In a bold move, Spotify has opted to replace Meghan Markle with comedian Trevor Noah in its podcasting endeavors, as Amazon, Apple, and Google all declined to collaborate with the Duchess of Sussex. Spotify's commitment to the podcasting realm has come at a hefty price, with the company investing over a billion dollars in its bid to establish a podcasting empire.
High-profile deals with figures such as Kim Kardashian, the Obamas, and Prince Harry and Meghan Markle, involving a staggering $286 million for a pair of podcast studios, underscored Spotify's ambition. The company also didn't shy away from shelling out more than $250,000 per episode for exclusive shows, all in an effort to lure new listeners.
However, this costly bet hasn't yielded the desired returns. According to insiders, most of Spotify's shows are yet to turn a profit. In response, the company recently implemented staff and programming cuts to mitigate its losses. Spotify's financial instability is evident, with a reported loss of 527 million euros in the six months leading up to June, despite generating 6.2 billion euros in revenue.
It's worth noting that profitability in the podcasting industry remains a challenge for many players, but Spotify, which has outspent its rivals significantly, is particularly vulnerable to setbacks in this space.
One key observation is that exclusive podcasts, a strategy heavily pursued by Spotify, generally don't divert subscribers away from its competitors. In the first half of the year, podcast costs at Spotify soared to 29 million euros.
The podcasting landscape has witnessed similar challenges among rivals such as Sirius, I Heart Radio, and NPR, with layoffs and budget reductions becoming common. This belt-tightening trend reflects broader cost-cutting initiatives in the media and technology sectors.
Saha al-Abashi, the head of Spotify's podcast business, emphasized the company's evolving approach to risk-sharing with its talent. For instance, Spotify recently agreed to pay comedian Trevor Noah for an original weekly podcast set to launch later this year. The show aims to blend Noah's trademark humor and keen global perspective to offer a unique take on current and engaging topics. Additionally, it will feature in-depth interviews with influential figures from around the world.
This decision to bring Trevor Noah into the fold is seen by many as a prudent move, especially when compared to the failed deal with Meghan Markle. While Markle's podcast "Archetypes" made an impressive debut in August 2022, claiming the top spot on Spotify's podcast charts, it failed to sustain a substantial audience and was not renewed for a second season.
Spotify's competitors, including tech giants Amazon, Apple, and Google, were quick to reject collaborations with Meghan Markle following the underwhelming performance of "Archetypes." Julie McNamara, Head of Global Podcast Studios, highlighted the company's quest for partnerships with influential creators who have meaningful stories to tell. Spotify has made exclusive deals with renowned podcasters like Joe Rogan and Alex Cooper.
However, some critics argue that Spotify's extravagant spending on talent without the corresponding results may be a significant part of their podcasting division's struggles. They argue that until Spotify shifts its focus from lavishing large sums of money on less-talented individuals and inflating their audience numbers, the company may continue to face challenges in this competitive landscape.
In contrast, long-form podcasts featuring insightful discussions and smart hosts like Louise Perry's "The Witch Trials of J.K. Rowling" have been gaining popularity among discerning listeners. These shows prioritize in-depth conversations and expert guests, eschewing self-promotion, and showcasing the fundamental difference between content-driven podcasts and celebrity-driven ones.
