Monday AM Briefing #75: Spotify's Emerging Creator-Economy-Meets-Aggregator-2.0 Bundles
First, a bit of self-promotion:
* In case you missed it, Axios's Sara Fischer and Nick Johnston shed some additional light on the business rationale for The Information's Newsletter Network, including a mention of PARQOR as the first member of the network.
* I was quoted at length in Wired's Nicholas Stokel-Walker piece, "Star Trek: Discovery Is Tearing the Streaming World Apart", which discussed the fallout from ViacomCBS's decision to move season four and the three previous seasons of Star Trek: Discovery from Netflix to Paramount+ outside of the US.
A Short Essay on Spotify's Emerging Creator-Economy-Meets-Aggregator-2.0 Bundles
Back in September, I wrote about how Spotify seems to be replacing the exclusive, expensive podcasts from Hollywood talent prong of its strategy with a more Creator Economy-focused business model.
Fast Company's Nicole LaPorte delivered an update on that strategy last week in More than Joe Rogan: Inside Spotify’s audio revolution:
As Spotify steadily acquires audio content companies and distributors (such as Anchor and Gimlet, which it bought in 2019 for $340 million), and pushes out new features like live audio, paid subscription, video, polls, and other modes of personalization and interactivity, the company is setting out to become not only the biggest podcast platform in the world, but also the most transformative. Indeed, the company likes to say it is investing not just in podcasts but in “future formats of audio.” And it’s doing this at a speed that Ek says is an integral part of the plan. During the earnings call, he repeatedly invoked the term velocity to describe the company’s audio strategy.
LaPorte only included parts of Spotify CEO Daniel Ek's quote from the Q3 2021 earnings call here, and I think the whole quote on velocity is valuable:
So why does this velocity matter so much for Spotify? Well, I believe that we will ultimately determine -- that will determine our long-term success. If you are slow, you better be right most of the time. But if you're fast, you can test and iterate more, which creates a culture of innovation. And at Spotify, we want to constantly iterate and improve. And there's no question that we will always have competitors. And some of them will be good, but I believe we will be better, because we're focused on our stakeholders, the creators, and consumers and we prioritize speed and we adapt quickly.So by constantly improving our user experience, users will not only come to Spotify, but we will retain them. And if we retain our users, we will bring more creators to the platform to share their content. Better content means more advertisers and all of these things coupled together, users, creators, and advertisers unlock the power of our flywheel.
That quote, alone, reflects my conclusion from September that Spotify’s bet on exclusively-hosted original podcasts isn’t driving as much growth as they had originally assumed.
But, that September piece also quoted Ek from a Q2 earnings call where he answered a question whether the podcast strategy had "changed". His response was that nothing had changed - "we are very much aiming to be a very open platform all along"; rather, Spotify had been undergoing a "natural evolution" towards "more and more of the listening to happen only on Spotify".
"Velocity" appears to be the next phase of that evolution, but directed more towards the objective of a Spotify flywheel of the attraction and retention of both users and creators.
Spotify Flywheel → Aggregator 2.0
Last Thursday, Spotify announced it is acquiring Findaway, an audiobook distribution company. Nicole LaPorte of The Verge's Hot Pod had a good summary of the significance:
The announcement likely made sense to anyone who’s been paying attention to Spotify’s audio moves, but for those who haven’t, to sum it up plainly: Spotify wants to be the place you consume all audio. This purchase sets it up to achieve that goal. When you open Spotify this time next year, the app will likely highlight an Armchair Expert episode alongside Taylor Swift’s newest single alongside Barack Obama’s newest book. It’ll be a crowded, but potentially powerful, destination.At the same time, though, Spotify getting knee-deep in audiobooks is a wildly different proposition than podcasts. There are powerful publishers to handle, a separate revenue model, a higher barrier to entry, and lots of IP rights to navigate.
The result is Spotify becomes a mix of "Anchor for audiobooks", an audiobook distributor, and a bookseller, a strategy which LaPorte described is:
a retention strategy — don’t move to Audible for your audiobooks, stay on Spotify — and also might recruit people to the platform if the offering is competitive. If Spotify sells books a la carte, the margins will be much higher compared to podcasts. Even a CPM of $50 in podcasting means a podcaster is only making five cents per listener. Charging each listener $15 for access to an audiobook is a more lucrative arrangement.
But, it's also Spotify's audio-only version of an “aggregator 2.0” bundle, which offers “the ability to personalize offerings like never before, mixing and matching television, news, e-commerce, gaming, health, and any other service that charges a monthly or annual subscription rate.”
It could be argued that now, Spotify is building the creator economy meets “aggregator 2.0” bundle, a unique offering in the evolving media marketplace (we tend to see examples of one or the other in the marketplace).
