Editor's Note: The content in this story is part of a "Risk Takers" TV special. It airs on CNN on Saturday, June 20 at 2:30 pm ET.
A year ago, Spotify made an expensive bet, shelling out hundreds of millions of dollars to get into the podcast business. For a company that was still unprofitable, losing more than $200 million that year, it was a bold move.
Then the coronavirus pandemic struck, and podcasting consumption immediately changed. Spotify noticed drop-offs in listeners tuning in via their cars and wearable devices — probably because they were no longer commuting into work. Meanwhile, listening time around activities like cooking, doing chores and family time suddenly surged. There was also an uptick in podcasts related to wellness and meditation.
"It's clear from our data that morning routines have changed significantly," the company said in its first quarter earnings release. "Every day now looks like the weekend."
That sudden shift wasn't something the company had anticipated — and it could have been worrying, but Spotify's Chief Content and Advertising Business Officer Dawn Ostroff said the streaming service is getting even stronger in spite of the pandemic.
"I think once things return to normal and people wind up commuting again, the habits that they're forming now will stay with them," Ostroff said. "It just allows for even more time for them to consume podcasts in different times and different ways."
In an interview with CNN Business' Rachel Crane, Ostroff said Spotify users have been listening to podcasts later in the day than usual. They also are listening through more home devices such as televisions and gaming consoles.
"What we've seen through the pandemic is that people are really sitting down and listening to podcasts in a group," Ostroff said. "It's been clear to us that there's real opportunity in family consumption."
Spotify's Chief Content and Advertising Business Officer Dawn Ostroff speaks with a colleague at the company's headquarters in New York City in 2019. (Celeste Sloman for CNN)
A bold bet
Spotify made its commitment to podcasting known last year when it acquired podcast-creation app Anchor and production company Gimlet. In financial statements, the company acknowledged those purchases as a risk, saying there was no guarantee it could "generate sufficient revenue" to "offset the costs of acquiring" them. The company continued investing in podcasts in 2020, announcing in February that it was acquiring Bill Simmons' The Ringer, which owns dozens of podcasts.
Those pricey acquisitions are starting to pay off. About 19% of Spotify's monthly active users listen to podcasts, up from 16% last quarter, the company reported as part of its first quarter earnings in April. Spotify said it reaches 286 million monthly active users, which translates to about 54.3 million podcast listeners.
Apple has long been the dominant player in podcast consumption, but Spotify is rising in popularity among listeners. Ostroff said Spotify is "ahead of Apple" in more than 60 markets. Spotify pointed to data tracked by podcast technology firm Voxnest, showing that between January and May, Spotify's podcasts were used more frequently than Apple podcasts in countries including Canada, Germany, France, Mexico and Spain, among others.
"That's pretty meaningful because we've only been in the game now for about two years," Ostroff said.
Podcasting in a pandemic
Despite the pandemic changing people's daily lives, podcast consumption continues to grow across the industry. Chartable CEO Dave Zohrob said his podcast analytics company saw a 20% drop in consumption in early March for podcasts using the platform. But that bottomed out by the end of March and is now trending upward. Jonathan Gill, CEO of analytics company Backtracks said his platform showed overall listening was up by 2.78% in March, compared to February.
Anya Grundmann, NPR's senior vice president of programming, told CNN Business that the nonprofit media company saw volatility in listening during the pandemic but also some new growth. NPR's Coronavirus Daily podcast is its fastest growing podcast and podcasting overall is the "fastest moving growth line for NPR over the last five years," she said.
Podcasting "is more and more the way people are spending time, trying to educate themselves, trying to get smarter, trying to have companionship in a moment when people are alone," Grundmann added.
Details at the Gimlet office in Brooklyn. (Celeste Sloman for CNN)
'Not just a side-show anymore'
For Spotify, the industry's growth is great news.
The company continues to make big investments in podcasting. Last month, it signed one of the world's most popular podcasts, "The Joe Rogan Experience," for a multi-year exclusive licensing deal. The Wall Street Journal reported the deal was worth more than $100 million.
"We felt like we need to have the number one podcaster on our platform in order to really be a winner in this medium," Ostroff said. "It doesn't feel like a risk to us because [Rogan] is such an important player in this space."
Marty Moe, president of Vox Media Studios, told CNN Business the company's podcast "consumption from Spotify has increased." Vox Media has more than 200 active shows in its podcast network.
Spotify's investment "validates what we've known for years," Moe said. "This is a medium that's not just a side-show anymore."
Ostroff said Spotify is seeing a rise in podcast creation, saying that 150,000 new podcasts were made in March compared to February.
"Maybe we'll have some of those podcast producers stay on and continue to make content even after life resumes and we go back to somewhat of a normal existence," Ostroff said.
