What Spotify is doing to podcasts on The Future, This Week

Disclaimer We'd like to advise that the following program may contain real news, occasional philosophy and ideas that may offend some listeners.

Kai Hello, Sandra, what are we talking about?

Sandra Well, I know what we're not talking about, because we've been arguing about this before we started this podcast. We're not going to talk about Facebook's plan to change the company name next week to reflect the fact that it's focusing on the metaverse now.

Kai There's been reports in the media that they might abandon the name because it has become so toxic, but that would mean to rebrand the product and the company. It might just be a move like Google did to rebrand the company, but keep the product name. We will know more next week. But it is interesting that they seem to stress the idea of the metaverse.

Sandra So that's the official reason, obviously, for the rebranding, the fact that the company has kind of outgrown the social media network that started it all, that it now has all these other social apps. It's got Instagram and WhatsApp and Messenger and, you know, Oculus and all these other things.

Kai Yeah, Oculus. So the VR platform, which points to the metaverse.

Sandra And we've already started talking about this back in March of this year, when it turned out that nearly 10,000 people at Facebook, were working on AR/VR-related projects. That's about 20% of Facebook's total global workforce working on these applications.

Kai So they do put a fair bit of weight behind this.

Sandra But we are going to hold off on talking about this until next week, because we do want to do a whole episode around the metaverse and what is it? And what is it for? And who's doing it? And this will be the perfect opportunity to do it. And we might in the end also be doing an episode on how the world's sixth most valuable company, which is now worth almost a trillion dollars, might be abandoning its brand.

Kai That would make for an interesting business story because it is one of the most iconic brands of the last few years. So interesting news ahead next week. There's been another story which I just wanted to mention, and that is coming out of Norway. In Norway now nine out of 10 cars being sold are either plug in hybrids, or E V's and eight out of 10 are straight up electric vehicles. So 80% of all new vehicle sales.

Sandra And that's a huge number compared to places like Australia where as you can hear outside my window. It's not an electric vehicle. It's very much a diesel bus.

Kai In Australia, it's in the low single digits as it is in the US where only 5% of total sales are EVs, and that's been a huge increase over previous years. Europe is ahead with the UK having 21% of sales being plug in hybrids or EVs. And in China, it is 19% for EVs but the standout is Norway.

Sandra But you mentioned China and we do have to mention that China might actually have the coolest EVs we've seen in a long time.

Kai Absolutely! So in Australia it's very hard to get your hand on an affordable EV, Teslas are heavily taxed and they're expensive and there's not that much choice here as it is in Europe. So there is a solution. And the solution can be found on Alibaba actually, the website Electric runs a segment which they lovingly call, "Awesomely Weird Alibaba Electric Vehicle of the Week", and shame this as a podcast because we would be showing you some photos now.

Sandra We will obviously put the link in the shownotes and hours of fun.

Kai You can have a look at the 12-seater vintage electric car which looks a little bit like the bus from Harry Potter. There is jeeps and scooters, but my absolute favourite is the tiny one-seater electric car, which basically looks like someone built a teeny tiny car around one chair with four teeny tiny wheels and it just... yeah, you have to have a look.

Sandra There's electric boats, electric just pretty much everything.

Kai An electric submarine you can get so you know if you're not having enough fun in your local swimming pool.

Sandra But we are in Australia so submarines is not one of the news we want to discuss on The Future, This Week.

Kai Not one of the topics. Nope.

Sandra Very interesting news coming out of China with LinkedIn pulling out of China. The news this week has been that Microsoft is going to shut down LinkedIn, which is kind of the last standing Western social media service in China, and Microsoft's argued that that they'll make the move later this year because Internet rules were tightened, and this makes it a really challenging operating environment. So they're pulling out and the app will be replaced with a new app called InJobs that will have the job search features but none of the kind of the social features that LinkedIn got us used to, posts, articles, likes, shares, that won't be available.

Kai And it's the social aspects and the content moderation requirements imposed, that has led Microsoft to make that step and pull out because the resources required might not warrant the gains from being present in that market.

