Bill Rosenblatt: Amazon Takes On Spotify In Podcasting

Guest columnist Bill Rosenblatt is Founder and President of GiantSteps Media Technology Strategies, a New York consultancy with clients in three continents, ranging from startups to enterprises including Warner Music Group, Sony, Disney, Google, NPR, Spotify, and others. He is also adjunct faculty at NYU, teaching Data Analysis in the Music Industry. This article was originally published in Forbes.

This week Amazon announced the launch of a podcast service integrated with Amazon Music, along with a slate of exclusive celebrity-driven shows. After nipping around the edges of podcasting in its Audible audiobook subsidiary for a few years, Amazon is jumping into the market—with its competitive sights set squarely on Spotify. Amazon’s emulation of Spotify’s podcast model has implications for the future of podcasting as a business.

Spotify started moving into podcasts about five years ago. This was the first phase of a campaign to diversify its business beyond music, reducing its exposure to competition from much larger companies (Amazon, Apple, Google) that don’t depend on music as a single “input good.” Spotify has spent hundreds of millions of dollars on podcast publishers and publishing tools, and it is making deals with more and more individual podcasters for exclusive access through Spotify.

The strategy is paying off for Spotify: it is now at least the number two podcast listening app, behind Apple Podcasts, and some estimates put it at number one. Spotify has gone to great lengths not only to incorporate podcasts into its user interface (beyond including them in search results) but also to integrate them into recommendations, playlists, and so on. In contrast, Apple maintains separate apps for music and podcasts. Google includes podcasts in Google Play Music, but only at a superficial level, and Google is phasing Google Play Music out anyway in favor of YouTube Music.

Amazon’s new podcast feature follows Spotify’s strategy of bundling podcasts with its subscription music service and cross-pollinating the podcast and music audiences in a single app. Podcasts are available at all tiers of service in Amazon Music, including the free tier (playlists and radio stations with advertising), Amazon Prime Music (limited catalog of songs available on demand for Amazon Prime members at no additional charge), Amazon Music Unlimited (full catalog of on-demand music, competes with Spotify Premium), and Amazon Music HD (enhanced audio quality at a higher price point).

Podcasts are integrated into the Amazon Music app’s search engine and at the top levels of navigation and recommendations; Amazon has yet to determine how to intermix podcasts with music in playlists. The app also has features similar to the Google Podcasts app’s integration with Google Assistant for enabling users to start listening to a podcast on one device and continue from the same place on another device.

Amazon is launching a handful of original exclusive podcasts, focused on music and entertainment, from celebrities such as DJ Khaled and Will Smith. It is also getting an exclusive deal to distribute the popular music-meets-true-crime podcast Disgraceland.

Amazon Music’s tight integration with Alexa devices, and its lower price points for Amazon Prime subscribers and Alexa device owners, have helped its user base grow fast. The Infinite Dial market research study from Edison Research and Triton Digital, for example, shows that within the past year Amazon Music overtook Apple Music as the no. 2 most popular paid subscription music service in the U.S., behind Spotify.

From that perspective, it’s significant for the podcast business in general that Amazon and Spotify are adopting the same model of bundling podcasts into a paid music subscription service and including a growing number of exclusive podcasts in that service. This could come to be one of the dominant revenue models in podcasting.

Revenue in podcasting is currently in a state of flux. Currently there are two primary revenue models: advertising and crowdfunding. The Interactive Advertising Bureau measured 2019 podcast ad revenue as $708 million, up 48% from 2018, and predicts 2020 revenue to approach $1 billion despite the effects of the pandemic; these figures are higher than last year’s projectionsPodcast crowdfunding, such as through Patreon, likely brings in an order of magnitude less than advertising.

The dominance of ads in podcasting in the U.S. market (in contrast to elsewhere) is due to the outsized influence of two podcast publishers that dominate the listenership rankings: iHeartRadio and NPR. Both have long histories of funding through advertising and corporate sponsorships, which they are leveraging in the podcast space. Their influence over podcasting in the U.S. has been so pervasive that there has been little space for other revenue models—such as Luminary’s paid-subscription model—to take hold.

With Spotify and Amazon pursuing the same music-bundling model, that could change. Together they will set expectations among a large audience that podcasts, including some high-profile exclusive shows, will be available as part of paid subscriptions to music—or, perhaps, audio content—services. (Spotify earns ad revenue from podcasts it owns or licenses exclusively; Amazon expects to do the same.)

The logical next step in solidifying this value proposition is to add audiobooks to the mix. Amazon’s subsidiary Audible is already the market leader in digital audiobook services. Audible also features podcasts and other short-form produced audio content, but it has not marketed itself as a podcast platform per se. It will take some effort, organizationally as well as technically, to integrate Audible’s audiobooks into Amazon Music (or vice versa), but Amazon may decide to do it in the future. Meanwhile, Spotify already offers a small catalog of audiobooks and recently posted a job opening for Head of Audio Books in its New York or Los Angeles office. (And the job listing was removed from Spotify’s website, suggesting that Spotify may already have filled the position.)

Brad Hill