Podcasts Q2 2020: Spotify takes an early lead

MIDiA has just published its latest Podcast report, Podcasts Q2 2020: Spotify Takes an Early LeadIn it we present data from MIDiA’s quarterly survey that presents a comprehensive view of podcast user behaviour, who podcast listeners are, how it stacks up against radio and music streaming listening and which platforms listeners are going to for their podcasts. One of the key findings of the 3,000 word report is that Spotify is now firmly established as the most widely used podcast platform. 

Spotify is now the leading destination platform for podcast users. In Q2 2020 42% of podcast listeners used Spotify, 10 points ahead of Apple in second place. This does not necessarily mean that it yet leads in terms of volume of listens, but it is the platform that the largest share of regular podcast listeners visit. Spotify was second in Q4 2019, so it is a rapid ascension for the streaming platform, leaving Apple trailing significantly. Google in third place may surprise some in the podcast sector, as it is renowned for being a small player. However, MIDiA has tweaked the wording of the question repeatedly over the last nine months, making it absolutely clear what we are referring to, and the result is always the same. This suggests either a) a large number of people use the app but have much lower listening patterns than users of other platforms, or b) Android users are somehow less clear on what podcast apps they use than iOS users. We think the latter is unlikely.

Early adopter behaviour shapes the market

Varying levels of podcast usage among users is however very likely as we are at such an early stage of market development (just 14% of consumers listen to podcasts regularly). This means that podcasts are at the ‘critical mass’ phase of adoption, where usage starts to move from early adopters towards the mainstream. As a consequence, heavy-usage early adopters, which Spotify podcast users tend to be, have particularly heavy behaviour and skew the overall numbers. This illustrates the supreme importance of measuring audience behaviour like MIDiA does, rather than relying solely on analytics – which are great for understanding volumes of listens, but less useful for understanding audiences. 

This early adopter skew also means that the content that resonates well with podcast users now will not necessarily be the right content to pull in more mainstream audiences, nor is it likely to be the right content mix for a longer-term strategy.

Podcasts are still small scale for now, but have vast potential

Podcasts are still small scale and far outweighed by radio. In fact, overall audience penetration has not shifted much during the last six months, though volumes of podcast listens have increased. So, existing podcast users are listening to new podcasts, creating new ‘day parts’ in their lockdown behaviours.

Spotify’s podcast strategy is dominating thinking in the podcast space at the moment, and with good reason considering its heavy investment. However, with the ad market softening, and Spotify relying primarily on ads to monetise podcasts, it will be some time before it can recoup its investment. Nevertheless, Spotify is betting big. It sees the opportunity in competing for radio listening to be a much bigger move than music alone. It is betting that podcasts will take radio out of radio, just like Netflix took TV out of TV.

BBC Sounds represents a podcast blueprint for radio broadcasters 

Spotify will not, however, find all radio companies bending to its will. In the UK, the BBC Sounds app illustrates how powerful a strongly integrated app and content strategy can be, with the app the second-most used podcast platform in the UK. Crucially, the vast majority of Sounds users that are also podcast users, use the app for podcasts. This contrast strongly with other broadcaster apps. For example, in the US, only a small minority of NPR’s app users that are podcasts listeners use the app for podcasts.

The experience of BBC Sounds illustrates that broadcasters can be a major force in the future of podcasts, but that they cannot rely solely on the strength of their content and programming. Without the tight technology integration that Spotify employs, broadcasters will find themselves looking more like NPR than they do the BBC.

If you are a radio broadcaster exploring how to innovate your audio and tech strategy to compete in this new marketplace, then get in touch with [email protected] to see how MIDiA can help.

HomePod Mini: Apple’s pandemic-era product

Apple’s Tuesday product announcement showcased its 5G iPhones, but also included the launch of the new $99 HomePod Mini. Though it might have looked like a supporting act for the launch, its strategic importance should not be underestimated – especially in the context of how Apple competes with Amazon, the company that is arguably becoming Apple’s most important competitor among the Western Tech Majors (Apple, Alphabet, Amazon, Facebook). Amazon is emerging as a global scale hardware competitor, focused on the home rather than on personal devices.

HomePod Mini is a product for the era of pandemic

The home is becoming the new battleground for the tech majors and Amazon has a comfortable lead with more than 50% of the installed base of smart speakers, significantly ahead of Google and far ahead of Apple which currently sits at less than 10% market share. HomePod Mini is an affordable device that gives Apple the opportunity to quickly expand its role across the homes of iPhone owners, a beachhead for future content and services. HomePod Mini is also very much a pandemic-era product move; with more of us spending more time working and studying from home, we are more inclined to use specialised home devices such as smart speakers, rather than the convenient but not specialised phone. As the HomePod was always a premium, Apple afficionado device, HomePod Mini gives Apple a tool with which it can extend its footprint in the average day of its increasingly home-bound iPhone owners.

