Does Spotify’s podcast plans make it a good investment?

Ahead of its earnings call later tonight, Spotify has unveiled its latest plans to corner the podcast market ahead of rival Apple.

Ahead of an important Q1 earnings report today, Spotify (NYSE: SPOT) showed the world that it means business when it comes to podcasts.

And it’s not afraid to take a minor loss in the process.

Spotify’s Big Tech move

Spotify is finally rolling out podcast subscriptions.  

This new feature is powered through its creator platform, Anchor, with the move coming just one week after streaming rival Apple announced its own subscription podcast offering. But here’s the kicker:

While Apple will take its usual 30% cut of podcast creators’ revenue, dropping to 15% in year two, Spotify has opted to take no cut whatsoever for the first two years. This means that podcast creators will keep 100% of their revenues, at least until Spring 2023, when Spotify will introduce a modest 5% fee for access to the subscription tool.

Usually, it’s the Big Tech giants such as Apple that can afford to pull stunts like this, but Spotify isn’t messing around — it wants to be the name in podcasting. Zero fees versus 30% is a pretty easy sell for Spotify, which has already pulled off major podcast coups in recent years, signing exclusive deals with Joe Rogan, the Obama’s, and more. 

With Apple being the only dominant industry player Spotify simply has to offer a better deal, which it appears to have done. While podcasts are not a majorly lucrative industry right now, valued at roughly $11 billion in 2020, it is expected to grow at a CAGR of 27.5% from 2020 to 2027. 

By becoming the primary name in podcasts, Spotify could build a separate revenue stream to rival that of its music business, and from there, who knows?

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