May 29, 2021

Why Apple is Handing Podcasting to Spotify (& Why It Matters For Marketers)

In this episode, James Carbary and Dan Sanchez riff on th e current race of the podcasting tech giants Apple and Spotify. A recent article made it clear why Spotify is taking the lead and Apple doesn't care.

Transcript
WEBVTT 1 00:00:02.540 --> 00:00:02.740 Yeah, 2 00:00:06.140 --> 00:00:09.960 welcome back to be, to be growth. I'm dan Sanchez with sweet fish media and 3 00:00:09.960 --> 00:00:13.800 if there's one thing you have to know about me, it's that while I like coffee, 4 00:00:13.810 --> 00:00:17.330 I like your Beaumont even more. If you don't know what it is, it's worth a 5 00:00:17.330 --> 00:00:24.130 google, but I promise it's legal, it definitely doesn't sound legal, I'll 6 00:00:24.130 --> 00:00:28.120 just let you google it for curious. We had to jump onto this, this is like an 7 00:00:28.120 --> 00:00:31.930 impromptu recording here at Sweet Fish Media because I just sent James an 8 00:00:31.930 --> 00:00:38.420 article about why why Spotify and why essentially Apple is pretty much giving 9 00:00:38.420 --> 00:00:42.430 up podcasting the Spotify and it was an interesting enough topic that James and 10 00:00:42.430 --> 00:00:47.670 I decided to push record and just kind of banter back and forth about what the 11 00:00:47.670 --> 00:00:51.450 heck is going on in the podcasting industry and why you as an audience 12 00:00:51.460 --> 00:00:57.280 should care. Yeah, so, so Apple just seemingly has been crapping the bed 13 00:00:57.280 --> 00:01:01.830 when it comes to innovation with their podcast product. I've been seeing more 14 00:01:01.830 --> 00:01:06.230 and more people. I've done two surveys on linkedin, asking people where they 15 00:01:06.230 --> 00:01:11.090 consume their podcast content and I did one about nine months ago and was 16 00:01:11.090 --> 00:01:18.970 surprised to see that it was like 55% Apple 38% Spotify, something like that. 17 00:01:18.980 --> 00:01:26.050 Nine months later it was like 58% Spotify, 40 something percent Apple. I 18 00:01:26.050 --> 00:01:31.570 mean, Spotify had had straight up taken the lead and this isn't a huge data set, 19 00:01:31.570 --> 00:01:37.280 but I had about, I think 15 or 1600 people reply to those polls. I've seen 20 00:01:37.290 --> 00:01:41.050 other polls on Lincoln that say the same thing, which just makes you wonder 21 00:01:41.060 --> 00:01:46.090 what the hell is Apple doing? Like they had, they literally, I think they named 22 00:01:46.090 --> 00:01:51.660 the category podcasts like pod and they're losing and seemingly they just 23 00:01:51.660 --> 00:01:57.180 don't care that they're losing. They added this subscription product 24 00:01:57.190 --> 00:02:02.490 recently. Uh, that Spotify basically just said, you know, hold my beer, 25 00:02:02.490 --> 00:02:05.280 we're gonna go and do what you just said you were going to charge creators 26 00:02:05.280 --> 00:02:09.350 for and we're going to do it for free. So anyway, this article that you just 27 00:02:09.350 --> 00:02:13.950 sent me uh kind of shed some light into that. Do you want to elaborate on what 28 00:02:13.950 --> 00:02:17.650 that article talked about, sitting here with you, wondering what the heck's 29 00:02:17.650 --> 00:02:21.310 Apple's game plan on this? It's kind of like they sit on so much money, like 30 00:02:21.310 --> 00:02:25.310 why aren't they innovating around podcasting? Like why aren't they doing 31 00:02:25.310 --> 00:02:29.380 anything? They already own the category. Like they could continue easily, easily, 32 00:02:29.380 --> 00:02:33.190 continue to own the category. If they take some of that huge pile of cash 33 00:02:33.190 --> 00:02:35.640 they're sitting on and just do something about it. And then we were 34 00:02:35.640 --> 00:02:38.360 all sitting because we knew there gonna be doing something around podcasting. 