Sandra And also maybe the backlash that some of these companies face in the West where most of their subscriber base is, where the demands on kind of a Western social media platform to operate in China are viewed negatively. But to me what this story also highlights is this increasing fragmentation between what the Internet is and what it is for. In places like China versus somewhere like Australia, we've discussed this a number of times on the podcast, and we'll include links in the shownotes to our conversations around social commerce, and WeChat. And all these apps and ways of being on the internet that are quite different in China. And LinkedIn is a really good example of that as well. I was talking to one of my friends in China this morning, and I said, 'LinkedIn is gonna disappear, you know, how are people going to do business networking? and she's like, 'What do we need LinkedIn for? We're on WeChat. I've got 5000 people on WeChat. I organise everything from my work to my social events there to conference presentations to everything else'. Highlighting further that the Internet just works differently in China, not only in terms of the infrastructure of the apps, or the technologies used, but in the ways that people interact and what they do while they're online.

Kai And so we don't quite know whether this is genuine content moderation concerns, or whether this is just the straw that broke the camel's back. And the fact that it might actually be very hard for Western business models, for Western platforms to operate in what is a very different cultural environment with a very different approach to many of the, the apps and online services than we have here in the West.

Sandra But speaking of the changing face of the Internet.

Kai As our main topic for today, we will have to talk about, and this is very meta, we will talk about podcasting.

Sandra Yes, absolutely. the changing face of podcasting on a podcast. What could be better?

Kai Let's do this.

Sandra Let's do this.

Intro From The University of Sydney Business School, this is Sydney Business Insights, an initiative that explores the future of business. And you're listening to The Future, This Week where Sandra Peter and Kai Riemer sit down every week to rethink and unlearn trends in technology and business. They discuss the news of the week, question the obvious, and explore the weird and the wonderful.

Sandra The story we want to start out with today comes from The Verge and it's about another one biting the dust, another podcast that is, going exclusive. Heavyweight, which is one of the longest running podcasts on Gimlet, the production company acquired by Spotify a couple of years ago. So Heavyweight, which has been around for about five, five years, will now only be available on Spotify. So a podcast that was previously available on all platforms will now only be available through Spotify.

Kai And that follows in the footsteps of a whole bunch of other Gimlet productions, as well as The Joe Rogan Experience. And Joe Rogan, whose podcast was the number one ranked podcast across many of the platforms went exclusive on Spotify for the astounding amount of $100 million, reportedly.

Sandra And fans were obviously quite unhappy about this, fans of various podcasts that used to get, whether it's Heavyweight or The Joe Rogan Experience or other Gimlet podcasts that they used to get on Apple Podcasts or on Overcast on Pocket Casts or other podcasting apps no longer have access to it. And now they would have to register on Spotify and get their podcasts on Spotify.

Kai And while they might still be free on Spotify, it is cumbersome having to go to a different app when listening to, you know, what might have been someone's favourite podcast. So now podcasts might sit across apps, or of course, people might want to switch to Spotify because Spotify does pull in other podcasts if their creators submit them to the Spotify platform.

Sandra And just taking a step back for a second. It's worth noting that the podcast market is quite big already. It's worth about 15 billion In dollars, but it's expected to also grow very rapidly in the next few years. The expectation is up to about 40 billion in the next five years. And Spotify, which is a Swedish company, is positioning itself to basically dominate that market with all the acquisitions that they've done over the last few years. It also comes from Sweden, which is first in terms of podcast consumption, we'll add the link in the shownotes. But about 47% of the respondents in Sweden have said that they do listen to at least one podcast in the last 12 months. The UK and the US are about a third of respondents as podcast listeners. And then places like China have about the 20% share of podcast listeners.

Kai And also Spotify are not the only ones making this move. YouTube is looking to hire into its first executive role to look after podcasts. And Netflix is also set to grow its podcast offerings.

Sandra Facebook has also launched its 'Audio' hub that now includes podcasts and Live Audio Rooms and all sorts of short and long form audio. So there's a lot of activity in this space. So it's worth unpacking what's going on and what the implications are long-term for the industry.

Kai And Spotify's move is driven by business logic, given that podcasts have growing popularity, there are moves to monetize this content. And it's worth looking at how podcasts are being monetized traditionally, to see why Spotify would want to make podcasts exclusive to their streaming platform.

Sandra And at this point, we should say that our podcast is not monetized. It is released under a Creative Commons licence, and we do not carry advertising of any sort on it.

Kai But advertising is a good point here, because traditionally, advertising on podcasts is fairly cumbersome and lags behind in terms of the technology behind it compared to what can be done with other content such as on you know, social media, or more traditional streaming platforms.

