Spotify wants to hook podcast creators on its newly launched paid-subscription program — by offering far more attractive economic terms and broader reach than rival Apple.
On Tuesday, Spotify announced new monetization options for podcast creators, starting with paid subscriptions. For the first two years, Spotify’s podcast subscriptions will carry no creator fees, so participants will receive 100% of the subscriber revenue (excluding payment-transaction fees). Starting in 2023, Spotify plans to take a 5% cut of subscription revenue.
“We really wanted to come out and show creators that we are offering the best terms… and two years [of no fees] is a great way to do that,” said Michael Mignano, Spotify’s head of podcaster services and tools. He added, “There’s no exclusivity. We’re not locking you into terms.”
Podcasters will be able to select one of three price tiers for subscriptions through Spotify: $2.99, $4.99 or $7.99 per month. “We felt like rather than put the burden on creators [to set pricing], we should make a recommendation on what we feel are strong price points,” said Mignano.
Spotify is beating Apple to the punch — Apple’s podcast subscriptions debut next month — and it’s promising creators more favorable business terms and wider distribution. As with App Store subscription purchases, Apple will keep 30% of podcast subscription fees in the first year, dropping that to 15% in year two and beyond. Apple also is charging a $20 annual fee to use its podcast-subscription tools. And unlike with Spotify’s approach, Apple Podcast Subscriptions will be available only on the tech giant’s own podcast-listening apps.
It’s worth noting that Spotify podcast subscriptions cannot be purchased through the Apple App Store (or Google Play), just as Spotify Premium customers aren’t able to pay through in-app purchases. That’s to avoid the “tax” that the app stores levy on developer. To sign up for a Spotify podcast subscription, users will need to visit the company’s website.
Spotify’s paid-podcast subscription platform launches in the U.S. today, and the company plans to expand it to other markets in the coming months. The program is kicking off with a small group of about a dozen podcasters, and Spotify said it is now starting to on-board creators on a waitlist.
Podcast subscriptions will be available to creators through Anchor, the self-publishing podcast company Spotify acquired in 2019. Podcasters are able to mark episodes as subscriber-only and publish them to Spotify, where they will searchable and discoverable like any other podcast episode. On other podcast platforms, subscribers will get a dedicated RSS feed for subscription-only content.
NPR is among the first media companies to launch podcast subscriptions on Spotify. The public radio broadcaster will publish a selection of ad-free shows for paying customers. On May 4, NPR will release five shows — “How I Built This With Guy Raz,” “Short Wave,” “It’s Been a Minute With Sam Sanders,” “Code Switch” and “Planet Money” — designating the subscription-tier versions with “plus” in the title (e.g., “Planet Money Plus”).
The same terms will apply to media companies for their subscription offerings: They’ll keep all the revenue through 2023, when the 5% fee split kicks in. For now, Spotify has no plans to introduce subscription tiers for its own original and exclusive podcasts.
Mignano, the co-founder and former CEO of Anchor, expects most podcasters to use Spotify’s subscription platform to offer bonus content. By enabling wide distribution of subscriber-only content, “our aim is to help podcasters maximize their subscription audience and grow it from their existing listener base,” he said.
All that said, it’s unclear how much traction podcast subscription services in general will get. About 80 million Americans (28% of the U.S. population 12 and older) are now weekly podcast listeners, up 17% over 2020, according to Triton Digital/Edison Research’s latest research. But those millions of podcast fans are mostly accustomed to getting their shows for free — and paywalled content may appeal only to a niche of superfans.
In addition to podcast subscriptions, Spotify announced announced the Spotify Open Access Platform (OAP), which will let creators and publishers integrate their login systems with Spotify to let listeners access subscription content on the streaming giant’s platform. That, according to Mignano, will let podcasters retain direct control over the subscriber relationship. Spotify’s OAP will be available at no cost to partners.
Also, Spotify said that starting May 1, it will open the Spotify Audience Network audio advertising marketplace to select Anchor creators. That will let podcasters tap into streaming ad-insertion inventory, and also let marketers reach a broader audience base. The Spotify Audience Network already includes podcast publisher inventory on Megaphone, which Spotify bought last fall for $235 million.
“It all starts with the fact that we believe creators should have control of how they approach their business,” Mignano said. “It’s all focused on maximizing creator choice.”
In 2020, Anchor users launched more than 1 million new shows on Spotify, representing 80% of new podcasts overall. Spotify had 2.2 million podcasts on the platform as of the fourth quarter, more than tripling from the year prior. About 25% of Spotify’s 345 million monthly active users in Q4 listened to podcasts, per the company. Spotify is set to announce first-quarter 2021 results on Wednesday (April 28) before the market opens.