Spotify’s continued investment in podcasts appears to be paying off, after the company reported that podcast listening has increased by 200 percent year-on-year in its fourth quarter earnings today. The company says it now has over 700,000 podcasts on its platform, and that over 16 percent of its users now listen to podcasts. Spotify says the amount of users paying for its premium tier increased to 124 million.
Despite the increase in podcast listening, Spotify couldn’t help but slide back into the red, making a €209 million (around $230 million) operating loss which sat in stark contrast to its third-ever quarterly profit during Q3. The company says it expects these losses to continue for the rest of 2020, which it’s calling an “investment year.” These investments will include the purchase of The Ringer and its collection of around 30 podcast titles. Spotify hopes to end 2020 with around 150 million premium subscribers, and over 300 million active users. The company thinks podcasts are going to be instrumental in attracting more paying subscribers, Spotify’s most lucrative customers:
We have a growing body of evidence showing that there are significant benefits to engagement, retention, and conversion of users from Ad-Supported to Premium stemming from consumption of Podcast content. We have seen benefits to retention on the order of several hundred basis points, which is a material change on a retention curve, for users that engage with spoken word content relative to those that haven’t, and early data indicates that these users are more likely to convert to Premium over time.
Spotify has made numerous investments in its podcasting business. It acquired the podcasting companies Gimlet, Anchor, and Parcast and announced a partnership with Barack and Michelle Obama’s production company last year. Part of its plans to monetize these podcasts includes targeted ads served using its new Streaming Ad Insertion technology. It is also promoting new podcasts using its algorithmic Your Daily Podcast playlist, launched earlier this quarter