Sandra So just think videos on YouTube, right? Like the way you would get video ads on YouTube at the beginning of the clip or in the middle of it. The same thing happens in the audio space. So the way that people have sought to monetize the podcasts has been mainly through advertising, a few people have tried subscription-only podcast, so you would pay per episode. That hasn't really taken off. So the main way to monetize is ads. And also traditionally, these would have been fairly independent of the person listening to the episodes, they would either come with the episode, so they'd kind of be baked into the episode, or they would be kind of dynamically inserted into the podcast, but not really taking into account who the person listening to the podcast was.

Kai Yeah, so the most common one is where the ad is basically recorded into the episode. And in traditional podcasts, people download an episode, they can take them on their mobile device, and then you just listen to the ad. But if you have evergreen content, for example, and you listen to something that is five years old, the ads are also five years old. So the next step up from this was to allow for dynamically inserted advertisements where the creator just specifies the points in the podcast where an ad would be inserted. And then if the user is online, a new ad would then be inserted at that particular moment, and that could be current content. So that is, you know, relevant at the time of listening. And it could also be targeted to the location of the user.

Sandra But that was pretty much it. Really none of the kind of really targeted advertising that we see on Facebook or on Instagram, or on YouTube or in other places. So Spotify is trying to change that game through these exclusive content that you can only find on Spotify.

Kai Because technically what Spotify is doing is no longer delivering a podcast. Podcasts traditionally are just audio files that people subscribe to via a so-called RSS feed, which would allow for the creators to push out the content. Whenever there's a new episode, it will appear on the user's podcast app or the user's device. Spotify will stream in real time it's audio content outside of the traditional podcast technology, which allows them to dynamically insert advertisements that are specific to the user who is listening, much like Facebook can show targeted advertising to users that is relevant to a user's situation for example, Spotify wants to go that next step and do this individualised targeted advertising.

Sandra So this doesn't sound like a really big deal, but it actually is a really big deal. So RSS feeds are a bit like email right, someone writes one and then sends it out to a list of newsletter subscribers, and those people then read that email and do whatever they want with it. But it really doesn't matter what email application you're using.

Kai No, it is a standard, basically, it is independent of platforms is independent of devices. And it allows any creator to talk to any app.

Sandra Exactly. So I could be on my university email, I could be on my Gmail, I could be on my phone, on my laptop, it doesn't really matter, I would be getting the same email that you just pushed out. And then I receive on whatever platform I normally use. And that used to be the case with podcasts. What's happening with Spotify is that if you're now having exclusive content, that means you can't use kind of any email, you have to use a Spotify account, and you have to be on that platform. And it also means that Spotify now knows how you're listening to that episode, how long you linger on it, what else you're listening to, at the same time, every single detail around how you interact with that.

Kai And with music, the other content on the Spotify app.

Sandra Exactly. And it now controls everything about that podcast. So while shows that you could access on Spotify, Spotify would know what you're doing with them on Spotify, it now knows everything about them. Because previously, if I listened to Joe Rogan on a different app other than Spotify, they wouldn't know what I'm doing with it on that particular app. But now, they know pretty much everything about what I do with them. And they can now not only sell you better ads and get all the data around and exclusive data around your use of that podcast. But they can also try to convert you into a paying subscriber or get you to listen to music or other things on their platform.

Kai And deliver more useful feedback to the creators. So there is an upside to the way in which the app can now learn about listener behaviour. because traditionally, as a creator, you're fairly far removed from your listeners, because you're just sending them an email, essentially.

Sandra And this is the point where in our discussion of this news, we really struggled with the fact that we're both in a Business School as we're recording this podcast. And as a business move, this is a fantastic business move. It's what you would recommend as part of a strategy course that Spotify do to improve their competitiveness and their position and get new markets and market share and so on.

Kai It is vertical integration, you produce your own content, you create recurring revenue, maybe through subscriptions, also, you increase your ad revenue, because you make ads more relevant you target the more therefore you might get more engagement from listeners and make it more relevant and more lucrative for advertisers to come to your platform.

Sandra You control the distribution; you also control the ecosystem. From a business point of view, brilliant move. And we really struggled with this because from a both a podcaster and a podcaster listener view, this is a bit like, and there was an article in Wired that was saying it's a bit like 'Spotify is breaking podcasts'.

Kai Because Spotify is technically not delivering podcasts anymore, but streamed audio content that sits behind a wall. They do not participate in the podcast ecosystem with this type of content because they do not make it available via an RSS feed. And therefore they change the nature of what podcasting has always been.

Sandra Podcasts, much like email have been one of these last bastions of open and democratised Internet, where everyone is on a level playing field. Everyone has access, there are many platforms, there are basically no restrictions to how you access the content who can enter the ecosystem, what platform you use to access the ecosystem.