35 00:02:38.360 --> 00:02:41.210 This last release. They didn't remember sitting there watching it live and 36 00:02:41.210 --> 00:02:45.130 being like, they gave like two minutes of their hour long thing to podcasting 37 00:02:45.130 --> 00:02:47.580 and then just went into their other products that they're releasing, you're 38 00:02:47.580 --> 00:02:52.680 just like what? That's it dang. And then Spotify quickly stole any, any 39 00:02:52.680 --> 00:02:57.680 kind of thing they had by just totally dominating their new offering. But this 40 00:02:57.680 --> 00:03:02.520 morning, Robin Hood serves me up articles that of stock side investment 41 00:03:02.520 --> 00:03:05.760 naturally, I've been seeing the trends with Spotify. So you know, I buy a few 42 00:03:05.760 --> 00:03:09.560 shares, not a lot, but a few, I'm trying to read the tea leaves here, 43 00:03:09.560 --> 00:03:12.700 looking at Spotify growing and podcasting and like we'll invest in 44 00:03:12.700 --> 00:03:16.160 things, you know, and you know, I get this article kind of breaking down like 45 00:03:16.160 --> 00:03:19.610 what's going on between these two companies just from a financial 46 00:03:19.610 --> 00:03:25.550 perspective and it brought so much clarity as into why Apple doesn't care 47 00:03:25.560 --> 00:03:31.130 and why Spotify cares so much and it really has to do with what was kind of 48 00:03:31.130 --> 00:03:35.780 documented in the book. The innovator's dilemma, right? Big companies and it's 49 00:03:35.790 --> 00:03:39.480 kind of like the, just, just on that book is that big companies go after 50 00:03:39.480 --> 00:03:42.600 where they have the most margins, big companies go after where they know they 51 00:03:42.600 --> 00:03:47.670 can grow their financial pie in the most substantial way. And for Apple, 52 00:03:47.670 --> 00:03:50.500 they make a ton of money in so many different ways, mainly from their 53 00:03:50.500 --> 00:03:54.840 hardware, product sales and the computers and the iphones and probably 54 00:03:54.850 --> 00:03:58.800 don't know. The app stores brings in as much. It probably still brings in a lot 55 00:03:58.800 --> 00:04:02.030 of money. Maybe not as much as it used to, I don't know. Um, but they make 56 00:04:02.030 --> 00:04:04.070 money in so many different ways. They're probably looking at this 57 00:04:04.070 --> 00:04:07.630 podcast service and can like, like for them, they weren't even making money 58 00:04:07.630 --> 00:04:11.620 off of it. It was kind of like an add on. It was a way for them to their like 59 00:04:11.620 --> 00:04:15.430 just it was a way for them to keep their users engaged. I mean, that's 60 00:04:15.430 --> 00:04:20.500 what the article laid out, like. It's it's yeah, it just keeps apple users 61 00:04:20.510 --> 00:04:26.070 more engaged with the Apple ecosystem. That's how they're looking at 62 00:04:26.070 --> 00:04:31.060 podcasting. It's like, oh, this is this cute little thing on the side over here 63 00:04:31.240 --> 00:04:36.660 that just keeps our users a little bit more engaged. Whereas Spotify, there 64 00:04:36.660 --> 00:04:40.970 are billions of dollars on the line for Spotify because they've gone all in and 65 00:04:40.970 --> 00:04:44.730 they only care about podcasting and that's kind of the other end of the 66 00:04:44.740 --> 00:04:48.530 innovator's dilemma, right? Is that smaller companies? And I mean, no one 67 00:04:48.530 --> 00:04:52.200 thinks to Spotify as a small company, but compared to Apple, it's a small 68 00:04:52.200 --> 00:04:56.720 company, right? They come in and find the parts and to them while while it 69 00:04:56.720 --> 00:05:01.390 might be a small gain for Apple, it's a big game for Spotify, right? It doesn't 70 00:05:01.390 --> 00:05:04.730 take a it doesn't take a lot for a smaller company to see and seize the 71 00:05:04.730 --> 00:05:07.950 opportunity for it to become a huge deal for a small company. Which 72 00:05:07.950 --> 00:05:11.060 classically is why big companies fall hard and small companies end up 73 00:05:11.060 --> 00:05:15.250 innovating underneath them. In this case we're talking about cos apples 74 00:05:15.250 --> 00:05:18.640 well diversified company with lots of different irons in the fire. So