An enabler for audio strategy

Though Apple has much bigger ambitions for the home than music alone, music is the use case that is spearheading the product strategy. Apple TV continues to grow in importance for Apple, but as a screen plug-in, it lacks the capabilities of a standalone smart speaker. As Amazon has shown, smart speakers can become the digital hub around which smart home strategies can be built. HomePod Mini may also be the tool for a bolder, joined-up audio strategy for Apple. Alongside Apple Music, Apple continues to back its radio bet Apple Music 1 (previously Beats 1) and of course it is one of the leading destinations for podcasts. Apple can pull these three disparate strands together by creating in-home use cases via HomePod Mini. In this respect, Apple will need to, once again, do all of that and more – as not only has Amazon recently added podcasts to Amazon Music, but it also the home of Audible, an asset both Apple and Spotify lack.

Finally, what Apple did not announce on Tuesday was content bundles for its hardware. An Apple One / iPhone device lifetime bundle feels like an obvious move – competition authorities permitting, perhaps sometime over the coming 12 months. A $3.99 Apple Music Home Pod tier would make sense also.

The device may be mini, but the strategy is anything but.

Quick Take: Apple One – Recession Buster

Apple officially announced its long anticipated all-in-one content bundle: Apple One. $9.99 gets you Apple Music, Arcade, Apple TV+ and 50GB of iCloud storage. A family plan retails at $14.99 and a premier plan includes 1TB storage, News and Apple’s new Fitness+ service. While the announcement was expected (and you may recall that MIDiA called this back in our December 2019 predictions report) it is important nonetheless. 

As we enter a global recession, the subscriptions market is going to be stressed far more than it was during lockdown. With job losses mounting, and many of those among Millennials – the beating heart of streaming subscriptions – increased subscriber churn is going to be a case of ‘how much’ not ‘if’. In MIDiA’s latest recession research report, we revealed that a quarter of music subscribers would cancel if they had to reduce entertainment spend and a quarter of video subscribers would cancel at least one video subscription.

A $15.99 bundle giving you video, music, games and storage will have strong appeal to cost conscious consumers who are loathe to drop their streaming entertainment but need to cut costs. As with Amazon’s Prime bundle, Apple One is well placed to weather the recession. They may not be recession proof – after all, entertainment is a nice-to-have, however good the deal – but they are certainly recession resilient.

Which may explain why music rights holders have been willing to license the bundle which almost certainly included a royalty haircut for them, to accommodate the other components of the bundle. While rights holders will not have been exactly enthusiastic about further royalty deflation (one for artists and songwriters to keep an eye out for when Apple One starts to gain share) they are also keenly aware of the need to ensure they keep as many music consumers on subscriptions as possible. 

One key learning of the impact of lockdown has been that new behaviours learned during a unique moment in time (eg not commuting to an office, doing more video calls) can result in long term behaviour shifts. Lower music rightsholder ARPU may be a price worth paying for shoring up the long term future of the music subscriber base.

Who will own the virtual concert space?

2020 will go down as a rough year for many artists, largely because of the income they lost when live ground to a halt. Unfortunately, the live music sector is still going to be disrupted in 2021 and it may take even longer for the sector to return to ‘normal’. In fact, we could see the bottom of the live sector thinned out as the smaller venues, agencies and promoters do not have the access to bridging finance that the bigger players have. So, smaller artists may find the face of live permanently changed for them in a way that larger artists do not. Whatever the outcome, one thing is clear: live music is not going to be the same again, and the innovations in virtual and streamed events are not simply a band-aid to get us through tough times. Instead, they are the foundations for permanent additions to the live music mix. The big unanswered question is, who is going own the live-streamed and virtual concert sector?

Bringing it all together

One of the most important things digital tech does is to bring things together. The smartphone is a perfect example. 20 years ago people switched between phones, calendars, diaries, computers, maps, phones, music players, DVD players etc. Now these are all in one device. Streaming did the same to music, taking radio, retail, music collections and music players and putting them together into one unified experience. Until now, live music was not subject to streaming’s great assimilation process. But COVID-19 changed all that. Live used to be separate because it required logistical assets like buildings, ticketing operations, relationships etc. The last few months have shown us that the virtual live sector can operate entirely independent of the traditional sector’s frameworks – which is one of the reasons so much innovation and experimentation has happened. Sure, lots of the early stuff was scrappy and of patchy quality, but is through mistakes that we learn the right way forward. Thus, we have new companies like Driift emerging to bring a more structured and professional approach to a fast-growing but nascent sector.

