Michelle Obama Podcast.
• Kim Kardashian, Prince Harry, and Meghan Markle: Spotify also inked deals with several other significant figures in the entertainment and political world, including Kim Kardashian for a criminal justice-themed podcast and a partnership with Prince Harry and Meghan Markle’s Archewell Audio to produce a range of exclusive podcasts.
• Original Shows: In addition to exclusive deals with well-known figures, Spotify invested heavily in producing original podcast content through its acquisitions. From true crime series to narrative storytelling shows, Spotify hoped to create a stable of original podcasts that would entice users to spend more time on the platform.
The Problematic Execution and Mounting Challenges
Despite the fanfare surrounding Spotify’s aggressive push into podcasting, cracks in the strategy soon began to show. While the company was successful in securing big names and producing a large volume of content, the overall return on investment was far below expectations. Several factors contributed to this failure:
1. Overestimating Audience Migration
Spotify believed that exclusive content would force podcast listeners to switch platforms. However, the migration did not occur at the scale Spotify had anticipated. Listeners who were used to accessing podcasts for free on Apple Podcasts, Google Podcasts, or other open platforms were not always willing to switch to Spotify—especially if it required them to sign up for a new account or pay for a subscription.
Even with The Joe Rogan Experience, one of the world’s most popular podcasts, Spotify struggled to convert Rogan’s massive YouTube and Apple Podcast audiences into Spotify listeners. While Rogan did bring in new listeners, the overall numbers were not sufficient to justify the $100 million investment, and the platform did not see the widespread boost it had hoped for in terms of active users or podcast market share.
2. Inconsistent Content Quality
Spotify’s podcast strategy was ambitious, but the quality of the exclusive content it offered was inconsistent. Many of the company’s original shows, while well-produced, failed to capture the public’s imagination or develop large followings. Shows that lacked star power struggled to find an audience, and even some of the celebrity-driven content, such as The Michelle Obama Podcast, failed to sustain long-term engagement.
Part of the issue was that Spotify focused heavily on producing content in popular genres, such as true crime, without necessarily considering whether it had something new to offer. The market for true crime podcasts, for instance, was already saturated, and listeners were not always eager to switch to Spotify’s offerings when they had established favorites on other platforms.
3. Expensive Deals with Limited Payoff
The massive sums Spotify paid for exclusive deals became a source of concern as the return on investment did not materialize as expected. The deal with Joe Rogan, for instance, garnered significant media attention and did bring some users to Spotify, but it also came with controversy. Rogan’s comments and guests sometimes sparked backlash, leading to boycotts by some artists and Spotify employees voicing their discomfort with the platform’s editorial direction. These controversies often overshadowed the content itself, distracting from the platform’s broader podcasting goals.
Similarly, the deals with celebrities like Kim Kardashian and the Obamas, while impressive on paper, failed to deliver the explosive growth Spotify had anticipated. These big-name podcasts garnered initial interest, but their audiences did not stick around, and they were not able to maintain the level of engagement necessary to justify their costs.
4. Misaligned Monetization Models
Spotify’s podcasting strategy also ran into challenges on the monetization front. While the company had hoped to increase ad revenues from podcasts, the advertising market for podcasts was not as mature or lucrative as anticipated. Advertisers were hesitant to pay premium rates for exclusive shows, especially when audience numbers were not as high as projected. As a result, many of Spotify’s original podcasts were not as profitable as expected.
Furthermore, Spotify’s approach to podcast monetization—particularly its focus on premium subscribers—created friction with its goal of building a broad podcast audience. Many podcast listeners were accustomed to free access, and asking them to pay for premium content or endure more ads on a paid service led to user frustration. Balancing between serving free users with ad-supported content and catering to premium subscribers became a delicate act that Spotify struggled to manage.
Retooling the Podcast Strategy: Mitigating Losses
As Spotify’s podcasting venture failed to live up to expectations, the company had to face the reality of its overinvestment and the need to recalibrate its strategy. By mid-2023, Spotify began taking steps to minimize its losses and reevaluate its podcasting approach.
1. Layoffs and Restructuring
In June 2023, Spotify announced layoffs in its podcasting division as part of a broader effort to cut costs. The company let go of approximately 200 employees from its podcasting unit, representing about 2% of its workforce. This marked a significant shift, signaling that Spotify was scaling back its aggressive expansion into podcasting and focusing on a more streamlined approach.
