In the current issue of Bloomberg Businessweek, the publication argues (in the article’s subhead) that “Joe Rogan, Bill Simmons, and Call Her Daddy haven’t fixed the business.”
Journalist Lucas Shaw describes the hiring of former TV/cable exec Dawn Ostroff, who was hired as Spotify’s chief content officer in 2018: “Although she had no background in podcasting—or music, for that matter—her time in TV taught her how to talk to talent. Over the next four years, Ostroff spent more than $1 billion on the business, licensing shows, buying production studios, and signing exclusive deals with celebrities, including the Obamas, Kim Kardashian, and Prince Harry and Meghan Markle.
“Last year, Ostroff’s research and data team asked a question that many at Spotify already knew the answer to: Had any of this spending yielded a major new hit? The team produced a report that basically said no, according to five current and former employees.” The only true “hits” identified by the team were “Serial” and “The Joe Rogan Experience,” neither of which Spotify produces, which frustrated execs near Ostroff, the article says.
The article notes that Spotify “moved into podcasting to free itself from the unprofitable and competitive business of music streaming. The company’s deals with record labels require it to pay them more than 70% of every dollar that comes in, which is why Wall Street has long doubted the business model. Podcasting offers Spotify exclusive material that forces other tech giants to carry its service—and creates a revenue stream the music labels can’t touch. Yet despite all of Spotify’s spending on podcasting, it accounted for only 7% of total listening hours in the first quarter of 2022 and 2% of revenue last year.”
Spotify told investors earlier this month that, eventually, podcasting will have better profit margins than music. The company has already reported ad sales of over $1.3 billion last year.
Over the past 16 months, however, Spotify’s stock price has moved from a peak of $364 to a recent, all-time low of $101 — although that still gives the company of a market cap of around $20 billion, which is close to SiriusXM’s current market cap of $24 billion and significantly ahead of major radio broadcast companies (e.g., iHeartMedia at $1.2 billion).
The article describes how Spotify’s spending on podcast platforms and producers (and Wall Street’s positive reaction to those moves) inspired Amazon and SiriusXM to go on similar spending sprees. It concludes, on a relatively positive note, that Spotify “has invested the most money in new shows, especially abroad, as well as in the technology to capture ad dollars. As long as Apple doesn’t sell ads and fund original programming, Spotify will ultimately be the big winner. How big the win will be is another matter. ”
Read the full piece in Bloomberg Businessweek (it may be behind a paywall for you) here.