Comparing Spotify and Apple’s Podcast Subscription Services

Spotify Follows Apple’s Lead

Spotify (SPOT) is taking a page out of Apple’s (AAPL) book and is launching a podcast subscription service. The move comes a week after Apple unveiled its own subscription model for podcasts.

The new services by the two streaming giants mark a big change for the industry. Podcasts have long been freely accessible online. Charging podcast listeners provides new ways for creators to make money but it is an unproven business model. Apple, Spotify, and other players in the podcast industry will be eager to see how consumers respond to these changes.

Spotify Won’t Take a Cut for Two Years

The new subscription model at Spotify will be powered by the company’s Anchor creator platform. Podcast creators will be able to mark certain episodes or shows as “subscriber only.” They can then charge listeners a monthly subscription fee of $2.99, $4.99, or $7.99.

Spotify will not take a cut of subscription revenue for the first two years of using this business model. Creators will get 100% of their subscriber revenue during that time, excluding payment transaction fees, then Spotify will take a 5% cut of subscription fees starting in 2023. Spotify is launching its subscription service with 12 independent shows and NPR, but the company plans to add more creators over the next few months.

Apple’s Strategy

Though Apple is also developing its podcast subscription service, it is taking a different approach. Apple’s new podcast subscription model enables creators to charge $19.99 per year to access premium podcasts. Apple takes a 30% cut of the subscription revenue, which is the same amount it gets from apps in the App Store. Apple’s cut declines to 15% after a year, but this is still higher than what Spotify plans to charge.

Podcasts have grown increasingly popular in recent years, but the podcast market has been tough for companies to monetize. If the subscription model works out for Spotify and Apple, more podcast providers will likely follow suit.

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