The battle for podcast dominance is on.
A pair of announcements this week—
introduction of paid podcast subscriptions and
new partnership with Spotify Technology SA to spur discovery and listening on the social network’s platforms—are the latest for a rapidly growing medium that is attracting top talent and top dollar.
“With Apple making its move into subscription, there is this platform war emerging,” said Josh Lindgren, head of Creative Artists Agency’s podcast department.
Podcasting, already on a tear before the coronavirus pandemic, exploded in popularity during the lockdown, and is on track to bring in more than $1 billion in revenue this year from advertising in the U.S. for the first time. An estimated 116 million Americans, or 41% of the U.S. population over the age of 12, are now monthly podcast listeners, an 11% increase over 2020, according to Edison Research and Triton Digital.
For years, competition in podcasts has been a lopsided one: Apple—responsible for the namesake of the industry, a portmanteau of “iPod” and “broadcast”—enjoyed its status as the default destination for listening while doing relatively little to enhance offerings or profits. Spotify, meanwhile, has lavished hundreds of millions on popular creators and companies—sparking an arms race among
Sirius XM Holdings Inc.,
which all now see podcasts as vital for keeping customers engaged with their services.
Spotify’s chief content and advertising business officer, said the rush of other bets on podcasting validates the company’s early moves.
“We saw the opportunity before anybody else did, and we’ve been at it significantly longer than anyone else,” she said.
To some observers, Apple’s podcast news this week is akin to the awakening of a sleeping giant. More than 15 years after adding podcasts to its iTunes software, the tech company introduced a way for podcasters on its platform to sell subscriptions. Until now, the company has neither offered paid access for podcasts nor earned a commission from ads that appear in the more than two million shows on its platform. Apple declined to comment.
“Apple, where podcasting originated, cannot lose out on the podcasting battle,” said
an analyst for Wedbush Securities. “It’s now or never. It’s both a defensive move toward Spotify but also offensive in terms of monetizing.”
Podcasters will pay Apple $19.99 a year to enable subscriptions, and set their own prices for listeners. Apple will take a 30% cut of subscription revenue the first year, and a 15% take thereafter.
“For any industry to be sustainable, we have to be able to generate revenue from more sources,” said Donald Albright, co-founder of Tenderfoot TV, the maker of hit shows including “Up and Vanished,” “To Live and Die in L.A.” and “Atlanta Monster.” Tenderfoot will keep its shows free for now, but will explore releasing exclusive bonus content and early access to subscribers via Apple’s new program, he said. “It creates a more healthy industry.”
Spotify, the big spender on exclusives, talent and technology, has also sought to make the medium more financially viable through advertising and eventually subscription.
Spotify now carries more than 2.2 million podcasts on its service, up from 450,000 in 2019. The Swedish streamer’s podcast listenership in the U.S. is on track to overtake Apple Podcasts’ this year, according to a forecast from research firm eMarketer. Though Apple’s service has grown along with the medium, it has lost market share, falling to 24% in 2021, from 34% in 2018.
Apple’s podcast subscription, which rolls out next month to users, will have company. Spotify plans to announce its own offering next week, according to people familiar with the matter. It will not charge podcasters, nor take a cut from their subscriptions, and will allow them to set their own pricing, one of those people said.
Users of Spotify’s iOS app who subscribe will be routed to a website for the transaction, meaning that Apple won’t take a cut of that revenue, the person said.
Stitcher (acquired by SiriusXM), Wondery (acquired by Amazon), Patreon and Pocket Casts have offered paid subscriptions with varying success. Luminary, thought to be the most established player in subscriptions, will make its original podcasts available to Apple podcast listeners through the new program. Apple and Spotify, which command many more listeners than those apps, are likely to make paying for podcast content more mainstream.
The broader competition between Apple and Spotify is intensifying. Aside from competing for music subscribers (Spotify is far ahead of any other service, with 155 million globally as of Dec. 31 while Apple last reported 60 million subscribers in June 2019), Spotify has been among the tech company’s most prominent corporate critics, claiming that it uses its strength to compete unfairly, which Apple denies.
Apple’s new podcast subscription option within a revamped app reflects one of Chief Executive
core strategies, which has focused on building out digital services to fuel growth. That strategy—which generated almost $16 billion in sales in the fourth quarter, a 25% lift from a year before—put Apple in closer competition with companies that operate on its devices. Spotify, among others, has complained that Apple uses its App Store in anticompetitive ways.
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Spotify set off a feeding frenzy with deals for podcast makers like Gimlet Media and Bill Simmons’ the Ringer, along with its blockbuster $100 million-plus licensing agreement with Joe Rogan. It has sewn up other deals with Michelle and Barack Obama, Kim Kardashian, and Prince Harry and Meghan Markle, while also investing in studios and services for up-and-coming voices.
“Spotify making these investments has helped increase the market and push up the value of creators’ work,” said CAA’s Mr. Lindgren.
Apple, whose TV studio has released original podcasts including “The Line” and “For All Mankind,” is in talks with podcasters about creating original and exclusive shows for its service, according to people familiar with the matter.
“Even though they have the keys to the kingdom in terms of overall customer base and the App Store and broader content, what’s going to differentiate them is not just aggregation, it’s exclusive content,” said Mr. Ives.
Spotify says it welcomes competition.
“The opportunity in audio is massive. We feel there is room for everybody given the scope and scale of what this medium has become,” said Spotify’s Ms. Ostroff, who added that Spotify is distinct from rivals because of its singular focus on audio. “Other companies are looking at audio as a side business—it’s our core mission.”
Write to Anne Steele at Anne.Steele@wsj.com
Corrections & Amplifications
Podcasters will pay Apple Inc. $19.99 a year to enable subscriptions. An earlier version of this article incorrectly said podcasters will pay Apple $19.99 a month. (Corrected on April 23)
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