(upbeat music)
- Joe Rogan, one of the world's most popular podcasters
is making his show,
The Joe Rogan Experience, a Spotify exclusive.
This is huge industry changing news.
The show hasn't even been available in Spotify
up until this point,
and the company is reportedly spending
potentially more than $100 million to bring it over.
This means that if you wanna listen to The Rogan Show,
you're going to have to download Spotify.
Now, you probably think more of music than podcasting
when you hear Spotify's name,
but this Rogan deal is actually
an essential part of the company's plan
to become the biggest name in audio.
To understand why,
we have to look at the big picture.
Spotify made its podcasting ambitions known
in 2019 with three acquisitions.
Basically back-to-back,
it bought two podcast networks,
Gimlet Media and Parcast,
and a podcast creation company called Anchor.
All together, the company spent around $400 million
for those three companies combined.
Then this year, it also acquired The Ringer
and Bill Simmons Flagship show
for reportedly around $196 million.
The team spent a lot of money all in an effort
to lock down some of the industry's top content,
committing it to Spotify's library,
but Spotify attempted exclusives
with big name record releases
and the strategy failed years ago.
So why is it investing so much in podcasts now?
It's about getting people to use it to app.
Similarly to how Amazon knows the items
people most want to buy
and develops its own products around that data.
Spotify knows what content listeners search for the most,
and that data informs it's purchasing decisions.
The company said when it bought Rogan show,
that it was one of the most searched podcasts.
It needed the show to become the go to place for listening
and this is critical.
Rogan show is free to listen to.
People don't need Spotify Premium to hear or watch it.
Instead, they pay with their data.
Spotify also doesn't need people to subscribe
because it makes money in a more traditional way too.
- [Announcer] This episode the podcast
is brought to you by stamps.com.
This is...
We've been sponsored by stamps.com
for seven years now.
It's amazing-- - There's never been
a single podcast company
that sells ads, makes content,
has a popular podcast player
and gives people the tools to create their own shows.
Spotify now has all of that.
It's just a question of getting people to use it.
Big names like Joe Rogan,
bring people to the platform,
but a large show library keeps them there.
Spotify says it has more than a million podcasts available
and that during the first quarter of 2020,
70% of shows were created with Anchor.
On top of all these acquisitions and deals,
Spotify also created new tech for generating playlist
and inserting ads.
It now algorithmically generates podcast playlists,
and launched its own advertising tool
called Streaming Ad Insertion,
which allows targeted ads to be placed into shows
as people listen to them,
which again, relies on that critical user data
we talked about earlier.
And then of course,
it launched video podcasts in app,
which allows it to sway
some of YouTube's popular podcasters,
over to its platform.
Spotify sees a big opportunity for podcasts because for one,
the competition isn't very strong.
Apple, the biggest name in podcasting up until now,
has mostly left its product alone,
letting listeners freely come and go
and allowing all creators to upload their RSS feeds,
without Apple trying to own any show exclusively.
It doesn't make its own shows right now
and it doesn't sell ads,
which would go against
its privacy oriented positioning anyway,
Spotify can totally own this space.
Even more importantly though,
these exclusive podcasts cost Spotify a lot upfront,
but they could pay off in the future.
Every time someone listens to a song on Spotify,
the company has to pay the record labels for that listen.
But with podcasts,
it deals with the creators directly.
In fact, with its exclusive deals and its own programming,
it actually makes money off each listen
because of the ads it places.
Now, I should say,
Spotify Premium users still hear ads
in Spotify programming,
so the company is actually double-dipping
with the revenue there.
Podcast could be lucrative for the company,
which is why although it's spending
hundreds of millions of dollars on tools and talent
for its platform,
it'll likely make that money back.
Midroll, another podcast ad network,
says advertisers can pay anywhere
from $18 to $50 per 1000 listeners.
Joe Rogan says his show reaches
190 million downloads per month,
meaning he and his team could on the low end
be making $3 million in revenue on ads per month.
The bigger question is how Spotify's decisions,
affect the broader podcasting industry.
It doesn't use RSS,
so it controls the whole system,
including the data,
which informs not only its own purchasing decisions,
but also its ad targeting.
If the technology takes off,
we could live in a world in which podcast ads
more closely resemble web ads,
in that they're targeted to individual listeners.
This might be okay with some people,
but others might worry about their privacy.
Podcast listening data is more sensitive than music,
for example, because people listen to nice shows
about potentially telling topics.
Just as we've seen people on the broader web,
make decisions about where they browse
or what email or messaging service they use,
based on their privacy.
The same of might happen with podcasting.
Podcasting was once equal across all platforms,
but it now seems like there will be two podcasting worlds,
Spotify versus everybody else.
Hey everyone,
thanks so much for watching.
Make sure you check out our other big picture episode
about how podcasting became as big as it is now
and why everyone's talking about it.
I hope you're all staying safe and healthy,
subscribe to the channel,
check out theverge.com,
we got you.
Alright, bye.