Disruption is coming

The big traditional live companies right now may be most concerned about whether the still-dormant venues are looking at the new ticketing models being deployed with the likes of Dice and wondering whether they can rethink their entire way of doing business when they reopen. While that may trigger what could prove to be the biggest-ever shift in the live business, the virtual part of the business is where the money is flowing right now: Melody VR bought pioneering but struggling streaming service Napster, Scooter Braun invested in virtual concert company Wave and Tidal bought seven million dollars’ worth of access into virtual concert ‘space’ Sensorium. Virtual reality (VR) spent much of the last couple of years in the trough of disillusionment but now COVID-19’s catalysing impact may see it starting to crawl onwards and upwards. Prior to COVID-19 VR was a technology searching for a purpose. COVID-19 has created one. This is not to say that all of VR’s prior failings no longer matter – they do – but it at least has a set of music use cases to build on. VR can now realistically aspire to be a meaningful component of the wider virtual event sector.

Streaming+

It is no coincidence that streaming is playing a key role. Nor is it just the smaller streaming services at play – Spotify has built the tech infrastructure for live events, while Apple is introducing artificial reality (AR) into Apple TV+, so it is not too big a leap to assume Apple Music AR experiences will follow. Live was the last major component of the music business that streaming could not reach, and that is all about to change. The value proposition for music fans is clear: why go to multiple different places for all your favourite music experiences when they can all be in one place? Think of it as Streaming+. Whatever the future of live is going to be, we can be certain about one thing: it will never be the same again.

Apple to launch subscription bundle – we called it!

In MIDiA’s 2020 Predictions report published in December 2019 we predicted that tech majors would start creating subscription bundles, with Apple leading the fray. Lo and behold, news has just come out that Apple is working on ‘Apple One’ – a multi-genre subscription bundle that will include Apple Music, Apple TV+, Apple Arcade and Apple News+.

This is what we said back in December:

“Expect Apple to experiment with paid bundles. Adding TV+ to its student Apple Music package is another test case and may soon see Arcade folded in also. With a global recession looming, Apple and Amazon will be well placed to grow market share.

We called it!

So why is Apple doing this, and why now?

With smartphone sales slowing, Apple needs another growth driver to maintain revenue growth. It is making this move now because, one, it needs the transition to start soon, and two, it is looking to profit from the recession. Standalone digital subscriptions are contract-free and so are vulnerable to cancellation. Additionally, they skew towards Millennials – the segment most likely to be hit hardest by any workforce reductions. Consumers who find themselves having to tighten their belts will not want to simply ditch their digital entertainment, however – it has become too important to them. So, a multi-subscription, value-for-money bundle will become particularly appealing during a recession. Apple is thus hoping to pick up price-sensitive subscribers during the economic downturn.

Apple also has an ace up its sleeve: device bundles. As we wrote in December:

“Currently, Apple’s mix of premium, standalone subscriptions are educating its user base that they have a clear monetary value. Apple will start to bundle these together with devices in order to maintain revenue growth in its otherwise slowing device sales segments. The initial bundling of Apple TV+ for free for one year may help acquire market share but it also lays the ground for a more comprehensive and structured bundling strategy. By tying subscriptions into long-term, need-to-have relationships – i.e. phones and shipping – […] tech majors could gain at the expense of standalone subscriptions.

Bundling used to be the sole domain of Telco’s but the tech majors are looking to get in on the act. Apple can use Apple One to increase device prices, e.g. pay $200 more to get an iPhone with a lifetime of unlimited music, video, games and extra cloud storage. By doing so it both increases device revenue (and after all, Apple is still a device company and is measured that way by investors) and taps into an entirely different purchase decision cycle. Devices are need-to-have and if you are in the market for a high-end device, adding on 15% for unlimited content is a much easier sell than trying to sell the subscription standalone.

In doing all of this, Apple is of course taking a leaf out of Amazon’s book. Amazon has built the core of its streaming businesses around the Prime bundle. In doing so, it has the additional benefit of creating a recession-proof bundle (everyone still needs to buy stuff) – one which is proving its worth already, if it’s incredibly successful Q2 is anything to go by. As we enter the recession, standalone subscriptions like Spotify and Netflix are vulnerable to increased churn. Apple and Amazon will be waiting to pick up the pieces.