2. Winding Down Underperforming Shows
Spotify also began winding down or canceling several underperforming original podcasts. Some of these shows, which had failed to generate significant listener engagement, were no longer deemed worth the continued investment. By cutting these underperforming projects, Spotify aimed to focus on its more successful content and reduce the financial burden of maintaining a sprawling podcast portfolio.
3. Refocusing on Core Strengths
Rather than trying to dominate the entire podcasting market, Spotify shifted its focus back to its core strengths—music streaming and developing a robust podcast ecosystem that complements its music offerings rather than trying to compete directly with open platforms like Apple Podcasts.
Spotify’s new approach became more about integration and curation rather than complete ownership or exclusivity. The company began placing a renewed emphasis on leveraging its existing strengths, such as its sophisticated algorithms and user interface, to create better podcast discovery tools and personalized recommendations. This pivot allowed Spotify to focus on enhancing the user experience for both music and podcast listeners, aiming to keep them engaged with the platform without relying solely on costly exclusives.
4. Diversifying Monetization Models
Another significant aspect of Spotify’s recalibrated strategy was rethinking its monetization models. While the exclusive deals had been one avenue to drive subscriptions, Spotify realized that this was not enough to make podcasts a profitable part of its business. Instead, it began exploring more diverse revenue streams, including podcast advertising, dynamic ad insertion, and promoting a self-serve ad platform for independent podcasters. By making it easier for podcasters to monetize their content on Spotify—whether through sponsorships, ads, or listener support—the company aimed to build a more sustainable ecosystem for all podcasters, not just the celebrity ones.
Spotify also began experimenting with paid subscription models for podcasts, giving creators the option to offer premium content to their listeners directly through the platform. This approach allowed Spotify to generate revenue not only from its in-house productions but also by acting as a facilitator for independent podcasters who could benefit from its tools.
5. Shifting Away from Costly Celebrity Deals
One of the most noticeable changes in Spotify’s podcasting strategy has been its shift away from signing big, expensive celebrity deals. While partnerships with high-profile figures like Joe Rogan and the Obamas garnered attention, they also proved to be a financial strain without delivering the anticipated results. Moving forward, Spotify appears to be more selective in its partnerships, focusing on aligning with content creators who have established, engaged audiences rather than simply betting on the star power of a few individuals.
This retooling is evident in Spotify’s recent investments in podcast networks and independent creators rather than headline-grabbing exclusives. By emphasizing partnerships with creators who already have proven audiences or strong niche followings, Spotify can avoid the pitfalls of overspending on big names and focus on fostering organic growth in its podcast library.
6. Leaning into Data and Analytics
As Spotify reevaluated its approach to podcasting, the company began relying more heavily on data and analytics to guide its decisions. The platform’s strength in data—particularly its ability to analyze listening habits and preferences—became a crucial part of its new podcast strategy. Spotify began using this data to refine its content offerings, better target podcast recommendations, and improve ad placements for maximum impact.
Moreover, Spotify started sharing more of this data with podcasters themselves, giving them insights into their audience’s demographics, listening habits, and engagement. This transparency helped independent podcasters optimize their content, build stronger listener relationships, and improve their monetization strategies.
7. Global Expansion of Podcasts
While Spotify’s initial podcast push focused heavily on the U.S. market, the company began expanding its podcast strategy globally as part of its retooled approach. Podcasting is growing rapidly in regions like Latin America, Europe, and parts of Asia, and Spotify saw an opportunity to tap into these emerging markets. By focusing on local content and fostering relationships with creators in non-English speaking regions, Spotify hoped to replicate the success it saw in music streaming across new podcast markets.
This global push has involved acquiring smaller podcasting companies in international markets and commissioning content that resonates with regional audiences. By taking a more localized approach to podcast production and distribution, Spotify aimed to build a more robust, more diversified podcast offering that catered to a broader audience.
8. Enhancing User Engagement Through Features
As part of its efforts to retool its podcast strategy, Spotify has also invested in new features aimed at improving user engagement. One of the platform’s advantages over competitors is its ability to offer an integrated listening experience where users can seamlessly switch between music and podcasts. Spotify began doubling down on features that would make podcast listening more appealing and accessible for its users.
