Spotify Wants You to Listen to Less Music

Why podcasts equal profit.

Spotify's $340 million play for podcasts is not just an attempt to dominate every facet of your audio experience--though Spotify would certainly like that, too. Following its recent acquisitions of Gimlet, a podcast production house, and Anchor, a broadcasting app for podcast creators, CEO Daniel Ek wrote in the company blog that the moves were part of Spotify's transition from a music to "audio-first" enterprise. What he did not write is that Spotify wants you to listen to music on its platform way less than podcasts.

But Spotify is music, you counter. True, but it's also now the world's largest podcast publisher, with more in-house shows than any other competitor. It also now owns a popular tool for up-and-coming podcasters to create new shows and fuel the Spotify podcast economy. But music, however, remains by and large controlled by the record labels. Unlike its podcasts or, say, Netflix's slew of original content, Spotify doesn't own the rights to its extensive catalogue of songs. That means royalties must be paid out to labels every time you play Lady Gaga or Cardi B, preventing Spotify from becoming a profitable company despite 200 million global users. And no, Spotify cannot simply become its own label -- otherwise it'd risk the others pulling millions of iconic songs from its database while Apple Music and Google Play benefit.

Spotify's natural solution then in is to provide more content that it directly owns, allowing the company to cut out the middleman. Podcasts also open a host of new advertising revenue opportunities. So go ahead and listen to Ek's grand vision of a "global audio economy." Yes, he wants that. But what he really wants is to make one of the world's most-used apps finally profitable.

A version of this article appears in the April 2019 issue of Fortune with the headline "Spotify’s Podcast Play."