A few weeks back, Spotify announced they were angling to become the Netflix of music. Isn’t that the same as what they currently offer? You pay for a monthly subscription and consume music that eventually builds an algorithm perfected by past choices.
But — what this means is something else. Something both Netflix and the long list of internet retailers and blockchain startups already do — wipe out the middle man.
In other words, Spotify needs to make its own content if it wants to level up its profit potential.
As is, record labels take about 75% of Spotify’s revenue. So, they’re making moves toward original content.
Spotify acquires Gimlet and Anchor
As we mentioned, Spotify needs to get in on the content game to make money. So the plan is to take over podcasting. The streaming company announced this month that they had acquired Gimlet Media and Anchor.
These acquisitions signal a move toward a podcasting version of something called vertical integration. What this means is, one company buys two or more parts of the supply chain — an example is a store like Target that owns the manufacturing of its store brands, controls the distribution process, then sells those products in its stores.
Then, in the case of Target’s generic brand, passes the savings on to the customer.
Podcasting only? Not exactly
Interestingly this vertical approach seems to apply only to podcasting. With podcasting, the medium is only starting to pick up mainstream steam. Though some podcasts are hugely popular, many still have a DIY vibe.
Spotify has plans to spend up to $500m on podcast-centered acquisitions. Anchor and Gimlet are the tips of the iceberg.
TechCrunch raises an interesting point about Spotify’s focus on casts — the app simply added podcasts into the fold, alongside the music. The company hasn’t tried to force users to separate apps for podcasts and music like Apple. Rather, they’ve opted to keep things together inside the one app.
Second, Spotify is one of the few podcast platforms with a decent discovery feature, which has long been a pain point for the slow-growing industry.
That said, the discovery feature could be improved. As is stands, Spotify’s podcast section does make a few recommendations, but the content doesn’t always match up with listening preferences.
What about music?
According to Billboard, Spotify has started licensing some songs from artists directly. But it seems that right now, the streaming service is trying to stay away from competing with record labels.
While they don’t seem to be publicizing this much, Spotify does offer artists more money to work with them directly — so they technically are competing with record labels.
Spotify doesn’t ask for exclusive rights from those artists who work directly with the streaming service. Those artists can also sell their music to Apple and Google, or whoever else.
It’s also important to note that Spotify isn’t trying to become a label. But they are paving the way for artists who want to own their content and make deals with distributors, rather than working with a label who owns that music.
How will this affect content creators?
Ultimately, the actual payout remains to be seen. Spotify isn’t exactly known for offering musicians massive paydays.
Still, podcasting is a different industry. Creators often rely on crowd-funding and DIY marketing methods to get off the ground. Those who make money do so by selling ads, doing live shows, and selling merchandise.
No one really knows how this whole thing will shake out. There’s no question that a massive corporation entering this anything-goes, low-stakes industry might change what makes podcasting so special.