Kai Yeah, there's no centralised control. As a creator, I can make a podcast, I can upload it to multiple different podcast hosting services. And then the content is available via this RSS standard to anyone who has an RSS application, or a podcast application, can then subscribe to my content. And Spotify breaks with that.

Sandra Yes. So previously in the podcasting world, there was no one player that could basically turn off the tap or decide what you do. And increasingly with moves like the Spotify move, which again, good business move, this open model is breaking down.

Kai And in that way, it mirrors the history of the world wide web more broadly, which started out with this democratic idea of information access and a bunch of websites that were connected, where anyone ultimately would have the same voice, the same access. And that has changed since much of the content is now house by walled gardens like Facebook.

Sandra It used to be very much everyone had their own website and did their own thing. But now it's these large companies that direct the ad money, and that really have moved the business model from kind of individual producers to large tech companies.

Kai And as we've discussed previously, algorithms now organise the way in which we consume content, often driven by the monetary interests of advertisers.

Sandra So again, this tension between what is business best practice and best strategy to employ within the podcasting business? Is very much at odds, it seems with kind of the common good, what would be best for all of the consumers.

Kai So attention between the individual strategy and the global outcome at the ecosystem level to maintain, you know, this openness of the system.

Sandra So we're quite torn on this one. But maybe there is one good thing that will come out of it. And what we usually say in this case is, 'it's fine, business will step in, because there's more money, there's more competition, so there'll be more innovation in this space'. And maybe that will be the case with podcasts as well. After all, the podcasting genre and the format and so on, at least in the way that we use podcasts hasn't really changed.

Kai Which means, for example, that for creators these days, it's very hard to build relationships with an audience. And that usually happens on other platforms where creators connect on Patreon, which allows listeners to sponsor podcasts, or on Discord, or in Facebook groups, where creators then interact with their audiences. Whereas we could envision models where the delivery, the engagement with podcast, the listening, is integrated with engagement and interaction. And we find such models in China, for example.

Sandra In China, as we said, it's not a huge podcasting market there, but for podcast creators, there are many different apps that are out for audience participation. The Chinese podcasting ecosystem evolved separately from the western podcasting ecosystem. So apps like Spotify are blocked in China. But it's much more of a social experience, much like social commerce or all other activities on the Internet in China, where listeners do leave notes and interact with the content in each episode, not just with the whole show, as we do in the West. They can join in listening circles or discussion channels that are associated with specific podcast episodes, or with specific podcasts. They can gift shows, some podcasts can be live-streamed and monetized that way. There are voiceover services, all of these within the apps that give you access to the podcasts themselves.

Kai So unlike in the West, where podcasting is still organised via RSS, are platform and app independent, in China podcasts live on platforms. Which comes with benefits for monetization from a business standpoint, but also from the artistic side. It allows to include audiences in storytelling, episode by episode, because the feedback channel is much more direct. Listeners can be encouraged to engage with the content on the platform, which can then feed back into the script of the following episode. So a much more direct way of building community around content than is afforded by the podcasting ecosystem in the West.

Sandra So maybe giving up openness will come with some benefits in terms of innovation, of community, of different ways to monetize content, or interactivity. But it does remain to be seen where this is going. But in the meantime, The Future, This Week is still available on all podcasting platforms, including Spotify.

Kai And speaking of feedback...

Sandra Do leave us a positive review on your favourite podcast platform.

Kai And also, watch out for our new episode of The Unlearn Project.

Sandra Our new podcast, The Unlearn Project is still free on all podcasting platforms and on Spotify and our new episode unlearns music.

Kai Why music is no longer just something to listen to, but a material for creation and storytelling.

Sandra We spoke to the Global Head of Music from TikTok, we spoke to Australia's very own Masked Wolf, who has not only been topping Billboard charts, but now is up for five Aria awards, to Hank Shocklee, to musicologists to narratologists. It's a feast. We hope you enjoy it. But that's all we have time for today.

Kai See you next week. And of course over at The Unlearn Project. Thanks for listening.

Sandra Thanks for listening.

Outro This was The Future, This Week, an initiative of The University of Sydney Business School. Sandra Peter is the Director of Sydney Business Insights and Kai Riemer is professor of Information Technology and Organisation. Connect with us on LinkedIn, Twitter and Flipboard and subscribe, like or leave us a rating wherever you get your podcasts. If you have any weird and wonderful topics for us to discuss, send them to sbi@sydney.edu.au.