This is Hot Pod, The Verge’s newsletter about podcasting and the audio industry. Sign up here for more.
In pursuit of profit, Spotify looks to AI rather than original content for its podcasting future
Spotify shareholders are thrilled with the company reporting an operating profit for the first time in a year, sending the stock up nearly 10 percent on the news. The revenue bump was in large part due to the streamer’s $1 price increase earlier this year, but executives also pointed to the downsizing of the podcast operation — which included hundreds of layoffs and the dissolution of Gimlet and Parcast — as a contributing factor. The adage that “content is king” no longer applies, with Spotify increasingly focusing on tools that will scale the business rather than content that will attract listeners.
In a call with investors, CFO Paul Vogel said that after being a real “drag” on profit margins in the past, podcasting will soon break even and turn toward profitability. CEO Daniel Ek echoed that sentiment. “We’re constantly finding new ways to bring more efficiencies out of the business… We’ve seen some improvements, but you should expect us to continue to look for more improvements going forward because that’s just our modus operandi.”
While Ek and Vogel really hammered that “efficiency” theme (according to my transcript, they said the word more than 30 times over the course of the 50-minute call), what was left unsaid about podcasting spoke louder. In the past, they would excitedly tout how many millions of podcasts were on the platform, the latest new celebrity show, and the area’s explosive growth. But as investors have run out of patience for the time and money such ambitions required, the company’s leadership changed its tune.
Rather than emphasizing, say, its new revenue sharing deal with Trevor Noah or the reliability of The Ringer, Ek pointed to Spotify’s new AI-driven translation product. He pointed to the automatic translation tool as a way of seamlessly scaling podcasts and increasing the amount of content in non-English speaking markets. He also expects AI will be a boon for podcast advertising, as well.
“Creating a great audio ad is something that’s quite costly and quite expensive for marketers to do,” he said. “What generative AI has the promise to do is allow for that creative cost to come down… It [also] allows you to scale that creative in unimaginable ways. You can translate whatever creative you had into lots of different languages; you can use the same voice actor; but instead of producing one or two ads, you can have 1,000 or 10,000 or even 100,000 ads that are individually created to each user.”
I would take that with a grain of salt (we know Ek loves to dream big!!), but it…