It’s been a busy few years for Spotify’s effort to diversify into podcasting. You’ll recall it was almost exactly two years ago that the music-streaming giant paid $340 million to acquire podcast producer Gimlet Media and podcast authoring service Anchor. At the time, CEO Daniel Ek said “audio — not just music — would be the future of Spotify.” Next came deals for true crime-focused podcast producer Parcast and Bill Simmons’ network, The Ringer. But the biggest stunner came in May when Spotify struck a rumored $100 million exclusive deal to carry comedian Joe Rogan’s podcast. Further deals have come with Kim Kardashian, the Obamas, and Prince Harry and Meghan, The Duchess of Sussex.
Any big tech company can target a new market and make a splash with expensive acquisitions. It doesn’t always equal a successful new business. IBM built up its Watson Health unit through M&A but is now looking to spin it off. Intel has tried to buy its way into security, embedded systems, and A.I. chips with mixed results. And Google, as noted in yesterday’s essay, flopped with phones and disappointed with home automation gear.
So there was a lot riding on Spotify’s strategy and product presentation on Monday, dubbed Stream On. Ek and his team announced an expansion into 85 new countries, unveiled new promotional tools for music artists and labels, and spent plenty of time promoting the podcasting push. They also debuted a new higher-quality (and presumably higher priced) music-streaming option called Spotify HiFi.
Spotify’s bottom line could use some help from podcasting. One challenge from being in the music-streaming business is that customers pay a set subscription fee but the streaming service must pay music rights owners based on the amount of listening. So even as Spotify’s revenue has grown from $6.4 billion in 2018 to $8.2 billion in 2019 to $9.6 billion last year, its net loss has increased even faster, hitting $706 million last year, seven-times higher than in 2018. Still investors are bullish that Ek can find a way to reduce the music rights expenses and find new revenue from avenues like podcasting—Spotify’s stock has more than doubled over the past year.
Podcasting works on a very different business model than music streaming. Spotify pays nothing at all to carry most podcasts, which are produced elsewhere, and generally pays only the fixed costs of production for its in-house podcast programming. Revenue comes from attracting more subscribers and from advertising inserted into its shows.
At Monday’s event, Spotify highlighted some of its most promising new podcasts, including programming developed with DC Comics and a new show with Barack Obama and Bruce Springsteen called Renegades: Born in the USA. The company also explained a new podcast ad sales effort called the Spotify Audience Network and a coming option for podcast producers to create premium podcasts (with Spotify likely taking a cut of the subscription sales).
In an interview with The Verge after the event, Ek addressed the threat from a newer, buzzy startup, the audio chat platform Clubhouse. He pointed out one overlooked reason why it may not challenge podcasts as much as some fear: Clubhouse shows run live and can’t be played on demand. “It’s a really interesting format from a creation perspective, but I suspect that from the consumption perspective, most of the time consumed will still be on-demand which is what Spotify is known for today,” Ek said.
With Amazon, Apple, Google and others battling Spotify for podcasting supremacy, it’s probably a good thing for Ek that Clubhouse has remained so limited—at least for now.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com
NEWSWORTHY
War by other means. Australia and Facebook struck a deal. The social network agreed to allow users to post links to Australian news outlets once again and lawmakers tweaked their proposal which forces Facebook to negotiate payments to news outlets for those links. Meanwhile, Microsoft is backing publishers in Europe demanding similar rights to charge Facebook and Google for links to news stories in that region.
I can't resist your charms. Remember when an unlimited phone plan meant your phone plan was unlimited? T-Mobile moved to recreate a truly unlimited plan on Monday with its new "Magenta Max" plan starting at $85 a month for one line. Customers on the new plan can use as much 4G and 5G phone data as they'd like. Current plans slow download speeds to a crawl after 50GB on T-Mobile and even lower thresholds at other carriers.
Plop, plop, fizz, fizz. Not clear if the bubble in some parts of the stock market has popped or is just suffering a minor contraction, but the past two days have seen extensive selloffs in many former high flyers, from bitcoin to Tesla. Elon Musk even had to give the title of "world's richest person" back to Jeff Bezos. Bezos is stepping down as CEO of Amazon and apparently so is yet another of the company's top Jeff's. Senior vice president Jeff Blackburn, who joined in 1998, is heading to an undisclosed new role elsewhere.
FOOD FOR THOUGHT
How does one imbue killing machines with morality? That's the question being posed at military academies like West Point. Military ethics—a fraught discipline, for sure—grows even more so as humans set A.I. algorithms to war fighting. The Washington Post takes us inside the classrooms that are working through these dilemmas.
The camouflage-clad cadets are huddled around a miniature arena in the basement of a building dug into the cliffs on the West Point campus. They’re watching a robotic tank about the height of a soda can with a metal spear attached whir into action. Surrounded by balloons of various colors representing either enemy fighters or civilians, the tank, acting on its own, uses a thumbnail-size camera to home in on a red balloon. The cadets wince as an earsplitting pop suddenly reverberates through the room: One “ISIS fighter” down.
IN CASE YOU MISSED IT
How to nix loneliness and boost productivity while working from home by Rachel King
These 5 companies are now the highest-valued U.S. unicorns in 2021 by Anne Sraders
Arizona emerges as manufacturing hotspot in U.S. push to insulate semiconductor supply from China by Eamon Barrett
The all-male board is almost dead among major U.S. IPOs by Claire Zillman, Emma Hinchliffe
Inside the Future 50: The 3 key traits of companies that outperform, regardless of industry by Martin Reeves and Tom Deegan
To end the pandemic, every business leader must put worker health and equity first by Darren Walker and Chuck Robbins
(Some of these stories require a subscription to access.Thank you for supporting our journalism.)
BEFORE YOU GO
Yesterday NASA released footage of its Perseverance rover landing on Mars, a first-of-its-kind video recording that you can watch here. The space agency also released first-ever audio recordings taken on the Martian surface. If you listen closely, you can hear a gust of wind roll across the rock-strewn regolith, like a Buddhist's Om.
Will our descendants one day hear a Martian breeze with their own ears?
