News January 17, 2021

Analysts have weighed in on the expensive podcast investment by Spotify

As reported by CNBC, as of 2019 Spotify had spent multiple millions of dollars into podcast investment.

Naturally they needed to show their investors that the move would make a return on investment.

As per CNBC, Spotify’s tactic – Streaming Ad Insertion would be the money maker, with the key being to bring exclusive content to the app.

The intention would be to both strengthen advertising and increase their Premium subscribers.

And now as per a recent report from Citi analysts via CNBC, it seems that Spotify’s multimillion-dollar investment on podcasting may not be panning out as hoped.

Citi analysts wrote, “The cadence of Premium gross additions (through 3Q20) and app download data (through 4Q20) do not show any material benefit from recent podcast investments (that began in 2019).”

They also added, “To date, we have not seen a material positive inflection in app downloads or Premium subscriptions.”

“If we were to see a material positive inflection in app downloads or Premium subs (from higher gross adds or materially lower churn), we would alter our view. But, our fear is that if podcasting doesn’t provide a way for Spotify to shift away from music label dependence, the Street may reassess the underlying value of the business. And, that would be bad for Spotify’s multiple and equity value.”

As of 2020, Spotify’s podcast library included the likes of Gimlet Media, Anchor, Parcast and The Ringer (as acquisitions). It also gained the exclusive rights to Joe Rogan’s podcast, which is reportedly worth an estimated $100 million.

According to an eMarketer forecast last year, podcast ad spend in the United States is projected to surpass $1 billion this year.

Right now we know that the end of year feature, Spotify Wrapped feature is a top favourite. Only time will tell in showing us how the podcast facet plays out for Spotify.

This article originally appeared on The Industry Observer, which is now part of The Music Network.