Why Spotify plasters your home page with Podcasts:
Short answer is $$$$.
Longer answer is:
Spotify must pay royalties for each song played. Imagine if there was a completely free (for Spotify) form of content that filled users ears for hours, thus removing the need for Spotify to pay royalties. Ahem podcasts. Now imagine if Spotify started injecting ads into said media form to grow their revenue beyond subscriptions. Again, podcasts. So now, you have a very long-form content that both saves you royalty $ and drives new revenue. QED. Podcasts will continue to be plastered all over your recommendations, be top search results, etc, until the above stops being true.
I think the more likely answer is that podcasts can be produced with exclusivity deals while songs can not.
Spotify is large because they were first and because apple/google music suck. But eventually apple and google will stop sucking and users will drain from Spotify rapidly unless Spotify can create content to keep users in.
Spotify is in the position of Firefox 15 years ago right now. Eventually the built in apps will take over.
Selling a burger is inhernelty profitable for McD, they sell it for more than they spend on manufacturing and shipping and serving it. Each new burger sold adds more profit.
Serving music is unprofitable for Spotify. They collect your monthly subscription fee, then every additional song play makes Spotify lose money. They don't want to have zero song plays since then nobody would subscribe, but their goal is sell the profitable thing (subscriptions) while minimizing the unprofitable thing (song plays).
Just to add to this restaurant based allegory, Spotify is like an all you can eat buffet that tries to serve out lots of sodas so you get bloated and don’t eat the expensive stuff they have
> their goal is [...] minimizing the unprofitable thing (song plays).
If that's the case, how do you explain those two features :
- the repeat button
- the "automatically play similar songs" option
In the first case, since I don't know how it works, maybe they have to pay only one time for a song per user listening to it during a period (say a month). But I doubt it.
In the second case, it's Spotify explicitly saying : "here are songs you don't intended to play but that we picked automatically and are playing to you".
If you look at Netflix, sure they have the feature that automatically launch the next episode. Or they try weird stuff like live or play anything... But they also have the "Are you still watching ?" feature, to make sure that they don't display content to an empty room.
Spotify doesn't have that, it can just play songs indefinitely without any human interaction.
Well...yes, not necessarily fundamental, but it's the same class of problem cinemas and restaurants have (to pick two). What do cinemas mainly make money from? What do restaurants mainly make money from?
Yes, that seems to be true (and is that % you've guessed maybe too low? Maybe far too low?). Even with that though, it's extraordinarily fine margins -- w/r/t the businesses that I mentioned, the majority of the income comes from those value-adds, if they weren't there it would generally be difficult for the businesses to survive financially. That's where I was coming from.
To me, Spotify seems to be using podcasts in a similar way. I assume it's because the central business model is unsustainable when combined with investor pressure; they can't just focus on core product because they're burning too much of other people's money in an attempt to outcompete everyone else
I'm sure it boils down to money ultimately, but it can't be the way you suggest here.
The thing is that Spotify does not pay per play! The royalties lobby love to give the impression that they do, because it makes it look like Spotify is fleecing them.
Spotify pays percentages of what it itself collects in subscription fees. If a record company owned 10% of everything that was listened to on Spotify this month, they would make _the same_, regardless of how many absolute seconds their stuff was listened to.
So, more listening to podcasts does not mean Spotify has to pay out less. How much they have to pay out in total is fixed as a share of their subscription (and ad) revenue anyway, in multi-year, industry wide contracts with copyright owners.
There are ways Spotify could circumvent this, such as promoting content they covertly owned themselves, or content whose owners gave them kickbacks of some sort. There's some indication they do such shady things. But podcasts don't change this equation much.
I think Spotify's promotion of podcasts is simply good old fashioned loss-leading monopoly building. They're hoping that Spotify will become where listeners go for podcasts since that's where all the podcasts are, and also the place podcasters go because that's where all the listeners are.
That is a great point about loss-leading a future monopoly and of course a factor.
This isn't a hill I will die on by any means, but if you read Spotify's write up on royalties[0], they pay out based on stream share of the overall platform, on a monthly basis. E.g. If Columbia Records gets 10% of streams for a month, they get 10% of the pool of $ Spotify distributes. Now, like you said they likely have some shady practices - I would imagine Spotify has an incentive to create music like study and sleep beats themselves as those playlists get hit for 8 hrs at a time and it doesn't really matter who created the beat as long as it helps you study or sleep.
They do not indicate in [0] that podcasts are excluded from stream share. Even if they aren't included in stream share now, I'd imagine long term they very much intend for podcasts and music to be lumped into the same stream share model to drive payouts down.
You aren't wrong, but you would think they would then create an excellent podcast player, yet they can't even get simple things like the order of the episodes correctly, and I still haven't figured out how to setup a next queue.
Not to mention that I might listen to podcasts at home and one the way to work, but at work I won't want to listen to anything spoken, but half the time I end up accidentally starting the podcast anyway. That now means I am not using Spotify for podcasts.
You’re probably right. But then again: who cares about Spotify making money? I want to listen to music and not optimize the bottom line of the Company.
Spotify dynamically injects ads into podcasts. I was listening to an episode of the Conan O'Brien podcast from 2018 and got an advertisement to be safe from Covid by enjoying an ice cold Miller Lite at home.
It was extremely unsettling until I realized what they were doing.
They replace the ad breaks that would normally be in a podcast. (Like when the hosts say "we're going to take a quick break to talk about our sponsors for this episode"). It's not an unskippable ad like you get when listening to music using the free tier. It's inserted directly into the audio stream.
Edit: I guess it's possible the Conan podcast is doing that somehow and not Spotify, but I've never had something like that happen when using the Apple podcast app.
Are you certain it was Spotify that did that? Unless you downloaded the episode in 2018, it could have easily been the Conan podcast. Podcast episodes aren't immutable, they're just a url. I've seen podcasts that update the ads in their back catalogue to whoever is paying them at the time the episode is downloaded.
I've also noticed some location specific ads, which isn't that surprising if you think about. There's nothing stopping them from serving you a different mp3 file depending on your IP geolocation.
When I listen through the apple podcast app I get ads that are clearly from 2018 though. Like for events that are long gone and over. Ads that don't match the year of the episode have only ever happened to me in spotify.
> Spotify Podcast Ads are powered by Streaming Ad Insertion (SAI), which leverages streaming to deliver Spotify’s full digital suite of planning, reporting, and measurement capabilities. Spotify Podcast Ads offer the intimacy and quality of traditional podcast ads with the precision and transparency of modern-day digital marketing.
Short answer is $$$$.
Longer answer is: Spotify must pay royalties for each song played. Imagine if there was a completely free (for Spotify) form of content that filled users ears for hours, thus removing the need for Spotify to pay royalties. Ahem podcasts. Now imagine if Spotify started injecting ads into said media form to grow their revenue beyond subscriptions. Again, podcasts. So now, you have a very long-form content that both saves you royalty $ and drives new revenue. QED. Podcasts will continue to be plastered all over your recommendations, be top search results, etc, until the above stops being true.
Wrote about this in detail recently: https://www.towardssoftware.com/spotify.txt