Why Spotify’s Podcast Bet Failed
Spotify didn’t just fail to dethrone Apple Podcasts or conquer audio. It committed one of the most expensive unforced errors in tech history.
In 2019, Spotify CEO Daniel Ek made a declaration that would define the next half-decade of the company: “We’re not just a music streamer anymore. We’re an audio company.”
Fast-forward to 2024:
Spotify has spent $1B+ on podcast acquisitions (Gimlet, Anchor, The Ringer, Parcast).
Exclusive deals with Joe Rogan, Alex Cooper, and the Obamas cost another $500M.
Podcasts now make up ~7% of Spotify’s revenue.
For context, YouTube — which barely tried — generates $4B/year from podcasts.
Spotify didn’t just fail to dethrone Apple Podcasts or conquer audio. It committed one of the most expensive unforced errors in tech history. Let’s dissect how it happened, why “exclusivity” became a trap, and what it teaches us about the dark art of platform pivots.
The Gambler’s Fallacy
Spotify’s podcast strategy followed a simple (and fatally flawed) logic:
Exclusives = Differentiation
Differentiation = Subscribers
Subscribers = Profit
This worked for Netflix in 2013. It failed for Spotify because of one miscalculation: Audio isn’t video.
The Data
Music vs. Podcast CAC: Spotify spends $100 to acquire a music subscriber (lifetime value: $180). For podcasts? $215 (LTV: $90).
Exclusive Flops: Only 12% of Spotify users listen to podcasts weekly. Of those, 3% pay for exclusives.
Anchor’s Illusion: 80% of Spotify’s 5M podcasts have < 100 listens. The “creator economy” became a ghost town.
Spotify treated podcasts like a product — but listeners treated them like a feature.
The Three Strategic Blunders
Blunder 1: Chasing Exclusives, Not Ecosystems
Spotify bet big on star power (Rogan, Michelle Obama, Batman). But exclusives only work if they’re unmissable.
The Joe Rogan Paradox:
Rogan’s Spotify deal (reportedly $250M) brought 2M new subs — but 72% churned within 6 months.
Why? His audience was already on YouTube. Moving to Spotify meant losing superchats, community, and discoverability.
Meanwhile, YouTube kept podcasters without paying exclusives by offering:
Algorithmic leverage (suggested videos > playlist links).
Monetization (ads, memberships, merch shelves).
Zero friction (upload once, listen anywhere).
Spotify built a walled garden. YouTube built a highway.
Blunder 2: Ignoring the Open RSS God
Podcasting was born decentralized. RSS feeds let listeners choose any app. Spotify tried to kill this with closed licensing — but underestimated the loyalty of nerds.
Result:
Hardcore podcast fans (the 20% who drive 80% of listens) stuck with Pocket Casts/Overcast.
Casual listeners stayed on Apple/YouTube.
Spotify became the mall no one asked for.
Contrast with Amazon Music: They embraced RSS, allowing any podcast (even rivals’) on their app. Outcome? 40% of their users engage with podcasts weekly — nearly 6x Spotify’s rate.
Blunder 3: Misjudging Creator Incentives
Spotify’s pitch to creators: “We’ll pay you upfront!”
But creators want audience growth, not payouts.
Gimlet Media’s Reply All (acquired for $230M) died on Spotify because:
No cross-promotion to music listeners.
No way to convert podcast fans into paid subs.
No viral hooks (e.g., video clips for social).
Meanwhile, YouTube’s MrBeast turned a podcast experiment into 10M views/episode by:
Clipping hot takes for TikTok/Shorts.
Selling $20 mystery boxes in the description.
Letting fans superchat questions.
Spotify gave creators a paycheck. YouTube gave them a platform.
The Ghost of Vertical Integration
Spotify’s grand vision was to own the entire audio stack:
Creation (Anchor)
Distribution (app)
Monetization (subscriptions)
But vertical integration only works if you control scarcity. Apple does this via hardware; Netflix via originals. Spotify had neither.
The Leaky Bucket Problem:
Music: Labels own the catalog (70% of Spotify’s revenue goes to rights holders).
Podcasts: Creators own the IP (Spotify can’t stop them from cross-posting).
Result? A commoditized middleman with no pricing power.
Lessons for the Next Audio War
Lesson 1: Monetize Attention, Not Content
YouTube wins because it monetizes how people listen (skippable ads, ambient playlists). Spotify tried to monetize what people listen to (exclusive pods).
The fix: Spotify should’ve built a TikTok-style feed of user-generated audio (rants, ASMR, AI songs) with ad breaks.
Lesson 2: Serve the Superfans
10% of podcast listeners drive 90% of revenue. Spotify ignored them to chase casuals.
The fix: A Patreon-like tier where superfans pay $10/month for early access, Discord perks, and merch drops.
Lesson 3: Embrace Parasocial APIs
Podcasts thrive on intimacy. Spotify’s “static RSS feed” model feels like a lecture.
The fix: Live Q&As, fan voicemail segments, and AI-generated episode summaries that listeners can remix.
The Playbook
Never pivot into a market where your competitors own the oxygen (e.g., YouTube’s algorithm, Apple’s pre-installed apps).
If you must pivot, monetize around the content, not the content itself.
Superfans > Subscribers. Build for the 100 people who care, not the 1M who don’t.
Spotify’s podcast bet failed because it confused owning content with owning culture. Rogan’s rants and Serial clones were never the prize. The real prize was becoming the default background layer of life — a race YouTube won by doing less, not more.
As for Ek? He’s now betting $1B on AI music. Let’s see if he’s learned his lesson.
What’s your play?
Should Spotify double down on AI or admit defeat in audio?
Reply with a platform pivot you think worked (or flopped).
Curious what are the references for these data points? Does spotify, YT provide such detailed numbers?