Spotify bets big on subscription podcasts, taking no profit until 2023

Today Spotify is officially rolling out a feature for podcasters to charge listeners a monthly subscription fee, along with a very enticing 0 percent cut by Spotify until 2023, after which it’ll take 5 percent. The feature is available in the United States right now and will launch globally in the coming months.

Twelve shows will take advantage of the subscription tool at launch, utilizing Spotify’s Anchor platform. Interestingly enough, none of Spotify’s own original podcast series are amongst the first round of subscription podcasts; they’re all independently produced. NPR is also getting in on the initial feature launch, with ad-free versions of its popular shows available to subscribers. Subscriptions can be priced at $2.99, $4.99, or $7.99 monthly.

The official Spotify news drops mere days after Apple’s announcement of its own podcast subscription service. But Apple is asking podcasters to share 30 percent of their revenue during the first year (followed by 15 percent thereafter) — a sizable chunk of change, especially when stacked next to Spotify’s 0 percent cut, and 5 percent subsequently. The two companies are taking very different approaches to podcast profits; how that will play out for their long-term margins remains to be seen.

A real rival — Up until a few years ago, Spotify’s podcasting sector was all but nonexistent. You could listen to some podcasts on the platform in 2018, sure, but the app was overwhelmingly used for good-old music streaming. Then, in early 2019, Spotify purchased Gimlet and Anchor, two enormous podcasting networks — and its acquisitions in podcasting have continued at a rapid pace since.

Now podcasts are one of Spotify’s most prominent features. In the Spotify app, podcasts take up nearly as much room as music does, and they’re discoverable via search and recommendations. Now subscription podcasts will live right alongside the free ones — they’ll just have a small lock icon next to them.

A big, big bet — Despite its international prowess, Spotify is not profitable overall. For now, at least, subscription podcasts aren’t going to help out with that long-sought mission. The company will receive no money from podcast subscriptions until spring 2023.

It’s a long-term bet: That podcasters, excited by the lack of overhead costs, will flock to the service, building a subscription audience and eventually giving Spotify its cut in a couple of years. And they very likely will. Zero overhead on subscriptions is increasingly rare. The downside, of course, is the lack of profits Spotify will make in the meantime. But as Uber and its ilk have shown, profitability isn’t necessary when you’re promising to secure market share.

Meanwhile, Apple’s goals fall — as they often do — into the desire for short-term profits. A 30 percent cut is hefty, but podcasters already using Apple’s ecosystem might be willing to pay that for ease of use. Right now there’s no easy tool for migrating your existing podcast to Anchor — though Spotify says that’s in the works, too.

We won’t know the full payoff of Spotify’s big bet for a few years. In the meantime, its subscriber base is sure to keep growing, as it has been for a very long time.