Spotify ‘represents a great portfolio of products,’ strategist says

Magnificent Noise Co-Founder Eric Nuzum joins Yahoo Finance Live to discuss Spotify’s moves in the podcast space, the streaming giant’s heavy investments in the podcast space, and the outlook for the podcast industry.

Video transcript

- All right, we're sticking with Spotify. The streaming giant has made huge moves in the podcast space over recent years, investing over a billion dollars in 2021. Now, that money was spent on deals like the acquisitions of Gimlet Media, Anchor, Parcast, and The Ringer. It also gained the exclusive rights to Joe Rogan's podcast and signed TikTok influencer Addison Rae, Kim Kardashian West, DC Comics, and Michelle Obama.

Well, Spotify's paid user growth in the first quarter is likely to boost margins, but some investors are still focused on the ad revenue and what's to become of the company's heavily invested podcast division. Joining us now to discuss is Magnificent Noise cofounder and podcast strategist Eric Nuzum. Eric, thank you for joining me in this morning.

Now, we remember when they were just throwing money wildly at some of these podcasts. And, of course, Joe Rogan is the main one that comes to mind. Where are we now in the podcast story?

ERIC NUZUM: For Spotify or just generally in the entire industry? I think that for Spotify, they're in a pause moment of trying to look at the investments they've made. Some of them have paid off well. Some of them have not seen the kind of payback I think they were hoping for.

And that's actually reflective of the larger podcast industry, actually, that many companies have seen an easy flow of money into making investments. They're taking very much of a startup perspective of making lots of investments to see what plays out and what doesn't. And now we're kind of dealing with the reality coming creeping in with the softening of the ad market.

- I mean, when you look at now how crowded, as we look at that top podcast platforms graphic there, when you look at how crowded now the market and the space has become here, how does Spotify really move from this point, especially as we hear Ek talking about potentially raising prices?

ERIC NUZUM: It's interesting. When you look at this chart, there are so many different ways of looking at the podcast industry. This is top podcast platforms. I don't think this reflects the reality of where listeners are going to experience podcasts. And that's still heavily dominated by Apple. Usually between 50% and 70% of the show's downloads come from Apple.

But Spotify is number two. And as recently as two or three years ago, four years ago, that would have been in the low single digits, like many of the numbers you see here. So one thing that has come out of Spotify's investments is they've become one of the-- the number two and, in some territories around the world, the number one platform for listening. The problem with that is that has not clearly translated into dollars, into revenue. While it has given them a place at the table and a very commanding place at the table and those investments have made quite an impression on people, they haven't been able to translate that into something that is of value to the company's shareholders.

- So what is the company going to have to do, then, to make that translation so that it does actually end up translating into dollars?

ERIC NUZUM: Well, that's a very good question. And I think they'd love to know the answer to that question, too, that they-- I think probably the smartest decision that Spotify has made since this investing over a billion dollars of the podcasting has been the latest decision to basically stop a lot of their content creation efforts and pull back and reassess and ask some rather existential questions about what do they need podcasters' role in the company to be? And what do they have to offer to the podcast industry that is better than what other people are offering?

It's a very important platform. But if you look at from the experience of creators and listeners, it's just a matter of preference. There's not really a clear distinguishing thing. And I think that Spotify needs to think about what does Spotify mean? What can only Spotify do in podcast industry to create things for listeners, to create things-- to entice creators to favor that platform as a distribution point for their content.

And until they have a clear idea of what that means as far as what their role is, a lot of these acquisitions will continue to flounder. Some of them have. Some of them haven't. But you can't expect there to be a clear path forward until they really understand what the company is trying to do, what role the company wants to have, and what role podcasts play inside of Spotify.

- And to that point, then, so if you're an advertiser looking at where to best position your ad dollars to get the most bang for your buck and you're looking at the wide array of platforms that are out there, is Spotify really the place to go, then?

ERIC NUZUM: It depends on the audience you're trying to seek. There are times when Spotify speaks to many millions of people. And it's a great platform. Ad buyers don't want to go to 1,000 different places to place advertising. They'd rather go to a large player who represents a great portfolio of products.

And I think Spotify aspires to be in that place. I think in some regards they have achieved that. But it's a very small amount of the advertising in podcasting is going to Spotify.

And until they can make a distinction for a creator or talent-- everybody talks about the Joe Rogan deal, for example, for Spotify, which is such an outlier. It's an example of nothing. And if you look at the many other creators who are creating content and audiences are listening to content other than Joe Rogan, a lot of those don't really look to Spotify as being an advertising platform because they can make more money and have more control doing it on their own.

- And so then when we look at where the future of podcasting is heading, obviously, you have the big celebrities. That was all the craze. What does the next new normal for podcasting look like?

ERIC NUZUM: Oh, that's a great question. I'm not sure anyone has a good answer for it. But I would say that I think a lot of companies are going to find their next chapter by focusing on audience segments. When we look at the broad audience, which of those segments do we want to serve with content that we are either creating or acquiring and distributing, and that the focus will be less on talent or celebrities or even categories and more on audiences. When I want to serve this audience, what type of content are they interested in? And how can I create something that simply couldn't be doable by anyone else?

And I think that many of the audacious deals that Spotify has struck over the past several years have been very bold. Now it's time to deliver content, which has a similar sense of boldness, but for specific audiences rather than trying to think that one thing can serve many, many, many brands of people.

- Because it's true because it can be very overwhelming when you just jump in. But some of these more nuanced audiences, I think, as you mentioned there, the way to go. A big thank you there to Eric Nuzum, Magnificent Noise cofounder and podcast strategist. Thank you for joining us on Yahoo Finance today.