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Spotify spent more than $1 billion building a podcast empire that quickly crumbled around it. Now, Spotify’s CFO says the company is structuring content deals differently.
Kim Kardashian, Prince Harry and Meghan Markle, and the Obamas are just a few of the high-profile individuals Spotify struck podcasting deals with—not to mention the podcasting studios it acquired to the tune of $286 million. Now a splashy report in The Wall Street Journal reveals that the pricy content acquisition scheme Spotify cooked up between 2019 and 2021 just hasn’t paid off.
Spotify’s recent cuts to podcasting were billed as a reshuffling of the division—likely because most of its shows are not profitable. The company lost $565 million in H1 2023 on $6.6 billion in revenue with plenty of losses stemming from its bad podcast bets. While the pool of listeners seeking podcast content is growing, the sheer amount of new content available to consume makes it hard to land homerun shows that attract a vast audience needed to support the content.
The splashy exclusive podcast shows didn’t do much to lure subscribers away from rivals, which is why several shows were cut in June 2023. Spotify also consolidated its Gimlet Media and Parcast brands into the singular Spotify Studios under that effort. And it’s changing how it structures deals with its hosts.
A new deal with Trevor Noah allows Spotify to collect revenue from the podcast to cover its investment. After Spotify recovers its investment, both sides share in the revenue generated by the podcast. Spotify intends to structure many more of its deals like this after getting burned by its $20 million deal with Prince Harry and Meghan Markle.
Speaking at the Goldman Sachs Communacopia + Technology Conference in San Francisco, Spotify CFO Paul Vogel touted some of these changes to investors.
“We continue to believe that creating podcasts and having Spotify originals will still be a part of the strategy,” Vogel told investors as reported by The Hollywood Reporter. “We’re also going to think about what’s the best way to produce that content with the business partner with that content. What’s the best way to share in the risk and the reward of that content with our partners?”
“We’ve made some deals that we think were highly, highly beneficial to us; we probably made a few that didn’t work out as well,” Vogel shared. While he didn’t cite examples, he says those lessons taught the company a valuable lesson. “Okay, how can we structure deals differently? What are the right deals to sign that are really beneficial so that the cost structure is in a place that we are actually investing in the right things?”