Neel Ravi

STRT 4501
Prof. Anna Lamin
Nov 15th 2022

Spotify & Podcasting Memo

Spotify is a music-streaming platform and they have a the largest market share in the
market for music-streaming. But there is a competitive advantage that they do not have.
They are not a large tech company such as Apple and Amazon who have a large
corporate umbrella that gives them the ability to offer customers a bargain on their
subscriptions by bundling all the services they offer. Spotify has tried different strategies
such as partnering and bundling with streaming services with brands like Hulu &
Showtime, but this still does give them the advantage in the long run to stay in par with its
more successful competitors who can wage a price-war and able to sustain their price-
competition because of their additional revenue streams. This causes Spotify to lose
considerably on pro tability as they have to lower-prices too and don’t offer any other
services of their own. Spotify may not be losing market share, in Fact they have had large
growth on. Yearly basis compared to its competitors with smaller market shares, but
because of price-competition and bundling that creates more value for completion, Spotify
is bleeding average revenue per user(ARPU) from having to cut-prices and create multiple
subscription options that have large price deductions built in. This creates a problem for
Spotify to raise its prices.

So, Spotify, in a bid to add additional services that it can offer its present and future
customers and as a necessity to enable their ability to safely increase prices and user
experience, can motivate them to upgrade to Spotify’s premium subscriptions. Spotify has
vertically integrated three podcast companies, namely:

1. Gimlet Media: A narrative based Podcast production company that has a large
network and focuses on helping listeners better understand the world and and each
other.
2. Anchor: A creative platform that helps individuals to create, distribute, host and
monetize their podcast recording.
3. Ringer: A media platform that is is heavily focused on sports and pop culture and hosts
a Podcast network with these in-demand topics as its core speciality.

This was a good move for Spotify because its helps them achieve the specialty their
looking to create in the market and differentiate from its competitors, Although other
streaming services are already offering podcasts, such as apple music, they do not offer a
common user to create, produce, and expand reach for their voices. So Spotify’s has the
opportunity for user to create and monetize their creativity and for their users to also listen
to podcasts that are created by celebrities and podcast specialists. Competitors don’t offer
users the ability to create. This opportunity gives Spotify to vertical integrate the key
ingredients required to competitively push Spotify into the limelight of an all-rounded audio-
streaming platform. The vertical integration lets them diversify their offerings and bundle
sought after user listening experiences insuring price competitiveness straight to push
competitors and their price-war.

The Porter Five Forces model may help us consider the competition from current
businesses and the risk of new entrants. This demonstrates that 1) there is intense rivalry
in the podcasting industry, with platforms like iTunes housing a plethora of podcasts from a
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 wide range of high-pro le creators, including journalists, talk show presenters, and
in uencers. Moreover, WSJ reports that podcast competition is expanding at an
unprecedented pace of 15.6 percent annually. Such growth is due to the low barriers to
entry for podcasters, but what really sets them apart is the originality and inventiveness of
their material. Since anybody can start a podcast, the only real barriers to entry are a well-
organized schedule, a content development staff, compelling speakers and agendas,
in uential and viable hosts and co-hosts, and a committed fan following. The success of
these elements is contingent on the person and whether or not they have a wide enough
network or suf cient resources to invest. Second, competition from newcomers to the
podcasting business is a serious concern. This is due to the fact that, as was previously
discussed, podcasting does not need a lot of resources to begin (the basics are very
nancial for most people). Creating and hosting a podcast is surprisingly easy; all you
need is some basic equipment and to pay a nominal fee to a podcast publisher or podcast
outlet/streamer. Indeed, the threat of new entrants in this industry is very high; however,
similar to the rivalry among existing rms, more established and well-known Podcasts will
not be threatened by new entrants in the industry (unless the new entrant is someone with
a wide social reach or has high amounts to invest), because they are already well-
established and received and have a base of users that will keep returning for more. New
entrants constitute a signi cant danger to the podcasting business, but they don't threaten
existing podcasts all that much.

In my view, Spotify's decision to broaden its offerings meets the criteria of the Better-Off
test. This is due to the fact that Spotify provides Podcasters with yet another major venue
on which to post their programs. In addition, Spotify's expansion into the Podcasting
market has greatly increased the medium's visibility. In addition, Spotify collaborates with
prominent gures in the media and entertainment industries to produce original chat
programs for which subscribers pay a premium. The podcast chat show that Michelle
Obama hosts is a great illustration of this kind of thing. There were a lot of people who
started listening to Podcasts because of her show who weren't doing so before. For the
Podcasting industry, I think there is a sizable audience interested in Audi-related material.
By striking exclusive partnerships with a wide range of prominent gures, Spotify is not
only generating the kind of buzz that will help the podcasting business grow, but also
attracting a substantial number of new listeners who are looking for a dedicated platform.
Because of the increased amount of committed customers this is bringing to their app, it is
increasing their competitive advantage relative to their other business divisions. In my
view, this is a wonderful move by Spotify that will pay out handsomely in the long run.
Spotify has done an amazing job of providing a medium through which musicians can
communicate with their fans, and now it is doing the same for podcasts, drawing greater
attention to the medium as a whole thanks to the unique names they have given their
podcasts. In the grand scheme of things, there isn't much opportunity for Spotify to expand
further in the music business. This strategy with diversi cation and vertically integrating the
speci c aspects of podcasting by acquisition to establish higher control on podcasting
ecosystem is necessary if they wish to continue expanding in the face of competition from
the likes of Amazon and Apple in streaming entertainment media, which already offer
Podcasts, TV shows, Movies, etc. Spotify, which has made a number of purchases of
Podcasting and media rms and signed pricey exclusive arrangements, also seems to be
making a signi cant investment in the sector. This is the right decision on Spotify's part,
given the podcasting business is only now starting to mature and grow. Spotify seems to
be really committed to being a market leader.
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References

Zafar, Nina. “Michelle Obama’s Latest Venture: A Podcast with Spotify.” The Washington
Post. 2020.

Gallego, J. I. (2022). New synergies between the podcast and music industries: Spotify
plays the rhythm. Radio Journal, 20(1), 105–121.

Al Fatih, M. S., Muhammad Luth e, & Ali Alamsyah Kusumadinata. (2022). SPOTIFY
PODCAST BECOME A NEW LEARNING MEAN. Indonesian Journal of Social Research
(IJSR), 4(1), 1–9.

https://mediaradar.com/blog/spotify-and-hulu-how-and-why-ott-partnerships-formed/

https://www.fool.com/investing/2019/08/29/why-spotify-looking-alternative-revenue-
streams.aspx
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