it's 75 00:05:18.640 --> 00:05:22.460 not like this would disrupt Apple by any means. But for Spotify, this could 76 00:05:22.460 --> 00:05:27.100 be huge because they're in the audio game and podcasting lies squarely 77 00:05:27.100 --> 00:05:31.080 within that James. You want to share the other part about why Spot, why this 78 00:05:31.080 --> 00:05:37.500 is so attractive. Dis Spotify. Yeah. I mean to me it just seeing what Spotify 79 00:05:37.500 --> 00:05:41.680 has done with acquisitions like Joe Rogan, the Ringer. I just saw the other 80 00:05:41.680 --> 00:05:48.650 day on Spotify that they are, that they acquire Dax shepherd's show, armchair 81 00:05:48.650 --> 00:05:52.930 expert. And what they're essentially trying to do, like their, their 82 00:05:52.940 --> 00:05:56.820 operating margin, according to that article. They're operating margin on 83 00:05:56.820 --> 00:06:03.750 music is very, very small because you have to pay licensing to the artists 84 00:06:03.760 --> 00:06:08.210 for music. But with podcasting, especially when you're going and buying 85 00:06:08.210 --> 00:06:12.980 shows like Joe Rogan, his entire back catalog or Dax Shepard Show or the 86 00:06:12.980 --> 00:06:16.710 Ringer, you're bringing on shows that you don't have to pay licensing to. 87 00:06:16.720 --> 00:06:22.040 You've paid for the show. You, you've essentially purchased the asset that 88 00:06:22.040 --> 00:06:27.880 you can then create ad revenue off of and create, create additional, like you 89 00:06:27.880 --> 00:06:32.830 significantly increase your margin by owning the asset as opposed to having 90 00:06:32.830 --> 00:06:37.340 to pay a licensing fee every time a song gets streamed. So Spotify is 91 00:06:37.340 --> 00:06:42.880 seeing that they can make a whole lot more money with podcasts than they can 92 00:06:42.880 --> 00:06:47.940 with music and hence hence them going and doing all of these acquisitions and 93 00:06:47.940 --> 00:06:54.900 spending. So one thing I hope they do, I hope they spin off a separate app. I 94 00:06:54.900 --> 00:06:59.450 actually tried moving over to Spotify when I saw in linked in that so many 95 00:06:59.450 --> 00:07:04.270 people were moving over and I couldn't do it. The, the, the user experience to 96 00:07:04.270 --> 00:07:10.440 me is too clunky um, to go between music and podcasts and video in those 97 00:07:10.440 --> 00:07:15.540 podcast, it just, it's not a good experience for if it wasn't for me. So 98 00:07:15.540 --> 00:07:19.590 I actually went back to Apple for all of the problems that it has. Apple 99 00:07:19.590 --> 00:07:24.510 podcast is a standalone app that is just focused on podcasts. So that's the 100 00:07:24.510 --> 00:07:29.950 next move. I hope we see Spotify making is to split off podcasts into its own 101 00:07:29.960 --> 00:07:35.110 app, just so it can be a better experience. But and I use Spotify for 102 00:07:35.110 --> 00:07:40.190 music, so it's crazy that I wouldn't just want to use it for, you know, my 103 00:07:40.190 --> 00:07:45.050 podcast as well. But for whatever reason, the the experience was just not 104 00:07:45.050 --> 00:07:50.110 very delightful. So anyway, that's that I think is the underlying reason why 105 00:07:50.120 --> 00:07:54.130 their margins a whole lot, you know, a whole lot bigger. um they can make an 106 00:07:54.130 --> 00:07:58.560 article said that their margin is currently 25%, which isn't bad for a 107 00:07:58.560 --> 00:08:01.840 lot of companies, but compared to its Kind of big brother in the streaming 108 00:08:01.840 --> 00:08:07.430 games Netflix, who's getting between 35 and 40% margins, Spotify has got to be 109 00:08:07.430 --> 00:08:11.180 more competitive, right? Because that's the that's the closest kind of company 110 00:08:11.180 --> 00:08:15.170 to model after and they know they can get it up to about, you know, into the 111 00:08:15.170 --> 00:08:18.330 same range if they could become the leader in podcasting because the 112 00:08:18.330 --> 00:08:22.360 margins are so much better there. You see how closely licensing