If you think about this, I was doing a little bit of work before this, to see whether I could get some data, the overall revenue that exists, across all platforms, for podcasts – and Howard wouldn’t be in that; that’s a different thing – is a billion dollars. That’s the entire marketplace, which is highly fragmented. If you think about US radio, which is the other place that you hear these things, that’s an $18 billion business. Where you are here, is in a world where this is a play for a longer term. It may be the start for Spotify, which is we want to play against terrestrial radio. We want to draw the value out of terrestrial radio. This is certainly what we were doing, at Pandora. That was the plan. That was what we were doing on the audio side and it was one of the reasons that we were building a podcast business.
It could well be that that is where Spotify wants to go, to build out a more rounded way of interrelating with their listeners.
Right. Let’s just go back to that. It’s always been surprising to me that they haven’t been as aggressive in their freemium world, in developing tech and they are clearly doing that now. Anecdotally, it was because they believed that the whole business was about subscription and that that’s where they should put all of their efforts. I think what they’re doing now, and have been for the last year or so, which is building out a proper ad platform, is exactly what makes sense.
Yes. If you’re thinking about what the economics are, for Joe, and I know Joe, he’s probably looking at numbers of listeners and having value attached to that, because if you go on the subscription models, those are without ads, there’s no incremental revenue, but there has to be incremental revenue to him. My suspicion is that the ad revenue will do what we were doing at Pandora which is, it essentially sits and is adjacent to the subscription. You have it if you have the subscription and you’re going to have to listen to ads. That’s why it’s impossible to understand what the structure of the arrangement is. It will become clear, over time. At the moment, there are real questions, in my mind, as to how they are structuring it. They were pretty cagey about, it’s $100 million, yes, but when, how, how do you get it back, how do you make money on it? None of those things are answered.
I fully expect that there are clear answers to all those questions and that there is a broader strategy than just, let’s get a big name and put it on our podcasts. I think there’s a much bigger strategy around what they’re doing and how they’re going to do it. We can talk, at some point in the future, when that becomes clearer.
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