In 2019, Spotify announced it was moving its music focus to a more general audio focus to broaden its offerings and widen its global lead on competitors. It acquired the Joe Rogan Experience early in 2020 and penned exclusive podcast deals with Kim Kardashian and DC Comics.
The company’s stock jumped eight percent at the announcement of the Joe Rogan acquisition alone.
As it CEO Daniel Elk says:
A year ago, when I was on the show last time, I introduced the shifts in our strategy from music to audio. At that time, we were a very small player in audio, but growing fast. Now, where the number one player in more than 20 markets around the world and quickly catching up in the markets where we’re not number one.
That’s where Spotify is taking the future right now, and analysts believe it can ride that wave for a bit. Ninety percent of its monetization is on the subscription side. But 10 percent is on the ad side, and it thinks that there is a real growth opportunity for them in the ad space, particularly with podcasts.
Just after these podcast deals were penned, the global pandemic started taking its toll on the economy. But Spotify was one of the few companies that weathered the storm. In fact, Spotify stock increased 70 percent from the beginning of January 2020 to the end of June 2020.
They benefited from COVID because the lockdown has forced people to stop listening to the radio and they discovered Spotify while stuck at home.
Fixed Content Cost
It’s following the Netflix model of paying upfront fixed costs for Content acquisition and creation. If you are Spotify, you’d much rather make money from the podcast acquisitions and that then having to pay 60 to 70 cents for every dollar to Universal or Sony.
But in order to stay at the top, Spotify is going to have to stay nimble and quick. Competitors like Tencent are already adding features like karaoke to their streaming music platforms.
Tencent, at least, is on that path from a gamification perspective. So I do think that that is an opportunity for Spotify to keep in mind, like, yes, it’s great that you got Joe Rogan. It’s great that you’ve got Bill Simmons. But look at those opportunities as well. Even though it’s a different market, I think there’s a big opportunity there.
Nevertheless, Spotify is still very much a success story.