for the 113 00:08:22.360 --> 00:08:27.180 podcasters. Yeah, you see how closely they're following Netflix's model to, I 114 00:08:27.180 --> 00:08:32.350 mean with House of cards, I think that was netflix's first foray into original 115 00:08:32.350 --> 00:08:37.919 content. You're seeing Spotify get into it by acquiring Gimlet, who's got, I 116 00:08:37.919 --> 00:08:43.650 think they had 25 or 30 original shows whenever Spotify acquired them. Um, and 117 00:08:43.650 --> 00:08:49.650 now they're, they're getting into acquiring much, much larger shows. And 118 00:08:49.650 --> 00:08:53.860 uh, and so they're really following Netflix's Playbook, just an audio. And 119 00:08:53.860 --> 00:08:58.350 it seems to be working because more and more and more people are consuming 120 00:08:58.350 --> 00:09:03.230 podcast content via Spotify now. Yeah, as professional podcasters, we are 121 00:09:03.230 --> 00:09:06.760 definitely paying attention to what Spotify is doing, the technology 122 00:09:06.760 --> 00:09:09.730 they're putting out there all the acquisitions they're making, anybody 123 00:09:09.730 --> 00:09:13.650 who's taking podcasting seriously has to be watching Spotify because they are, 124 00:09:13.660 --> 00:09:17.450 they are going to be the ones once they overtake Apple, which is going to be 125 00:09:17.450 --> 00:09:20.300 this year. While, I mean even the polls were doing shows they've overtaken it 126 00:09:20.300 --> 00:09:23.660 already, but I know nationally, I've looked at some data that suggests 127 00:09:23.660 --> 00:09:27.070 they're going to essentially, by the end of the year, Spotify will be the 128 00:09:27.070 --> 00:09:31.080 new leader in podcasting, which means once they're the leader they get to 129 00:09:31.080 --> 00:09:35.240 send the trends, they get to set what podcasting becomes in the future. The 130 00:09:35.240 --> 00:09:40.350 future of audio and podcasting is going to be determined by Spotify and 131 00:09:40.350 --> 00:09:44.190 everybody will have to play by their rules, which I'm actually kind of 132 00:09:44.190 --> 00:09:48.230 excited about because I think they're going to be putting a lot more. I think 133 00:09:48.230 --> 00:09:52.280 they're going to in order to do that. They're giving a lot, a lot more tools 134 00:09:52.280 --> 00:09:58.810 and advertising and all kinds of things for creators to do what they do apples 135 00:09:58.810 --> 00:10:02.520 like, oh, we're going to charge 30% Spotify is like, well we're not 136 00:10:02.520 --> 00:10:06.050 charging anything because they know how to make up the money elsewhere in ads 137 00:10:06.050 --> 00:10:10.310 are paid subscriptions. Yeah. I mean when you're going for the whole 138 00:10:10.310 --> 00:10:15.600 ecosystem, yeah. When you've got a category leader, whose only thing is 139 00:10:15.610 --> 00:10:19.200 that category, of course you're going to see more innovation in it. It's all 140 00:10:19.200 --> 00:10:24.090 they, it's all they think about dream about playing all day every day where 141 00:10:24.090 --> 00:10:29.110 podcast. This is clearly, you know what the article called, A little, a little 142 00:10:29.110 --> 00:10:34.440 hobby on the side for that trillion dollar organization over There and this 143 00:10:34.440 --> 00:10:37.800 might not apply to be, to be brands, but it's gonna, it's gonna affect you 144 00:10:37.800 --> 00:10:40.840 and that you're going to be caught up in the rising tide of podcasting. If 145 00:10:40.840 --> 00:10:44.450 you think about YouTube and they have 30 million channels on YouTube. One of 146 00:10:44.450 --> 00:10:48.220 the reasons why YouTube has had continued success and I believe will 147 00:10:48.220 --> 00:10:51.890 continue to like grow substantially over the next 10 years is that YouTube 148 00:10:51.890 --> 00:10:55.820 has actually figured out how to give creators the most amount of money, who 149 00:10:55.820 --> 00:10:59.970 else gives creators money, twitch a little bit. Nobody else. Everybody else 150 00:10:59.970 --> 00:11:03.530 charges money, Facebook and instagram