Could Spotify Podcasts Finally Make Money From the Medium?

By James O Malley on at

Last night Spotify announced a raft of new features, no doubt in preparation for the forthcoming showdown with a relaunched Beats streaming service from Apple. One of the big announcements was the inclusion of Spotify podcasts (or “audio shows”, as the press releases insists on calling them). And this could be big news for podcasters, as it could solve one of the biggest problems in podcasting: the fact that it is basically impossible to make any money.

Time to Rewind

Podcasting has been around for over a decade now. It has always been a slightly unusual proposition because rather than having been invented by a big corporation, it was invented by nerds in their bedrooms, who wanted a means to download new stuff to their iPods automatically. This is significant, because it means that no one in a suit ever stopped to say “hang on… but how do we make money out of this thing?”

spotify podcastsSpotify CEO Daniel Ek lays out his plans at last night's conference. Image credit: Spotify

This is bad news for podcasting as a medium, as it means that it is hard for creators to be rewarded for pouring all of that hard work into creating something. While podcasting can give you a warm glow inside about making something cool, it will also leave you with a low rumbling in your stomach if you attempt to make podcasts as a day job.

This is perhaps why most podcasts are either hobbyists not expecting to ever make any cash, or traditional media looking to bring its radio content to a new audience (like the BBC’s podcasts), or as a “brand extension”, implicitly to promote a product on a different medium, with no expectation of making money on the podcast itself.

As with anything, there are a handful of exceptions to this rule. But these exceptions are massively in the minority.

The inability to make money is largely a technical conundrum. First off, there’s no mechanism for taking payments up-front. Unlike the app stores that came later, podcasting is reliant on RSS feeds and links to MP3 files, rather than any payment gateway or subscription service.

Jumping Through Hoops

There have been attempts to get around this. For example, Patreon enables fans of creative works to subscribe and donate money to podcasts (and YouTube creators) they like. While it works to a certain extent, the drawback is that because the service isn’t tightly integrated, it will only ever mean a small proportion of listeners pay – and there are more hoops to jump through to get to the point where money is taken from a listener.

Similarly, advertising in podcasts is rather tricky because there are no really good ways to measure the impact of advertising, which is something advertisers like. If you have adverts on a webpage (like this one, for example), advertisers can measure exactly how many people have viewed and clicked on an advert, as well as detect things like your rough geographic location for better targeting. With podcasts, there’s no way of doing this meaning that podcast adverts are more similar to old-fashioned poster adverts, with no way of figuring out if they’re actually effective.

spotify podcastsImage credit: Spotify

The lack of measurement goes deeper too. Podcast creators can probably gain a rough measure of how many people are downloading, but there’s no equivalent of Google Analytics to act as a benchmark for downloads ; worse still, due to the way that podcasting works, once the MP3 file has been downloaded on to the listener’s phone or computer, there’s no way to tell if the listener has ever actually hit the play button.

Perhaps most bewilderingly, part of the reason it has been impossible to monetise podcasts is due to the domination of iTunes, which estimates suggest has a 70-80 per cent share of the podcast market.

For a podcaster, iTunes is terrible. You might imagine that podcast creators would get a whole suite of analytics data from iTunes, or maybe lots of settings that can be tweaked and so on – but you’d be wrong. For a podcast creator, once you’ve submitted your feed to iTunes, that is the last interaction you’ll have with it.

Worse still, once someone subscribes to a podcast in iTunes, it essentially copies the URL for the podcast feed to the user’s phone or computer, and it never “phones home” – so, still no statistics. As a result, the iTunes chart is entirely based on new subscriptions, as Apple has no idea how many regular listeners are downloading.

This is where Spotify could conceivably come in and shake up the entire podcast scene. The company has announced that it has partnered with a number of major podcast providers – including the likes of the BBC, WNYC (which makes RadioLab) and Nerdist. While the financial side of the deal isn’t immediately clear, it strikes me that Spotify could finally provide podcasters with a much-needed business model.

A Knight in Spotify Armour?

Spotify already has over 60 million active users, many of whom pay a monthly subscription fee. The rest are subjected to advertising that is seamlessly inserted into the Spotify app between songs. After Spotify takes its cut, it redistributes the cash to artists based on what has been listened to.

spotify podcastsImage credit: Spotify

If the company extends this to podcast providers too, then this could be a game-changer, as suddenly the monetisation barriers are gone: there’s a payment system built in, a means of tracking listeners and creators will get paid when people listen to their content. Arguably better still, there’s no up-front prompt for listeners to pay to listen, as it is all built into their Spotify subscription – so as far as the listener is concerned, the podcast is still ‘free’.

Spotify could even solve the iTunes nightmare if it decides to offer better tools for creators to manage their content – perhaps letting creators edit metadata and track listenership too. It could also solve the problem for audio that YouTube solved for video: that of bandwidth. If you’re offering MP3s for download, they need to be hosted somewhere on the internet, and as audio files can be rather large, shifting all of that bandwidth can be rather expensive. If Spotify can shoulder that burden for creators, then it means they can spend more time creating great audio and less time worrying about how to pay the hosting bills.

It could work better for listeners too, as listening is more closely tracked, so Spotify should be able to make better recommendations, and the ability to pause and resume listening across different devices could conceivably be easily built in too, as Spotify is based in the cloud rather than on MP3s downloaded to individual devices.

While iTunes is unlikely to go away anytime soon, Spotify is ideally positioned to, after a long decade, finally get podcasting right, making online audio listening a viable proposition for creators, and not just something that is the preserve of geeks. If Spotify does things right, it could be about to usher in a golden age of podcasting.