Is Spotify's podcast exclusivity strategy working?
The open podcast ecosystem isn't dead yet.
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Is Spotify's podcast exclusivity strategy bearing fruit?
It’s not often that we actively root for the success of a newly-launched startup, but tens of thousands of people did just that in 2014 when Alex Blumberg launched the company that eventually became Gimlet Media. A former public radio producer, Blumberg decided to leverage the storytelling skills he’d built up working on hit shows like This American Life and Planet Money to tell his own entrepreneurial story; he did this through an appropriately-named podcast called Startup.
Over the course of several seasons, Startup documented Blumberg’s bumbling efforts to raise money, hire staff, distribute equity, launch shows, and transform Gimlet into a viable business. The show was a veritable hit, especially after This American Life excerpted an episode on its own podcast feed. Blumberg’s likeability and vulnerability endeared his listeners to his plight, and I wasn’t alone in cheering on the company’s triumphant $230 million sale to Spotify in 2019.
I also wasn’t alone in feeling some sadness when I read last week that Spotify was canceling several Gimlet shows and laying off a sizable portion of its staff. It wasn’t the first sign that the merger had struggled to bear fruit — there were a number of staff departures and public squabbles leading up to it — but it was certainly the most unambiguous. Whatever magic Blumberg managed to capture in those first few years had clearly dissipated.
Why did this happen? There were likely many factors involved, but it seems clear that Spotify’s strategy of locking its IP exclusively behind its walled garden played a large role. “Yesterday Spotify told show teams that their podcasts were being canceled because of low numbers,” tweeted the Gimlet Union. “But decisions Spotify leadership made directly contributed to those low numbers. Their decision to make most of Gimlet's and Parcast's shows Spotify exclusive caused a steep drop in listeners — as high as three quarters of its audience for some shows." Dr. Ayana Elizabeth Johnson, the cohost of one of Gimlet’s canceled shows, tweeted that “Spotify invested zero in building the show's audience, then forced us to go exclusive to Spotify, and then canceled it b/c it didn't build a big enough audience.”
For the first decade or so of its existence, the podcast industry was built on a largely open ecosystem. Episodes were distributed through RSS feeds, which meant that every podcast player, big or small, could carry virtually every show in existence. With most other mediums retreating behind walled, algorithm-governed gardens like Facebook and YouTube, the podcast industry remained truly decentralized.
The rise of the podcast streaming wars threatened to upend all that. As large tech and media conglomerates — companies like Spotify, SiriusXM, iHeart, and Amazon — invested in podcasting, many assumed they’d take a page out of Netflix’s playbook and pull all their shows off competing apps. Indeed, Spotify pursued this strategy aggressively, shutting off the RSS feeds for many of its acquired and licensed podcasts. You could even argue that the strategy has paid off, given that last year Spotify overtook Apple Podcasts as the most widely-used podcast player.
But there are also signs that the exclusivity strategy generates limited returns. Not only did some Gimlet shows experience a 75% drop in audience once they were locked down, but multiple other podcast companies — including Last Podcast on the Left and the Obamas’ Higher Ground — cited it as one of the reasons they chose not to renew their contracts with Spotify. Back in 2021, The Verge compiled publicly-available data indicating that The Joe Rogan Experience saw a sizable drop off in influence once it went exclusive. And Luminary, a podcast startup built on the idea of locking down exclusive IP on its premium app, also struggled to gain traction and recently began distributing its content on other platforms.
Meanwhile, other large tech platforms have mostly avoided the exclusivity approach, instead choosing to window new episodes for a short time before releasing them to the larger podcast ecosystem. When Amazon paid $60 million to license the celebrity-led Smartless podcast, for instance, it only required a one week exclusive window for Amazon Music. SiriusXM has also structured most of its podcast deals to allow for multi-platform distribution.
Why are these huge tech companies allowing their competitors to capitalize on their IP? Part of it may have to do with podcast listening habits; unlike with video streaming services, it seems that the average podcast consumer has no desire to switch through multiple apps, which means that if you take a podcast exclusive to an app they don’t use, they’ll just stop listening to it. That was my experience when Spotify pulled two of my favorite Gimlet shows off RSS.
But there are also other benefits to adopting a non-exclusive approach to podcast distribution. Let’s run through a few of them:
It keeps podcast talent happy
No creator relishes the idea of a tiny audience, even if it means making more money in the short term. Not only does wider distribution feed a podcaster’s ego, but it also sets them up for career longevity once their contract runs out. Multiple podcast companies cited Spotify’s exclusivity policy when exiting their deals. For instance, here’s Variety:
The Obamas are exiting their exclusive pact with Spotify, originally inked in 2019, after being frustrated with the company’s exclusive terms — primarily, they want to have their podcast programming distributed as widely as possible, according to two sources familiar with the situation.
And here’s the LA Times’s reporting on Last Podcast on the Left:
“It’s been really sweet, we’ve learned a lot from [Spotify], but then we got an opportunity to go wide again," host Henry Zebrowski said in an interview. “We’re on all the tubes and we’re excited about that.”
It allows you to promote your app to outside podcast listeners
As I mentioned, companies like Amazon and SiriusXM employ a windowing strategy in their podcast deals. This means that when they distribute their shows to the wider podcast ecosystem, they can constantly advertise the fact that the newest episodes are on their owned and operated apps. As superfans get more and more addicted to the programming, then they’re further incentivized to migrate their podcast listening to the IP owner’s platform.
These shows can also experiment in placing exclusive content on their own platforms. For instance, the Gimlet show Reply All never went exclusive to Spotify, but it published exclusive mini-episodes that only appeared on Spotify. This allowed the hosts to promote the mini-episodes on the main show, which drove listeners to make the switch to Spotify.
It creates the opportunity for further monetization and data gathering
Podcasts are still primarily monetized with advertising, which means that distributing to a larger audience generates much more revenue. If Gimlet shows indeed lost 75% of their audience once they went exclusive, then Spotify potentially lost out on at least half of their potential revenue. Given the scale of Spotify’s podcast inventory — generating billions of streams/downloads per month — then that’s a substantial amount of lost revenue.
What’s more, distributing on other apps allows you to collect crucial listening data on how a company’s shows are performing on its competitor’s platforms. That data can then be leveraged to deliver better targeted ads, and it could also be potentially used to generate a competitive edge over another platform’s offerings.
It’s difficult to give a completely objective assessment of the exclusivity strategy given my own reluctance to switch between apps, but I do think there’s a clear advantage to choosing the windowing approach instead. It gives the owned and operated app a competitive edge without relinquishing the benefits of the open podcast ecosystem. It keeps the platform, the creators, AND the listeners happy, what Michael Scott would call a win-win-win.
What do you think?
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