Spotify’s next frontier: video… and more advertising

The Future. Spotify is transitioning its business from a music streamer to a creator-focused platform that provides support for any audio and video content. Is this Spotify’s way of challenging YouTube for the throne? That’s probably a stretch, but the shift in priorities may at least demonstrate that the company sees podcasts as the path to profitability — and the billion-users club.

Hear me, see me
When it comes to Spotify’s podcast business, signing top talent like Joe Rogan and the Obamas is cool and all… but the company’s key focus is roping in as many creators as it can.

• It spent the past couple of years acquiring companies that make DIY podcasting possible — publishing platform Anchor and ad-tech company Megaphone.
• It acquired two podcast studios, Gimlet Media and Parcast.
• Buoyed by the popularity of Joe Rogan’s podcast in video form, Spotify also announced that it would roll out video podcasting to all of its creators.

Why video? The medium attracts more high-quality ads, which CEO Daniel Ek has called an “$18 billion opportunity.” This past year, Spotify has made $1 billion in ad revenue, mostly due to plugging into a lot of podcasts.

Label luxuries
But there’s a platform that sells that many ads in just weeks: YouTube. By introducing video podcasting, Spotify could potentially mimic that success if it could lure traditional radio advertisers (a huge business) to the platform.

But why is Spotify so keen on advertisers after years of focusing on adding premium subscribers? To boil it down: music doesn’t make enough money. According to Ek, record labels take too big of a cut. That makes Spotify unprofitable.

At one point, Spotify tried to position itself as a place where artists could ditch their labels and put music up as independent artists… but the well-reported measly payouts sent that plan back to the drawing board.