Spotify expects podcasts profitability within the next two years

 

Spotify expects podcasts profitability within the next two years

Spotify’s chief financial officer Paul Vogel has been talking about the company’s expectations of podcasts, in an appearance at the Evercore ISI Media Conference in the US. That included a prediction on when podcasts might become a profitable part of the business.

“We’ve had this drag from podcasting,” admitted Vogel, according to Inside Radio, before predicting that the business will “flip to profitable over the next 12 to 24 months”.

In a message aimed squarely at investors, Vogel also said that “we actually believe that some of the newer verticals that we will launch, podcasting, audiobooks and others, should have structurally higher gross margins than the music business, which will help overall gross margins over time”.

That’s no surprise, but it’s worth paying attention to Vogel’s thoughts on what podcasts do for Spotify’s business beyond direct revenues.

“It helps engagement. It helps retention. It helps user growth. We’ve seen when people engage with both music and podcasting, they’re more likely to retain at higher rates, they’re more engaged, and they spend more time on the service – all the things that keep them coming back.”

Without meaning to make (too much) mischief, perhaps now read again the recent comments by Universal Music Group boss Sir Lucian Grainge at another conference, delivering his own message to investors.

“We know that we are at least 80% to 85% of the acquisition pull of all the DSPs. We’re 80 to 85% of their retention,” said Grainge. “Consumers, me, you, us, don’t want a subscription which gives you either white noise or something to go to sleep to, or an act that you’ve never heard of.”

This isn’t a contradiction: retention of subscribers for a streaming service like Spotify can be about both music artists AND podcasts (and for insomniacs who’ve found a helpful playlist, even white noise too).

To be clear: Vogel was talking to an audience of investors to bolster their confidence in Spotify’s spoken-word expansion, rather than delivering a message to labels. His comments were not a direct retort to Grainge’s views.

However rightsholders’ belief that their artists and music are what drives growth and retention in streaming subscriptions, and DSPs view that there are other non-music levers at play here, will surely figure in the antler-butting during the next set of streaming licence renewals.

Written by: Stuart Dredge

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