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Streaming services such as Pandora and Spotify sell access to digital music options, a combined service and product that seemingly offers little room for expansion. But the growing popularity of podcasts has presented them with a novel opportunity, which they are pursuing avidly.
lo-res_is09b5ia8-sTheir efforts reflect a growing consumer trend: More than 73 million U.S. consumers listen regularly to podcasts, a number that is twice what it was five years ago. But the providers in this market are mostly small, individual producers, such that the overall market remains vastly fragmented. Although Apple is the dominant channel consumers tend to use to download podcasts, with an inventory of about 600,000 offerings, it does not collect revenue from the production of the shows themselves.
In contrast, the streaming services are looking to earn profits across the podcast supply chain. They are contracting for content from popular celebrities, then adding new subscription service options to allow consumers to access their offerings. Currently, while Pandora has several hundred podcasts available through its streaming service, Spotify claims to offer more than 150,000.
But both companies have indicated their intentions to add more and rely increasingly on this source of consumers and revenues. They believe they can make it easier for listeners to find podcasts they will like, because their systems already have tools in place to make effective recommendations. Pandora also has initiated its Podcast Genome Project, a parallel to its Music Genome Project, to ensure that consumers can easily find content that matches their preferences. By improving the supply chain in these ways, the service providers think they can compete effectively against Apple.
To ensure their competitive appeal, they also are turning to big names to front their podcasts. For example, Spotify has contracted with the comedian Amy Schumer, the rapper Joe Budden, and the news agency Vice to produce shows for its listeners.
Discussion Questions:
1. What kind of product line extension is represented by streaming services’ additions of podcasts?
2. Are these efforts likely to enhance their competitiveness relative to Apple, the podcast market leader?