Apple's new premium podcast offering allows creators to get paid for their work
and gives subscribers access to ad-free listening and exclusive content.
Source: Apple Inc.
Apple Inc. made it big in the 1980s with Mac computers. In the mid-2000s, it was iPhones. Now, the company seeks to capitalize on society's latest obsession: podcasts.
The company this week launched Apple Podcast Subscriptions, a subscription-based version of Apple Podcasts that allows creators and publishers to set pricing for each subscription of at least 49 cents per month. Paying users can listen to podcasts without ads and get early access to new episodes and exclusive content. The offering is available in over 170 countries and regions for iOS, iPadOS and macOS customers.
Though analysts do not expect the new offering to be a significant revenue driver for Apple, they said it should help the company take greater control of its ecosystem and potentially steal share from competitors.
Podcast listening has exploded in recent months, with a recent report from market research firm Edison Research estimating that 80 million Americans, or 28% of the U.S. population over the age of 12, listen to podcasts on a weekly basis, a 17% increase over 2020.
Apple Podcasts is included within Apple's broader services business, which also comprises Apple Music, video services and cloud offerings. Though Apple does not provide specific sales figures for the App Store, net sales in the company's services business came to $16.90 billion for the March quarter and comprised about 19% of Apple's total net sales in the period.
Rob Kniaz, founding partner of venture capital firm Hoxton Ventures, said Apple's push into premium podcasting is a "natural product extension" for the company as it seeks additional growth drivers beyond the iPhone and its other core hardware and services offerings.
"Apple has shown [that] their users are willing to be monetized and willing to pay for stuff," Kniaz said in an interview. "I think Apple is trying to get ahead of the curve and take advantage of a growing sector of the media space that's still somewhat emergent."
Beyond seeking to make its ecosystem stickier, Apple's competitive instincts also likely dictated its foray into subscription-based podcasts.
Wedbush Securities analyst Daniel Ives called Apple's podcasting subscription service "both an offensive and defensive move" against competitors — namely Spotify Technology SA — that will further enable the company to monetize its rapidly-growing user base and services business. The analyst estimated that roughly 1.6 billion Apple devices are in active use globally.
"This service will further enable Apple to monetize its podcasting moat and ultimately we expect more exclusive content partnerships to be announced over the coming months to compete with Spotify in this quickly morphing podcasting arms race," Ives wrote in a report.
Apple does not disclose subscriber figures for Apple Podcasts, but the company trails Spotify in terms of music subscribers. Apple Music last reported 60 million premium users as of June 2019, whereas Spotify counted 155 million paying subscribers as of Dec. 31, 2020. Spotify in April unveiled its own paid podcast subscription offering that gives podcasters the ability to set their own pricing and is aimed at helping them "maximize their subscription audiences and grow them from their existing listener bases," the company said.
Loup Ventures managing partner Gene Munster called Apple's latest podcasting ambitions more of a "hobby" than one that will significantly impact its bottom line. Regardless, Munster said it could help the company be more aggressive in expanding and monetizing the medium.
"While the podcast marketplace will be small for Apple, it's another offering that furthers user engagement with Apple services, increasing the stickiness of Apple's ecosystem," Munster wrote in a recent report.
When first announcing Apple Podcast Subscriptions at an April press event, Apple CEO Tim Cook said the goal of the new service was to provide podcasters a way to monetize their content while giving fans a chance to help them "build their business and fuel their creativity."
"These major updates will make listening to podcasts easier and more enjoyable than ever before," Cook said.