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Inverse incentives: the implications of Spotify’s Substack integration for podcasts

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Photo of Rutger Rosenborg
by Rutger Rosenborg

As platform decay seeps into major tech platforms and microcultures proliferate across the internet, feature development becomes less about building native tools and more about third-party integrations. For content platforms that are built upon providing access to infinite supply, new wells have to be tapped in the gated communities that spring up. 

For Spotify, replenishing the podcast well from both filtered and unfiltered taps means providing access to otherwise paywalled content from Bankless, Dateline NBC, The Economist, Freakonomics Radio, Patreon, Supercast, Supporting Cast, The Wall Street Journal, and now … Substack. 

Though Spotify allows podcasters to set up native direct-to-fan subscriptions, it is unclear how much podcasters actually make through the use of this feature. Judging by Spotify’s continued integrations with external subscription platforms,  neither podcasters nor Spotify itself are making enough from direct subscriptions to justify keeping things homegrown. It is a different story with Substack.

According to Substack, podcasters are now bringing in $100 million a year through direct subscriptions on the platform. If that figure is accurate, it means paywalled podcasts on Substack already generate more than a third as much revenue as Spotify’s podcast-related advertising, according to MIDiA's Global Podcast Forecasts. Importantly, Substack is generating that revenue with a fraction of the user base: Substack only has 3+ million users who subscribe to paid content while Spotify has 200+ million Premium subscribers and 300+ million ad-supported users.

The disparity in user volume and revenue volume comes from inverse incentives between the two platforms. On Substack, it is message over medium; on Spotify, it is medium over message. Substack users subscribe to content, and technology is a means of delivery. Conversely, Spotify users subscribe to technology, and content is a means of retention. In theory, Substack makes more money when its users make higher quality content. Spotify makes more money so long as content quantity increases.

As a result of these inverse incentives, Substack represents a model for complementary cross-format content: users consume written, audio, and video iterations of the same content (different mediums with the same message). Spotify represents a model for competitive cross-format content: users consume music, podcast, and video content coming from disparate sources (different messages coming from different mediums). There is no “right” way to go about monetising cross-format content; however, audio substitute threat is much more of a risk with Spotify’s approach, and that makes deep audience engagement much more difficult for creators on the platform. 

When a user opens the Spotify app, they may listen to a new song or the latest episode of their favourite podcast — but it is impossible for the user to do both at the same time, and each piece of content is likely unrelated, meaning attention is diluted for each creator. When a user opens the Substack app, they may read a new post and then listen to a new podcast episode from their favourite publication, with each piece of content reinforcing the other — arguably magnifying attention on the creator.

But the two — the broad reach of Spotify and the deep engagement of Substack — are not mutually exclusive for a podcast creator. In fact, it’s important that they work in tandem, especially as integrations like this become more common. Substack may never reach the scale of Spotify, but in some important ways, the platform is already positioning itself as the Bandcamp for podcasting. And that’s what makes Spotify’s move to integrate Substack into its Spotify Open Access suite indicative of where podcast monetisation goes from here. Rather than podcasters relying on a one-size-fits-all approach to revenue and marketing, a portfolio approach to monetisation will be key.

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