War of the Podcast Worlds: Apple vs. Spotify
Part 1: Product Strategy
If you paid attention to my Fitbit stats in college, it would be easy to tell when I moved off campus. I had a 20-minute walk to class and it seemed like an eternity. Thankfully, I took the solitude as an opportunity to become part of the 13% of Americans who were weekly podcast listeners in 2016. Podcast listenership has more than doubled since then, with 28% of Americans indicating they were weekly listeners in 2020.
When I started listening to podcasts, the Apple Podcast app defined podcasting for me. The way I discovered, listened to, and referenced podcasts was all shaped by Apple’s product. Now, 5 years later, there are a multitude of companies shaping the industry, including Amazon Music, Pandora, and iHeart Radio. Most recently, Spotify has entered the market and has grown aggressively over the past several years. According to research by eMarketer, 2021 is the first year Spotify has led Apple in its number of podcast listeners in the US. This advantage is expected to increase over the next 3 years.
The increasingly fractured podcast market provides a wealth of options for podcast creators and listeners alike. For example, my purpose in listening to podcasts has shifted from pure entertainment to a source of education and inspiration for my creative work. This shift in my needs and Spotify’s recent growth has forced me to reconsider which platform I use. In this series, I’ll compare Apple and Spotify’s podcast platforms, first starting with their strategies, which are the foundation that guide their respective product features.
Apple — Overview and Strategy
Apple has a long history in the podcasting space — so much so that the word podcast is actually a portmanteau of ‘iPod’ and ‘broadcast’. In 2005, Steve Jobs presented an iTunes product demo and announced that iTunes would start supporting podcasts in its platform, which would “launch podcasting into the mainstream”. In true form, Jobs was ahead of his time, and though initial adoption was slow, Apple served as a major accelerant in the growth of podcasting. In 2012, Apple then launched the Apple Podcasts application, solidifying its position as a leader in various podcast services:
- Discovery — providing listeners with new podcasts to explore
- Distribution & Management — allowing creators to upload and share podcasts
- Analytics & Monitoring — allowing creators to monitor the performance of podcasts
Since then, Apple hasn’t significantly changed or expanded its podcasting app outside of additional curation from the Apple Podcast editorial team. Apple’s approach to podcasting shows that being a first-mover in the space with a strong platform advantage isn’t enough to maintain a leading position
Spotify — Overview and Strategy
While Apple played a role in shaping the podcasting industry at the onset, Spotify has invested in its subsequent growth. Spotify began its foray into the podcasting space in 2015 when it announced that the Spotify product would include podcast functionality. Then in 2019, Spotify began a slew of acquisitions that reflected the size of Spotify’s ambition and allowed the platform to expand its production, advertising, distribution, and content capabilities. These acquisitions allowed Spotify to begin to vertically integrate across the podcasting space — an overview of those key moves is shown in the graphic below.
Monetizing Podcasts
Spotify’s recent investments in the industry speak to a big bet on the future of podcasting and a high potential for value. Though podcast monetization is still in its infancy, the strategies that Spotify and Apple adopt will lead the way for the industry.
Spotify’s Monetization of Podcasts
Spotify’s leadership has stated that Spotify is aiming to generate revenue in two main categories — content and advertising.
In addition to Spotify’s technology acquisitions, Spotify has launched strategic partnerships with various content creators and celebrities:
- Paid Bonus Content — When Spotify acquired Gimlet Media, the platform gained production and distribution capabilities, as well as the shows within the Gimlet Media network, such as Reply All. Upon acquisition, Gimlet’s podcasts weren’t immediately made exclusive to Spotify, but bonus content was only available via Spotify.
- Spotify Exclusive Content — Spotify’s exclusive, multi-year partnership with Brene Brown is an example of their foray into exclusive content. Brown has just launched her first Spotify Exclusive Original podcast, Dare to Lead, and mentioned the ability to leverage music in her content in new ways was a feature that fans should look forward to. As if partnering with the queen of vulnerability wasn’t enough, Spotify also announced a partnership with the Duke and Duchess of Sussex (read: Prince Harry and Meghan Markle) through their production company, Archewell Audio.
These investments in podcast content allow Spotify to make money from a portion of ad sales, but Spotify has also invested in the advertising space, through two new technologies:
- Streaming Ad Insertion (SAI): Taking advantage of the fact that Spotify streams podcasts as opposed to providing downloads, SAI allows advertisers to target ads, measure their performance, and add interactive elements. This personalization increases the value that advertisers can gain from ads, bringing more capital to the podcasting space overall.
- Spotify Audience Network: This February, Spotify announced the Spotify Audience Network as a feature in development that serves as an audio advertising marketplace that allows advertisers to reach the Spotify audience on and off Spotify. This marketplace would allow advertisers to move from title-based podcast buying (buying ad space through negotiating with specific creators that are seen as trusted voices relevant to the product) and move towards buying ad space targeted at specific audience segments. Though this product hasn’t been scaled, Spotify’s announcement is another indicator of Spotify’s investment in the space and represents a new way Spotify can provide value for advertisers, giving them an advantage in selling ad space.
Apple’s Monetization of Podcasts
Given Apple’s early leadership in the space and their platform advantage (all iPhones come with the Apple Podcast app), they have a significant competitive advantage. However, Apple has been surprisingly inactive when it comes to monetizing the podcasting space. Though there have been rumors of various updates to Apple’s approach to podcasting, none have come to fruition. Based on Apple’s strategy in other service areas and market trends, there are a variety of ways Apple could choose to monetize, which have varying levels of probability.
- Subscription: This is a method we see in Apple’s monetization strategy for Apple Music and AppleTV+, making it seem like a natural extension for podcasting. However, in Jobs’ initial framing of podcasts, one of the major benefits was that they were free. That ethos is part of the power and magic of podcasting — the accessibility and democratization of sharing ideas that comes from developing a free product. Developing a subscription model for podcasts would put Apple in direct opposition to that ethos. Adoption of this strategy will depend on how deeply held this belief is within Apple’s leadership.
- Advertising: Apple has continued to position itself as a steward of users’ data, especially given its new privacy feature that requires applications to ask users if they want to be tracked across services. Based on Apple’s commitment to data privacy as a core piece of its value proposition and brand makes advertising an unlikely monetization approach for Apple to use.
- Content: Though at a much slower pace than Spotify, Apple has begun to produce owned podcast content, through shows like The Line and For All Mankind. However, these shows serve as complementary/promotional content for Apple’s TV+ subscription service. Apple’s move into content doesn’t seem to be a move to compete in the audio space, though it could point to future content development and investment.
From a strategic perspective, Spotify is clearly in the lead. As a listener, these bold investments are important to me, because they reflect Spotify’s dedication to continuously improving their user experience. However, many of the resulting changes don’t feel like a win for the listener. For example, Spotify’s exclusive approach to content removes my ability to choose my preferred platform and their focus on personalization leaves me wary of my data privacy. The investment in growth is important, but a strong strategy needs to be backed by a strong product. In the next part of this series, I’ll compare some of the specific features of each product and share my decision around which platform to use!
My postings reflect my own views and do not represent the views of my employer.
