| A who's who of podcasting and YouTube descended on Spotify's Los Angeles campus yesterday. The company trotted out David Rosenthal of Acquired and Colin Rosenblum and Samir Chaudry of their eponymous show. Bill Simmons was there, along with Don Lemon, Rhett and Link, Nick Viall of The Viall Files, Steven Bartlett of Diary of a CEO and, for a concluding concert, Halsey. Spotify knows how to put on the razzle-dazzle. For those who hadn't attended one of their events before, they quickly learned the routine: free everything. Spotify-branded swag, lunch from David Chang (who also hosts a podcast), PopUp Bagels, a custom perfume-maker and an open bar and cafe. While munching away, creators and their reps sat through presentations selling a new concept for Spotify video. Starting in January in the US, UK, Australia and Canada, premium subscribers will no longer hear dynamic ads in video podcasts. For podcasters, this means they'll be getting paid through a new model — one based on subscribers' consumption rather than on ad impressions. The details on the model are scarce so far, though Gustav Söderström, co-president of the streamer, tells me that the payouts will not come from a pool like they do in music. "It's based on your audience, not your share of the pool," he said in an interview when I asked if every podcaster would be competing against long, prolific shows like The Joe Rogan Experience, which could easily suck up the vast majority of any hypothetical pool. Unfortunately, this was all the elaboration I could get from Söderström. So we'll have to keep digging in terms of how this will ultimately be structured. It's worth remembering that YouTube Premium also compensates creators based on consumption. Presumably, Spotify will operate somewhat similarly. As part of its presentation, Spotify characterized advertisements as a pain point for its subscribers. Söderström said the company found that podcasts increasingly include more ads. During a three-month period, ads first accounted for, on average, 8% of a podcast's length and then jumped to about 11%. "Now extrapolate that over a few years, it's not gonna be good," he said. "So this just keeps increasing, and in this weaker podcast-ads economy we're in right now, it's not about to get any better." The posturing against ads didn't exactly land well with podcast executives who will have to upend how they do business if their creators put videos on the service. I've written about some of this tension in the past when I broke the news of Spotify's recent push into video. But essentially, dynamic ads, or ads that networks can swap in and out, are critical to the business. Their widespread adoption helped the industry grow because it meant a single ad slot could be repurposed over and over again. Many times, these slots are filled by large brand advertisers, so they sound more like ads one might hear on the radio, rather than a host-read endorsement. If they opt into Spotify's new offering, networks would have to sell host-read ads that live in podcasts forever, instead of focusing on brand advertisers. For Spotify competitors like Sirius XM Holdings Inc., iHeartMedia Inc. and Wondery, this feels like an impossible ask. In recent years, all the mega deals we've covered in the industry reached these lofty valuations primarily based on a simple calculation of the number of impressions available on a show multiplied by the cost per 1,000 impressions, or CPM. The math doesn't math if one of the biggest podcast platforms says they can't sell all those ad slots anymore, at least when video is included. (Plus, many of these types of networks sell their own, ad-free subscriptions, so this puts them in even more direct competition with Spotify.) With Spotify rolling out the red carpet and wooing creators, I imagine hosts and their network partners will be having some tense conversations about these very unsexy ad details. One bright spot might be for shows that are notoriously difficult to monetize, like political programming. For them, the shift away from ad-driven compensation models could be a good thing. And when it comes to traditional YouTubers who don't yet have a fully built-out podcast business, this new Spotify model could be intriguing. Many have hesitated to upload their shows to the service in the past because it offered no way for them to monetize. But the new model could lead to extra revenue and audience for them. Then again, there's one potential downside they'll have to consider: Will fans dial back their YouTube consumption if they realize they can listen ad-free on Spotify? In the end, would the new money from Spotify make up for the lost revenue from YouTube, or would they wind up making less? I asked Söderström why Spotify didn't just build a competitor to YouTube's ads platform, AdSense, which is how most YouTubers make the majority of their money. "One of the big reasons that people convert from free to paid on Spotify is because of the ads," he said. "We're actually very big as a subscription platform compared to YouTube. So the reasonable thing for us is to have a strategy based on our strength, which is subscription. And the reasonable thing for them is to have a strategy based on their strength, which is ads. So instead of trying to do what they do on a smaller scale, we want to focus on what we can do better." In the context of Spotify's stellar earnings report this past week, the decision to eliminate video podcast ads makes total sense. The company is a subscription business, and it will do whatever it needs in order to entice more people to pay up. Apart from audiobooks, YouTube already has product parity with Spotify. So now Spotify is trying to exceed YouTube on the strength of its ad-free expertise and a more built-out music experience with viral features like Wrapped and Daylist. The territories in which this new model is first launching are all wealthy, English-speaking countries. The US is the biggest podcast ad market, and North America represents a significant portion of Spotify subscribers at 27%, or 68 million people. One-third of Canadian adults listened to a podcast in the last month, per Media Technology Monitor, while 47% of American adults say they listen monthly, per Edison Research. Therefore, it stands to reason that a sizable number of people pay for Spotify and listen to podcasts, and could become unreachable to the podcast ad networks. For Spotify, maybe this effort will help it convert more people in already relatively well-tapped markets. I put the podcast networks' concerns to Söderström. "I think in the long-term, everyone is going to have to do what is the best for their creators, which ultimately is what is best for their consumers," he said. He went on to note that the company will still offer its enterprise podcast platform, Megaphone, which networks can continue to use with dynamic ads in audio. "We're not actually saying take it or leave it," he said. "At the end of the line, this is gonna be good for them. The numbers are very clear. If they put video on Spotify, they perform better. If they put ad-free video on Spotify, they perform even better. They get more listeners, more attention, more following." | 
No comments:
Post a Comment