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Spotify, the green-hued titan of music streaming, has found itself in a $38 million conundrum, but it’s not what you might expect. It’s not about licensing fees or artist disputes, but rather about the rise of white noise and ambient podcasts on its platform. Internal documents reveal that as of January this year, these soothing, static-filled podcasts accounted for a staggering 3 million daily consumption hours on Spotify. This might seem innocuous, but the real issue lies in the ad payouts to the creators of these podcasts.
Once Spotify realized the significant airtime these podcasts were garnering, the company reportedly considered removing them from recommended feeds and blocking future uploads. This move, aimed at steering listeners towards more “economically viable” content, could potentially boost Spotify’s annual gross profit by a hefty €35 million, or $38 million. But let’s rewind a bit. Spotify, known for its innovative approach to music streaming and social sharing (remember Spotify Wrapped, which debuted in 2018, long before other platforms caught on?), actually encouraged this trend. In 2019, the company acquired the podcast creation app Anchor, aiming to provide a platform for the next generation of podcasters, even those just starting out. The acquisition initially seemed successful.
By July 2022, 44% of all podcasts were hosted by Anchor. However, not all podcasters are creating the typical hour-long talk shows. Enter the white noise creators, who, according to Bloomberg’s Ashley Carman, can earn up to $18,000 a month producing nothing but white noise – static, distant seagulls, repetitive waves crashing – which users stream for hours as a sleep aid. These creators earn their income from the advertisements that Spotify intersperses in their content. Spotify’s algorithm, known for its ability to recommend new content, may unintentionally be pushing users towards these white noise shows by prioritizing “talk” content over “music”.
This has led to a significant issue for Spotify, which now finds itself grappling with the unexpected rise of white noise. But the problem isn’t just about Anchor or white noise. In February 2022, Spotify acquired two more podcasting platforms, Chartable and Podsights, further solidifying its commitment to podcasts. However, this focus on podcasts may be diverting listeners away from the music and artists they love, potentially affecting the number of payouts per stream to artists who’ve created unique music tracks. It also means that ad revenue is being directed towards creators who simply record ambient sounds and enhance them with a tap of a button.
In essence, Spotify’s drive towards podcasts may be steering individuals away from music in general. Despite the buzz around podcasting on Spotify, there’s still no news on its long-promised high-quality streaming tier, Spotify HiFi, even in the wake of recent price hikes. Meanwhile, competitors like Apple Music and Qobuz have been offering high-resolution audio streams for years, at no extra cost to their subscribers. While Spotify remains the most popular streaming service by a considerable margin, other platforms may offer better quality music, as evidenced by Tidal’s rollout of six million high-resolution FLAC tracks.
