The company, which has spent a whopping $1 billion on podcasts, said its billion-dollar bet is “already starting to pay off.”
Spotify’s chief content and advertising business officer Dawn Ostroff told investors that the audio giant is still in “investment mode,” but expects its podcast business to be a “$20 billion opportunity” with continued improvements in both ad products and monetization.
CEO Daneil Ek also underscored the potential of the platform’s podcast unit, estimating that he expects it to generate margins between 40% to 50%.
During Wednesday’s meeting, Ek revealed that the company is “performing much better than you probably suspect, roughly 28.5% (margins) which is a significant progress in reaching our 30% to 35% long-term goal.”
Aggressive spending on both the podcast and audiobook side of the business hindered those long-term goals, the executive clarified.
U.S. podcast advertising revenues rose to $1.4 billion in 2021, surpassing the $1 billion mark for the first time, according to a study from the Interactive Advertising Bureau.
The bureau predicted that the market will exceed $2 billion in 2022 with an estimate of over $4 billion by the year 2024.
Spotify has doubled down on the trend with a slew of high-profile podcast deals, including a reported $200 million multi-year licensing contract with Joe Rogan.
Earlier this year, the platform came under fire for hosting Rogan’s controversial podcast, which critics slammed for spreading misinformation surrounding COVID-19 vaccinations.
Notable artists including Neil Young, Joni Mitchell, Nils Lofgren, David Crosby, and Stephen Stills, among others pulled their music off of the platform in an effort to oust Rogan — by far Spotify’s most popular personality, with 11 million listeners.
Ultimately, the platform sided with Rogan as Ek reiterated that the company would not “take on the position of a content censor.”
Despite the controversy, the service has continued to add users, reporting monthly users of 422 million in the first quarter (above Wall Street consensus estimates.)
Amid the surge in podcast popularity, listeners continue to flock to music streaming platforms.
According to IFPI’s latest Global Music Report, streaming grew by 24.3% ($16.9 billion) in 2021, a rise of five percentage points compared to 2020’s growth rate of 19.1%.
Paid subscription revenues jumped by 21.9% with streaming accounting for 65% of total global recorded music revenues.
Spotify leads the way, capturing 31% of total U.S. subscribers, followed by Apple Music (AAPL) at 15%; Amazon Music (AMZN) and Tencent (TCEHY) tied at 13%; YouTube Music (GOOGL) rounds out the top five at 8%.