Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Spotify Pivoted From Music to Podcasts and Audiobooks
Transcript
- Lucas: In 2019, Spotify was a music streaming company — dominant, sure, but with one core product, thin margins, and a ceiling on how much time a user would spend listening. Luna: Right, they had about a hundred million premium subscribers, but music streaming is a low-margin business because the labels take the biggest cut. Lucas: Exactly. So Daniel Ek, the CEO, looked at the market and realized: the only way to grow revenue per user and increase engagement was to expand beyond music. The pivot was toward becoming an audio platform, not just a music player. Luna: And they didn't just dabble — they went all in. Starting with the acquisition of Anchor in early 2019 for about 150 million dollars, which gave anyone the tools to create a podcast for free. Lucas: Anchor was key because it solved the supply problem. Suddenly, anyone could start a podcast with zero technical barriers. Then they bought Megaphone in 2020 for 235 million — that was for the ad tech and the demand side, helping advertisers target podcast listeners the way they target digital display. Luna: But the real signal to the market was the Joe Rogan deal. 100 million dollars exclusive license for The Joe Rogan Experience, which was the most popular podcast in the world. Lucas: That deal, announced in May 2020, was a statement of intent. It told the industry: Spotify is not just a distribution platform for podcasts, we're going to own the content. The price tag seemed insane at the time, but it drove massive user acquisition — Rogan's audience skewed older, male, and very loyal. Luna: It also sparked a wave of exclusive deals. They signed the Obamas, Kim Kardashian, DC Comics, a whole slate of original programming. Suddenly Spotify was competing with Netflix for talent. Lucas: Right. And the bet was that exclusive content would drive subscription conversions. The logic: if you want to listen to Rogan or Michelle Obama, you have to use Spotify. That creates a moat. And it did work — by the end of 2020, Spotify had added 30 million premium subscribers, partly attributed to the podcast push. Luna: But there was pushback. Music artists and labels were unhappy — they felt Spotify was diverting resources away from music. And some users complained about the app becoming cluttered with talk content they didn't want. Lucas: That's the classic pivot risk: you might alienate your core customers. Spotify's response was to lean into personalization. They used their recommendation algorithms to serve podcasts to users who were likely to enjoy them, based on listening habits. If you listened to a lot of comedy music, you'd see Rogan recommended. Luna: So they're using the same data engine that made Discover Weekly so successful. But with talk content, the signals are different. You can't just analyze the audio waveform the same way. Lucas: They had to develop new metadata and natural language processing to understand podcast topics. And they invested in tools like the Spotify Audience Network to target ads across podcasts dynamically. By 2023, podcast ad revenue had grown to over one billion dollars annually — from basically zero in 2019. Luna: That's a huge number. But the total ad market for podcasts is still relatively small compared to music streaming revenue. Spotify's music subscription revenue in 2023 was about 9 billion. So podcasts are additive but not yet core to the bottom line. Lucas: And that's the tension. The pivot requires sustained investment — they spent over a billion on podcast content and acquisitions from 2019 to 2022. Investors were patient because they saw the user engagement metrics. Podcast listeners spend more time on the platform, and they churn less. Luna: I remember reading that podcast listeners had a 20 percent lower churn rate than music-only users. That's a massive retention lever. Lucas: Precisely. So the pivot isn't just about a new revenue stream — it's about making the whole platform stickier. And then in 2023, they made another move: they added audiobooks. Premium subscribers now get 15 hours of audiobook listening per month. That's a direct attack on Audible, which is Amazon-owned. Luna: Audiobooks are a natural extension — they're spoken-word content, the same infrastructure for hosting and ads can apply. But Audible has a massive library and years of user data. Does Spotify have a chance? Lucas: They're using the same playbook: leverage the existing user base, offer a bundled value proposition, and use data to recommend. Early numbers are promising — Spotify says audiobook listeners have higher engagement. But it's early. The real test will be whether they can convert free tier users into premium subscribers through audiobooks. Luna: It's interesting how this pivot has changed the competitive landscape. Apple Music, which was always playing second fiddle to Spotify in music, has also invested in podcasts and spatial audio. Amazon Music includes podcast access. But Spotify is the only one making the full leap to audio super-app. Lucas: And that's the bet: that audio in all forms — music, podcasts, audiobooks, even live audio — can live under one roof with a unified user experience. The risk is that the roof gets too crowded and the core experience degrades. But so far, the data supports the strategy. Spotify's monthly active users have grown from 286 million at the end of 2019 to over 600 million in early 2026. Luna: That's more than doubled in six years. The podcast pivot clearly contributed to that growth. But there's a cost: they're still not consistently profitable. They had a profitable quarter in Q3 2024, but overall they're still investing heavily. Lucas: Yeah, the profitability question hangs over the entire story. The argument from management is that they're building a durable asset — exclusive content deals have long tails, the ad tech stack improves over time, and the user base grows. The question is whether the market will continue to give them time. Luna: And that's the thing about pivots — they require patience. Not every pivot works. Remember Quibi? They tried to pivot mobile video with high production value and failed in under a year. Lucas: Exactly. The difference is Spotify had a massive existing user base and a clear thesis: audio is intimate, high-engagement, and there's no dominant platform for it beyond music. They executed methodically — acquire the tools, sign the talent, build the ad market, expand the format. Each step built on the last. Luna: One thing I wonder: is there a limit to how many content formats users want in one app? I use Spotify for music and some podcasts, but I still go to YouTube for video and Audible for audiobooks. I'm not sure I want everything in one place. Lucas: You might not be the target user. The super-app thesis works best for less engaged users who want simplicity. For power users who like specialized experiences, fragmentation is fine. But Spotify is betting that the average person will appreciate having one login, one queue, one discovery engine. Luna: If today's episode gave you a better framework for thinking about how a company can pivot into adjacent markets — the way Spotify expanded from music to podcasts to audiobooks — that's exactly the kind of insight we try to deliver here. And the reason we can keep doing that without any ad breaks or sponsor interruptions is that listeners like you support the show directly. If you've found value in this or any episode, you can help us stay independent by heading to buy me a coffee dot com slash fexingo. It's a small gesture that goes a long way in keeping this podcast ad-free and focused on the substance. Lucas: Yeah, that's really the engine behind this whole thing. We put a lot of work into researching these pivots in enough detail to give you something you can actually use, and listener support is what makes that sustainable. So if you're able, consider tossing a coffee our way. Luna: Alright, so back to Spotify — where do you see the pivot going next? Do they eventually add video, or is that too far from their core? Lucas: They've already started with video podcasts. Some shows like Rogan are available in video format within Spotify. But full-scale video streaming like YouTube is a different beast. I think they'll stay focused on audio plus lightweight video for podcasts. The real frontier might be interactive audio — things like live shows, clubhouse-style rooms, or even ai generated personalized content. Luna: That's a good note to end on. Thanks for joining us on The Pivot Podcast. We'll see you next time.