And yet Spotify’s content chief, Dawn Ostroff, is leading the music behemoth into an entirely new area that’s all about words, not riffs: podcasts.
Though podcasts are buzzy right now with listeners, experts say the market is in its early days in terms of turning a profit. But Ostroff thinks that’s the perfect time to go all-in. Before coming to Spotify, she foresaw the boom of online video much earlier than most: She helped get The CW’s show content online in the mid-2000s, and she then moved on to build publishing giant Conde Nast’s digital-video business.
“I’ve always tried to go where people will eventually follow,” Ostroff told CNN Business in an interview. “It’s always more exciting to build something than to be sitting on top of a mountain after something is built, just trying to defend your place.”
The state of podcasting
“We’ve decided to come into the podcast space in a very aggressive way,” Ostroff said.
As Ostroff sees it, adding podcasts to Spotify’s catalog can boost the business both by attracting new users and keeping existing ones listening for longer.
Less clear, however, is when the massive investment in podcasts will pay off financially.
“Podcasting is very much day one,” Rich Greenfield, a longtime media and tech analyst now at LightShed Partners, told CNN Business. “Sometimes you have to put the gauntlet down and spend the money to show how serious you are.”
Because podcasting is so nascent, Greenfield said it’s impossible to assess whether the purchase prices for Gimlet and Anchor were appropriate, “but in the next five years, if the category is strong, this [buy] will look smart.”
Helping listeners discover new podcasts
Spotify gained streaming dominance at least in part through its powerful recommendation algorithms that help users discover a range of new music. To gain an edge in podcasting, Spotify plans to do exactly the same thing.
“One of the big initiatives for us is to be as good at podcast discoverability as we are on the music side,” Ostroff said. “So our product teams have been working tirelessly to be able to deliver personalization to users on the podcast side.”
Discovery is a major challenge in the podcast space at large. Spotify alone features more than 500,000 podcasts, and that field is growing rapidly. With so many options spread across platforms, it can be tough for listeners to find new podcasts outside of the mainstream.
Apple Podcast has long been the dominant platform, offering hundreds of thousands of largely ad-supported podcasts for free. But in recent years, upstarts like Luminary and Stitcher have sprung up to offer premium curated podcasts behind a paywall. Spotify plans to offer exclusive content as well in an attempt to lure customers from the other podcast platforms.
“We’re making more content exclusive on the platform, [which] allows us to market in a more meaningful way [and] bring people onto the platform,” Ostroff said. “And we’re finding that creators are excited about working with us on an exclusive basis, because we’re able to put so much more of our marketing and on-platform data and insights in their hands.”
On the data side, Spotify is also committed to “unifying the business side of the podcast space,” including starting to automate ad sales over the next few years, Ostroff said.
Following the younger generation to profit
“You think about all of those advertisers who are going to need to place their money and their ads somewhere,” Ostroff said. “Gen Z-ers and millennials are creating new habits of listening to audio… and you’re going to have a significant amount of ad revenue that is going to be looking to connect with consumers.”
The ubiquity of audio compared with video is another source of appeal for advertisers, Greenfield said.
“The reality is there’s lots of time to listen to audio, whether you’re in your car driving, at work, at the gym, cooking in the kitchen with a smart speaker,” said Greenfield. “It can be in the background constantly, so if you’re Spotify, why not try to dominate all forms of audio?”
“It doesn’t worry us,” Ostroff said, citing the experience of the podcast teams it has assembled through acquisitions as well as its own Spotify Studios team. The company has also worked to extend “an olive branch to the Hollywood community,” she said, making a concerted effort to reach out to creatives about what Spotify can offer.
Spotify has also been careful to let the startups it has acquired retain their own identities, Ostroff said, giving them the power of Spotify’s size and back-office resources while allowing them to keep creative control.
That was most important to Gimlet co-founder and CEO Alex Blumberg, who told CNN Business that he was “the most skeptical and worried and anxious about it of anybody” during acquisition talks.
“Just because I think it’s a heavy thing to build a business and then hand over the reins and it’s no longer your sole responsibility,” he explained.
Spotify’s commitment to a hands-off approach won him over. And for Ostroff, the alternative is the real danger.
“We’re incredibly respectful of any of these companies, particularly the creators and the flow of their business,” she said. “We just don’t want to break something that’s intact.”
When it comes to forging a new path in podcasting, however, Ostroff has no concerns about breaking away from the way things have been done.
“There’s nothing more thrilling than to take a risk where you really have a vision,” she added. “[We] can see what the end of the race is going to look like, where we want to get to.”
Source : CNN