On Tuesday, Spotify launched a podcast subscription service that allows creators to generate recurring revenue streams. Podcasters can set up their own subscription models free of charge (excluding payment transaction fees), with no commission fees to be paid until 2023 — when the company plans to introduce a 5% charge on subscriber revenue.
This service — where users can personalize and sell gated audio content — is available through a waitlist in the U.S. and will be expanded globally in the months to come.
Spotify’s announcement closely follows the release of Apple Podcast Subscriptions, a service that will let listeners pay podcasters for ad-free shows, exclusive access, and additional content starting in May. On top of its $19.99/yr access price, Apple is taking 30% of creators’ commissions in the first year and 15% in subsequent years.
Read more to see what each subscription model will offer, the difference between each company’s revenue strategies, and the competitiveness of the audio industry.
Spotify’s Approach to Increasing Customer Retention and Revenue
Through a cheaper subscription model, Spotify creators might feel compelled to upload more content on the platform, which would then provide more value to listeners.
Spotify’s Podcast Subscriptions:
- Has no up-front set-up fees, and no commission is taken until 2023.
- Uses its creator dashboard, Anchor, to host and develop shows, mark gated content, track metrics, grow audiences, and monetize original audio.
- Incorporates the StreamOn platform to track engagement, get streaming insights, and link podcast shows with compatible ads.
- Emphasizes the Spotify Audience Network — a marketplace that links podcasters with advertisers.
- Includes new show discovery features.
- Hints at the soon-to-be-released ‘Spotify Open access Platform.’
This model could improve Spotify’s acquisition and retention rates, as the company looks to help creators grow their subscriber base from their current audience. A creator-focused initiative could also benefit the Spotify listeners who use the platform to discover new content.
“We felt that one of the big things that we could do was accelerate podcast growth,” said Spotify’s Head of Consumer Experience, Sten Garmark. “This is a fantastic medium that has seen a lot of growth, but it’s not a true mainstream product yet—it wasn’t when we started and it’s arguably still not.”
Additionally, a recent partnership with Facebook could give Spotify a significant advantage over Apple Music in podcast streaming. Made available on Monday, users can stream music and podcasts directly on the social network, and the audio will keep playing even as they scroll through their feed.
This partnership can provide more accessibility, enhance social media users’ experience, and significantly increase Spotify’s streaming numbers.
The Competitive Nature of the Audio Streaming Industry
The two audio streaming giants are racing to the top of the industry and are looking for new ways to retain subscribers and increase revenue. Spotify has 155 million subscribers (345 million total users), while Apple Music is estimated to have just over 70 million subscribers.
Apple Music has hosted podcasts since 2005 and looks to stay ahead of competitors in this field. The company recently launched Apple Podcast Subscription, a service that charges creators a 30% fee for access to resources and analytics tools to grow their audience.
Apple Music’s Podcast Subscriptions:
- Includes new-and-improved dashboard of metadata, show scheduling, channel organization, and role assignment (denoting the tasks of each creator).
- Has advanced listenership metrics and visual marketing tools.
- Provides a news section to stay up to date on the podcast industry.
- Introduces channel discovery features to find new shows.
- Has access to resources that help creators develop and benefit from their own premium subscription models.
“We are proud to lead the next chapter of podcasting with Apple Podcasts Subscriptions,” said Eddy Cue, Apple’s Senior VP of Internet Software and Services, “We’re excited to introduce this powerful new platform to creators around the world, and we can’t wait to hear what they make with it.”
Each subscription model will allow podcasters to set their own prices and customize their gated content. However, both companies are using different methods to drive revenue — Spotify is looking to keep creators engaged through its low prices while Apple Music seeks to provide its users with tools that justify the 30% fee.
This month, Apple Music revealed it pays musicians nearly twice as much per stream than Spotify. The Swedish streamer was already under heavy criticism from musicians and users. The Union of Musicians has called on the company to “increase royalty payments, transparency in their practices, and to stop fighting artists.”
Spotify seems to be extending a generous hand to podcasters through its free, commission-less subscription model.
While Apple is arguably the main reason for podcasts’ initial mainstream existence, Spotify makes it clear that this industry is still relatively untapped given its potential.
“The industry had been so fragmented, and [before Spotify], nobody had stepped in to really aggregate the business from either a creative stance or from the business stance or from the advertising point of view,” said Dawn Ostroff, Spotify’s Chief Content Officer.
Spotify’s move toward podcast subscriptions is incentivizing creators to keep uploading and growing their audience, all in the hopes of “[maximizing] revenue, wide reach, and discoverability.” In encouraging more podcast content, the company can increase the value they provide to existing listeners and leverage it as a strategy to attract new users.
With the two subscription models’ stark price differential, many independent creators must make a choice.
Spotify is projected to finally surpass Apple Music in podcast listenership this year. It’s uncertain if Spotify will hold this lead and time will tell how podcast subscriptions can play a role in that.
In many cases, competition urges companies to produce higher quality products and services. For instance, Disney+ plans to have a content budget of $8-9 billion by 2024 to keep up with Netflix. In Apple and Spotify’s situation, the audio streaming space will continue to be defined by each platform’s willingness to become the industry’s leader.
- Spotify launched a podcast subscription service that creators can use to generate recurring revenue streams. This service was released a week after ‘Apple Podcast Subscriptions.’
- Apple is taking 30% of creators’ commissions in a ‘Podcast for Creators’ dashboard, while Spotify is taking no compensation (excluding payment transaction fees) until 2023.
- A partnership between Spotify and Facebook will allow more accessibility on the social network’s platform.
- Spotify is projected to surpass Apple Music in podcast listenership for the first time ever in 2021.