Why Spotify’s Premium Subscription Strategy Failed and What They’re Doing About It


The music streaming industry has been a dynamic one, with companies constantly evolving and adapting to keep up with changing market trends. One of the biggest players in the industry, Spotify, has recently made a major shift in its strategy, moving away from its original focus on music to become a major player in the podcast market. In 2020, the company made a huge investment in exclusive podcast content, acquiring popular shows such as Joe Rogan’s podcast for a whopping $200 million.

However, just three years later, Spotify’s stock prices have plunged by over 50%, indicating that this strategy may not have paid off as the company had hoped. So, what went wrong? And why did Spotify’s focus on premium subscriptions not work out?

One of the key reasons may be the fact that Spotify failed to crack the code when it comes to monetizing podcast content. Unlike YouTube, which offers a range of tools and tiers for creators to build a membership platform and monetize their content, Spotify’s revenue sharing model is notoriously low, which has led to creator dissatisfaction and disloyalty. YouTube, on the other hand, has managed to build a platform that creators aspire to succeed on, and this has helped to build a loyal following.

Another issue may be Spotify’s failure to crack original distribution. Creators were unhappy with the viewership on “Spotify Original Podcasts,” as their reach decreased from when they were on YouTube. While Spotify did allow creators to simultaneously post on both platforms, the lack of significant difference in the distribution of content made the move seem redundant. The fact that Spotify’s logo had to be carried throughout further served to dilute the creators’ brand.

Why Premium Subscriptions Were Not the Answer for Spotify

Spotify’s focus on premium subscriptions may have also been a limiting factor. While Netflix has managed to build a hugely successful business model based on premium subscriptions, it’s worth noting that content is a beast to crack. In the long run, having a paywall may limit the potential revenue that can be generated. Spotify may have been better served by looking at monetizing its content as an add-on rather than a barrier to entry.

So, where does Spotify go from here? The company seems to have realized that it needs to change course and is now looking to copy YouTube’s ad-revenue and creator route. By doing this, Spotify hopes to boost its revenue by offering more tools and tiers for creators to monetize their content. By adopting a revenue split model that is more generous than its current offering, Spotify may be able to retain creators and build a loyal following.

It’s worth noting that content is a fickle business, and even the biggest players can make mistakes. However, the key to success in the industry is to remain adaptable and open to change. By recognizing the need to change course and pivot its strategy, Spotify may be able to reverse its fortunes and regain lost ground.

In conclusion, the music streaming industry is one that is constantly evolving, with companies looking for new ways to monetize their offerings. Spotify’s focus on premium subscriptions and exclusive content may not have paid off, but the company still has the potential to succeed by learning from the successes of others, such as YouTube. By adapting its strategy to focus on ad-revenue and creator loyalty, Spotify may be able to turn its fortunes around and remain a major player in the industry for years to come.

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