Europe chief Michael Krause gave an interview to the FAZ. Abridged translation:
Spotify makes a point of saying it’s not just about music now. Spotify is a broad-based platform for all audio content. Big appeal lies in podcast. Opportunity for podcasters to offer their own paid services, or easy integration of audio content from other sites. At last count, the Swedish service had 381 million monthly active listeners and 172 million subscribers.
The Google service, which is not known to be limited to music, is a power especially in the advertising business. 7 billion in revenue in Q3 2021. Advertising revenue grows by 75% for Spotify in Q3 2021 and is over a billion euros for the full year thanks to podcast. Exclusive shows have huge reach and are particularly attractive to advertising partners.
The promise of “no commercial breaks” only applies to music.
The global market for radio advertising is extremely large, and this is often underestimated, although it continues to be a market worth billions. Attracting more radio customers to streaming is one of Spotify’s big themes, he said. In 2021, Spotify has seen that already many big consumer brands are now investing heavily in podcast advertising.
Podcasts are appealing to Spotify for other reasons as well: while the music catalog of the various services is largely the same, podcasts can be used to differentiate content. Spotify is therefore spending a lot of money on prominent hosts. American podcast star Joe Rogan alone is said to have received around $100 million for an exclusive contract. At the same time, higher podcast consumption makes people less dependent on the music industry.
The enthusiasm for podcasts and co. is also reflected in acquisitions. Just in November, Findaway, an audiobook distributor, was acquired. Then, in mid-December, Whooshkaa, a platform designed to make it easier for radio stations to turn their broadcasts into podcasts. The technology will be integrated into the Megaphone marketing platform. Spotify had paid $235 million for the latter at the end of 2020. Podcast company Gimlet and distribution platform Anchor have already been part of Spotify’s audio portfolio since 2019. The $500 million investment sum promised at the beginning of 2019 has long since been exceeded, and the shopping spree continues.
These acquisitions give the impression that Spotify is focusing more on spoken audio than music right now. With “Radar” and “Equal,” support programs for young musicians have been launched, and many new playlists have been set up at the same time. The partnership with Shopify, through which artists can offer fan merchandise on their Spotify profile, also serves musicians. Many artists also use Shopify for their own stores, so the integration is now easier. Users from Canada, the U.S., the U.K., Australia and New Zealand can shop with artists.
Meanwhile, very appealing to “creators” is the ability to offer their own paid content. But that is reserved for podcasters for the time being. Here, the licensing conditions are simpler than for music. In the podcast sector, Spotify has a direct relationship with podcasters via its own platform and the offerings of Anchor or Megaphone. Podcasters can only offer paid content and access contact information for their fans if they use Anchor for distribution.
Higher prices go down well with the music industry. Voices are repeatedly raised demanding that the services take more steps in this direction. Spotify has implemented them in some markets. Apple and Amazon had chosen the opposite path in May by now offering lossless CD quality for the standard price of 9.99 euros.
The European chief said it was standard market practice to charge a premium for better quality. Surely executives had this in mind when a Hifi subscription was announced last February. Since then, things have been very quiet. Plans are being made to deal with the changed market situation.
French music company Believe, for example - one of the major providers of “artist & label services” - threw its weight behind new Spotify billing models at the end of June. So did digital distributor Distrokid. Discovery Mode is especially exciting for indie labels and smaller acts without big advertising budgets. Spotify sees itself on the right track and continues to test the feature.
Overall, the manager is optimistic about the future. Still a lot of potential - even in large markets. In Germany and France, for example, there are still many people who do not stream. The more saturated markets in Europe are the UK, the Netherlands and the Nordic countries in general. In Southern and Eastern Europe and Russia, on the other hand, development tends to still be at the beginning.