Spotify Won’t Take a Cut of Revenue from Podcast Subscriptions

This will give them a distinct advantage over Apple’s new Podcasts Subscriptions program.

Spotify is launching podcast subscriptions soon but, unlike Apple, it will not take a cut of the revenue, reports the Wall Street Journal. Podcast creators and publishers will keep 100% of their subscription revenue, at least at first. This is a departure from Apple’s new Podcasts Subscriptions program, announced last week, which could take as much as 30% of subscription fees out of creators’ pockets.

0% versus up to 30%

This move will make the Spotify platform more attractive for creators, even though Apple is trying to woo creators through its Apple Podcasts for Creators program and its Apple Podcasts Connect dashboard which are only $19.99 a year. Sharing 15% to 30% of revenue versus 0% of revenue makes the Spotify vs. Apple decision an easy one for creators. Let’s say, for example, Podcast A generates $100,000 annually. Spotify is asking for $0 in revenue share from Podcast A, while Apple is asking for up to $30,000. In that scenario, Spotify has a clear advantage.

One feature Spotify and Apple will have in common is that premium podcast subscription creators get to set their own pricing. They don’t get to determine what the revenue share will be, but they do get to decide what to charge subscribers.

The revenue share difference further fans the flame that exists between Apple and Spotify. Spotify has long been frustrated that Apple takes a hefty share of subscription fees from users who download premium apps from the App Store. Apple used to take a 30% cut in year 1 of subscriptions and 15% in subsequent years. In November 2020, Apple lowered its App Store commission from 30% to 15% for small businesses earning up to $1 million annually. Called the App Store Small Business Program, Apple says the commission reduction “will benefit the vast majority of developers.”

Spotify, which now has more than 2.2 million podcasts, has been laser focused on the podcast market for the last several years.

“We saw the opportunity before anyone else did, and we’ve been at it significantly longer than anyone else,” said Dawn Ostroff, Spotify’s chief content and advertising business officer, in the Wall Street Journal article.

Not to be left out, Facebook is going to integrate a Spotify Player and add podcasts and audio-messaging features to the social media platform. This will expand Facebook’s partnership with Spotify while also helping it compete against audio platform Clubhouse, says Engadget.

“Make Spotify ubiquitous”

“Our ambition has always been to make Spotify ubiquitous across platforms and devices — bringing music and podcasts to more people — and our new integration with Facebook is another step in these efforts,” a Spotify spokesperson said in a statement.

The Wall Street Journal says that Spotify plans to release more information about its podcast subscriptions next week. The timing may have been spurred on by Apple’s announcement last week.

Insider Take

Last year, COVID spurred on the streaming video wars. This year, the podcast wars are heating up with more creators leaning toward that medium and companies like Spotify and Apple devoting resources to developing their platform and attracting publishers and creators. It will be interesting to see how this all shakes out. We expect to see other serious entrants into the market, some common features come into play, as well as exclusive features and content (e.g., Barack and Michelle Obama, Prince Harry and Meghan Markle) which will serve to differentiate the services from each other. We aren’t taking bets, but Spotify has made some key investments and has not alienated creators the way that Apple has. Those factors may give Spotify some additional leverage, along with the goodwill they will get from not taking a cut from subscription fees.