For instance, Spotify introduced features such as timestamped episode highlights, the ability to share specific moments from podcasts, and more intuitive browsing interfaces for podcasts. These features not only enhanced the user experience but also encouraged deeper engagement with content. This, in turn, helped increase the amount of time users spent on the platform, boosting Spotify’s long-term user retention goals.
Lessons Learned: Why Spotify’s Gamble Didn’t Pay Off as Planned
Spotify’s ambitious move into podcasting may not have resulted in the dominant position it envisioned, but it offered several critical lessons for the company and the broader industry. By examining why Spotify’s original strategy faltered, we can better understand the challenges that come with entering a competitive market and the difficulties of transforming a company’s core business model.
1. Overestimating Star Power
One of Spotify’s primary missteps was overestimating the power of celebrity deals. While Joe Rogan and the Obamas drew attention, their high price tags did not translate into sustainable audience growth or significant new subscribers. The reality of podcasting is that star power alone does not guarantee success. Audiences in the podcasting world tend to be loyal to the content itself rather than just the creator’s name. Spotify’s focus on big-ticket exclusives ultimately led to high costs without commensurate returns.
2. The Challenge of Exclusivity in Podcasting
Unlike video streaming, where exclusive content can drive subscribers, podcast listeners have historically been accustomed to open platforms where they can access content for free, on their own terms. Spotify’s move toward exclusivity clashed with the podcasting culture, which values accessibility and openness. Many listeners simply weren’t willing to move to Spotify or endure ads to access shows they could previously listen to for free elsewhere.
Moreover, Spotify’s bet on exclusivity also limited the potential audience for its shows. By keeping content behind a walled garden, the company missed out on reaching broader audiences who preferred to listen on other platforms. This ultimately hampered the growth of some of Spotify’s most expensive podcast deals.
3. Content Quality and Consistency Matter More Than Quantity
Spotify’s push to flood its platform with original podcast content didn’t always translate to success. While the company produced a large volume of shows, not all of them resonated with listeners. The market for podcast content is competitive, and Spotify’s original shows—many of which were produced in saturated genres like true crime—struggled to stand out.
Audiences tend to gravitate toward high-quality, consistent content, and Spotify’s decision to spread its investments across numerous shows diluted its ability to deliver top-tier productions across the board. In contrast, companies like Netflix have shown that curating a smaller selection of high-quality content can be more effective than pursuing sheer volume.
4. Monetization in Podcasting is Tougher Than Expected
Another major takeaway from Spotify’s venture into podcasting is that monetizing podcasts is much more challenging than monetizing music streaming. While podcasts don’t require the same level of royalties as music, the advertising revenue models for podcasts are still evolving. Advertisers are not yet willing to pay premium rates for podcast ads, especially when audience numbers are inconsistent or niche.
Spotify’s initial strategy of focusing on premium content and subscriptions for podcasts did not resonate with many listeners who were accustomed to free content. The company’s subsequent efforts to diversify its monetization models—through dynamic ads, podcast subscriptions, and self-serve ad platforms—reflect its understanding that the podcasting market requires more innovative and varied revenue streams.
Conclusion: What’s Next for Spotify in Podcasting?
Spotify’s foray into podcasting was a bold and costly gamble that, in many ways, didn’t pay off as the company had hoped. The platform spent billions on acquisitions and exclusive content deals that did not yield the subscriber growth, user engagement, or profitability it anticipated. However, rather than abandoning podcasting altogether, Spotify has wisely retooled its approach, focusing on cost-cutting, data-driven decision-making, and creating a more sustainable ecosystem for independent creators.
As Spotify continues to pivot its podcast strategy, it still has the potential to be a major player in the space, albeit with a more measured and balanced approach. While it may not have become the world’s go-to platform for podcasts, Spotify’s integration of music and podcasts, improved features, and more innovative monetization strategies could still position it as a key destination for listeners seeking a diverse audio experience.
The lesson from Spotify’s podcasting journey is clear: success in a new market requires more than just star power and big spending—it demands careful alignment with audience preferences, strong content curation, and a deep understanding of the industry’s monetization challenges. Spotify is learning these lessons in real-time, and how it adapts will define its future in podcasting.