definitely charge money. Tiktok doesn't 151 00:11:03.530 --> 00:11:06.360 give creators money. So everybody goes to Youtube to figure out how to make 152 00:11:06.360 --> 00:11:09.370 things that is B two C starts to figure out like, oh, we can actually make a 153 00:11:09.370 --> 00:11:12.480 pretty good amount of money through a podcast and it's easier to make 154 00:11:12.480 --> 00:11:16.220 podcasts and it is Youtube content that's gonna attract a lot of 155 00:11:16.220 --> 00:11:20.320 creativity to the space. It's going to blow up the BBC world as they, as 156 00:11:20.320 --> 00:11:24.950 people can figure out how to monetize audio content more. And Spotify makes 157 00:11:24.950 --> 00:11:28.510 that easier for them to do. The whole tide will rise and you'll start to see 158 00:11:28.520 --> 00:11:33.680 podcasting go from what I think we have two million shows to 10 million to 50 159 00:11:33.680 --> 00:11:37.170 million shows. That's why they're investing. That's why so many companies, 160 00:11:37.170 --> 00:11:41.190 even netflix is investing in audio content now because it's at two million 161 00:11:41.190 --> 00:11:44.400 now. But if you knew was going from two million to 50 million shows over the 162 00:11:44.400 --> 00:11:49.270 next 10 years, wouldn't you want to get in on that? Absolutely. It's one of the 163 00:11:49.270 --> 00:11:52.140 things, one of the reasons we're building a tool that we're building 164 00:11:52.140 --> 00:11:58.180 called showcase that auto clips, video podcasts, into micro clips that you can 165 00:11:58.180 --> 00:12:03.390 use on Youtube or social. I mean, you think about the revenue that joe Rogan 166 00:12:03.390 --> 00:12:08.410 makes from his three hour long episodes or was making, I guess before he moved 167 00:12:08.410 --> 00:12:14.320 over to Spotify, that you can make these creators are creating these clips 168 00:12:14.330 --> 00:12:20.080 from there, our to our three hour long episodes. And each one of those clips 169 00:12:20.090 --> 00:12:24.270 are now making the money as well because these, a lot of these clips 170 00:12:24.280 --> 00:12:28.010 from these big creators are getting hundreds of thousands of use. So 171 00:12:28.020 --> 00:12:33.420 they're, they're monetizing each clip on top of monetizing the entire episode. 172 00:12:33.430 --> 00:12:38.260 And so this is such an exciting space to be in and I'm pumped. We jump behind 173 00:12:38.260 --> 00:12:42.910 here and got this little impromptu episode on the board. Fantastic. So if 174 00:12:42.910 --> 00:12:46.930 you're not in podcasting now as a heck of a time to start all the presses on 175 00:12:46.930 --> 00:12:50.780 it right now, but it's gonna grow more so get in it. Yeah, I mean, sweet Fish 176 00:12:50.780 --> 00:12:54.420 Media can help you if you need help, but you can get, you can get in with 177 00:12:54.420 --> 00:12:57.710 that is you can start a free podcast on sounder anchor. It's not hard to get 178 00:12:57.710 --> 00:13:01.460 started. So at least get started dabble in the water, play with it on the side, 179 00:13:01.470 --> 00:13:03.730 whatever you gotta do to get comfortable with this medium because 180 00:13:03.730 --> 00:13:07.720 it's not going away any time soon start building the skill set now because it's 181 00:13:07.720 --> 00:13:10.060 gonna matter. All right lady, y'all 182 00:13:14.240 --> 00:13:17.840 one of the things we've learned about podcast audience growth is that word of 183 00:13:17.840 --> 00:13:22.530 mouth works. It works really, really well actually. So if you love this show, 184 00:13:22.530 --> 00:13:26.450 it would be awesome if you texted a friend to tell them about it. And if 185 00:13:26.450 --> 00:13:30.780 you send me a text with a screenshot of the text you sent to your friend meta. 186 00:13:30.790 --> 00:13:34.430 I know I'll send you a copy of my book, content based networking, how to 187 00:13:34.440 --> 00:13:37.870 instantly connect with anyone you want to know. My cell phone number is 188 00:13:37.870 --> 00:13:44.760 40749033 to 8. Happy texting