But there are two caveats: first, Spotify's growing emphasis on "velocity" and experimentation suggests this may not last long, so "testing" may be a better description than "building".
Second, owning an audiobook business means they can indeed go in the $10 to $15 per download of marginal gross revenue (nominally $57MM in additional gross revenues per month converting 1% of 381MM monthly active users).
But also, with its recent video podcasts innovation and focus on experimentation, it can also go in novel directions.
Whatever the outcome, the Q4 2021 earnings call (late January 2022) and FY 2022 earnings calls are shaping up be a fascinating listen.
Must-Read Monday AM Articles
Emerging "Metaverse"-type convergence strategies
* CNBC's Alex Sherman writes, "Execs seemed confused about the metaverse on Q3 earnings calls"
* Pokemon Go is partnering with artist Ed Sheeran for a special in-game event.
* Epic CEO Tim Sweeney argued "the metaverse has the potential to become a multitrillion-dollar part of the world economy" at a conference.
Aggregator 2.0
* Disney will give Hulu + Live TV customers access to its two other premium streaming packages — Disney Plus and ESPN Plus — whether they want them or not for an additional $5 per month.
* Wired's Cecilia D'Anastasio wrote about Minecraft’s Dream SMP server, "since May the home of a virtual world built whole-cloth by dozens of characters navigating intrigue and betrayal, with arcs and storylines more unpredictable than any reality television."
* CTO and EVP of Pluto TV, Vibol Hou, shed light on how they pivoted from AVOD model to Free ad-supported (FAST)
* Hulu launched Shop Hulu, which will feature limited-edition collections of apparel and lifestyle products from Hulu Originals and other titles in the company’s on-demand library, as well as Hulu-branded swag.
* Vox Media announced the acquisition of Criminal Productions, one of the top narrative audio storytelling studios, to be part of the Vox Media Podcast Network (VMPN).
Sports & Streaming
* Swerve Sports is a new linear 24/7 channel that is streaming for free on the Roku Channel. It was founded by former Roku exec Steve Shannon, and bills itself as "The Sports Movie Channel".
Creative Talent & Transparency in Streaming
* The Economist argued "In the new Hollywood, stars are neither made nor born: they are algorithmically generated." ($ - paywalled)
* Creator Economy company Jellysmack acquired two-year-old, A.I. video-editing company Kamua to resize, frame, and recut creator videos for distribution across Instagram, Facebook, Snapchat, TikTok, YouTube Shorts, and beyond.
* Adele has persuaded Spotify to take the shuffle button off all album pages so tracks play in the artist's own order.
* A good post on "The Nihilism and Exploitation of the NFT Industry", and also a good background piece on NFTs and "play to earn" in gaming
* Two good skeptical pieces on the creator economy, one from writer Nadia Eghbal, and another arguing There is No "Creator Economy"
Original Content & “Genre Wars”
* The Information;'s Jessica Toonkel wrote about how Disney's reorg last year has led to "to confusion and delays of shows for the service".
* Puck's Dylan Byers reported Disney CEO Bob Chapek "plans to budget up to $7 billion annually for Hulu content—a mind-boggling increase from previous annual budgets of $2-$3 billion that would put Hulu spending almost as high as the $8-to-$9 billion that Disney plans to spend on Disney+ content in 2024."
* Roku plans to develop more than 50 original shows in the next two years as part of an effort to make it a destination for free content.
Comcast’s & ViacomCBS’s Struggles in Streaming
* Adweek's Jason Lynch wrote about how ViacomCBS's YellowStone "has become fall TV’s biggest success story, and a rare linear smash hit".
AVOD & Connected TV Marketplace
* Brian Steinberg of Variety profiled how legacy media ad sales teams are pitching advertisers on new digital ad formats six months before Upfronts.
* The Information reported Facebook is offering to pay musicians and other celebrities tens of thousands of dollars to host sessions on its new live audio feature, as the social network beefs up its efforts to woo creators and the young people who follow them.
* Journalist Mike Shields argues "Amazon's IMDB TV may have the worst ad experience in all of streaming"
Other
* AT&T is rethinking its brand.
* Media entrepreneur Byron Allen has raised $10 billion in preferred equity and debt for his bid for U.S. regional TV station operator Tegna Inc.
* Puck's Matt Belloni argued Netflix is trying to get Wall Street to stop talking about subscribers and instead focus on engagement after it released its new Weekly Top 10 based on hours of engagement.
* The Entertainment Strategy Guy guest-wrote in The Ankler that Q3 2021 data suggests "the streaming wars aren’t that much changed by the last few weeks of earnings news".