Monday, July 20, 2020

Why Spotify bought Joe Rogan’s podcast

Joe Rogan, one of theworld's most popular podcasters is making his show, The Joe Rogan Experience,a Spotify exclusive. This is huge industry changing news.



The show hasn't evenbeen available in Spotify up until this point, and the company is reportedly spending potentially more than $100million to bring it over.

This means that if you wannalisten to The Rogan Show, you're going to have to download Spotify. Now, you probably think moreof music than podcasting when you hear Spotify's name, but this Rogan deal is actually an essential part of the company's plan to become the biggest name in audio.

To understand why, we have to look at the big picture. Spotify made itspodcasting ambitions known in 2019 with three acquisitions. Basically back-to-back, it bought two podcast networks, Gimlet Media and Parcast, and a podcast creation company called Anchor.

All together, the companyspent around $400 million for those three companies combined. Then this year, it alsoacquired The Ringer and Bill Simmons Flagship show for reportedly around $196 million. The team spent a lot ofmoney all in an effort to lock down some of theindustry's top content, committing it to Spotify's library, but Spotify attempted exclusives with big name record releases and the strategy failed years ago.

So why is it investingso much in podcasts now? It's about gettingpeople to use it to app. Similarly to how Amazon knows the items people most want to buy and develops its ownproducts around that data. Spotify knows what contentlisteners search for the most, and that data informsit's purchasing decisions.

The company said whenit bought Rogan show, that it was one of themost searched podcasts. It needed the show to becomethe go to place for listening and this is critical. Rogan show is free to listen to. People don't need SpotifyPremium to hear or watch it. Instead, they pay with their data. Spotify also doesn'tneed people to subscribe because it makes money ina more traditional way too. - [Announcer] This episode the podcast is brought to you by stamps.com.

This is We've been sponsored by stamps.com for seven years now. It's amazing - There's never been a single podcast company that sells ads, makes content, has a popular podcast player and gives people the toolsto create their own shows. Spotify now has all of that. It's just a question ofgetting people to use it.

Big names like Joe Rogan, bring people to the platform, but a large show library keeps them there. Spotify says it has more thana million podcasts available and that during the first quarter of 2020, 70% of shows were created with Anchor. On top of all these acquisitions and deals, Spotify also created newtech for generating playlist and inserting ads.

It now algorithmically generates podcast playlists, and launched its own advertising tool called Streaming Ad Insertion, which allows targeted adsto be placed into shows as people listen to them, which again, relies onthat critical user data we talked about earlier. And then of course, it launched video podcasts in app, which allows it to sway some of YouTube's popular podcasters, over to its platform.

Spotify sees a big opportunityfor podcasts because for one, the competition isn't very strong. Apple, the biggest name inpodcasting up until now, has mostly left its product alone, letting listeners freely come and go and allowing all creators to upload their RSS feeds, without Apple trying toown any show exclusively. It doesn't make its own shows right now and it doesn't sell ads, which would go against its privacy oriented positioning anyway, Spotify can totally own this space.

Even more importantly though, these exclusive podcastscost Spotify a lot upfront, but they could pay off in the future. Every time someone listensto a song on Spotify, the company has to pay therecord labels for that listen. But with podcasts, it deals with the creators directly.

In fact, with its exclusivedeals and its own programming, it actually makes money off each listen because of the ads it places. Now, I should say, Spotify Premium users still hear ads in Spotify programming, so the company is actually double-dipping with the revenue there.

Podcast could belucrative for the company, which is why although it's spending hundreds of millions of dollars on tools and talent for its platform, it'll likely make that money back. Midroll, another podcast ad network, says advertisers can pay anywhere from $18 to $50 per 1000 listeners.

Joe Rogan says his show reaches 190 million downloads per month, meaning he and his teamcould on the low end be making $3 million inrevenue on ads per month. The bigger question ishow Spotify's decisions, affect the broader podcasting industry.

It doesn't use RSS, so it controls the whole system, including the data, which informs not only itsown purchasing decisions, but also its ad targeting. If the technology takes off, we could live in a worldin which podcast ads more closely resemble web ads, in that they're targetedto individual listeners.

This might be okay with some people, but others might worryabout their privacy. Podcast listening data ismore sensitive than music, for example, becausepeople listen to nice shows about potentially telling topics. Just as we've seen peopleon the broader web, make decisions about where they browse or what email or messagingservice they use, based on their privacy.

The same of might happen with podcasting. Podcasting was once equalacross all platforms, but it now seems like therewill be two podcasting worlds, Spotify versus everybody else. Hey everyone, thanks so much for watching.

Make sure you check out ourother big picture episode about how podcasting became as big as it is now and why everyone's talking about it. I hope you're all staying safe and healthy, subscribe to blog. 

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