Spotify has announced its third quarter results, saying that the company now has 113 million paid subscribers and 248 million active monthly users.
Further down in the story, the company records that they made quarterly profit of €54m, which is a far cry from the US$200 million they lost in some other quarters, thanks to the onerous licensing deals the company has with those who hold the rights to music.
If licensing agreements for music see Spotify’s costs has alway risen in lockstep with their revenue, how could the company turn a profit? Podcasts. At least in part.
Spotify wants to be your one-to-stop-shop for all things audio. And while they attract us with music, they always want to keep us listening with other audio offerings like podcasts.
They have to pay royalties on music. They don’t pay royalties on podcasts. Spotify’s thinking is that if they can hook us into listening longer and to audio that doesn’t cost them money, they can increase their profit margins.
Say that you’re a fan of podcasts. If you spend just 10-20% of your time on Spotify listening to podcasts, that’s 10-20% the company has to pay out on your behalf whilst still happily collecting your subscriber fee.
It seems to be working. Read more here.