Spotify & Netflix Gun for YouTube's Eyeballs
Spotify partnering with Netflix on anything would be a big deal given the position of each in their respective markets. But partnering around video podcasts seems particularly interesting given who they're both clearly aiming at...
On one hand, this is clearly an admission that Spotify can't possibly hope to catch YouTube in video podcasts. No surprise there just given YouTube's scale – a scale which has already pushed the world's biggest video service to also be the world's biggest podcasting service, without even really trying. Spotify could either paddle against the current and try to get more exclusive content – but they already had that in the form of... the largest podcast in the world, and even restricting Joe Rogan from YouTube didn't really work, and now he's back – or they could figure out another path.
On paper, the world's largest streaming music service partnering with the world's largest streaming video service sounds sort of terrifying. Except that technically, YouTube is bigger at music than Spotify and bigger at video than Netflix. Add in the aforementioned podcasting, and they're sort of the hidden elephant in many rooms.1
Netflix, of course, has a different agenda. While they're increasingly what cable used to be for many homes, they can't possibly hope to scale the way YouTube has without UGC. This Spotify deal gives them UGC, in a way. I mean, The Ringer content is obviously more professional than just anyone with a phone recording themselves. But it's also, perhaps, just a start. Netflix will continue to say they have no desire to fully do UGC, and that's undoubtedly true right now. But as they go further down the advertising path... the more content the better. Basically as Ted Sarandos said in the Q1 earnings when asked specifically about podcasts.
This is a competition for literal eyeballs. And YouTube eats up so much of it in all these verticals. Oddly not in "premium" content where Netflix dominates, but it only feels like a matter of time until they're back competing in that world too, especially as they keep expanding YouTube Premium. Remember when Cobra Kai launched as a YouTube original only to be handed on a silver platter to Netflix? Yeah, they're gonna want another shot at this at some point. It's Google! Initiatives are cancelled only to be rebooted only to be cancelled only to be rebooted...
The fact that as a part of this deal, Netflix is requiring that the videos not be posted to YouTube in full – i.e. only clips for promotional purposes – says all you need to know here. While Spotify can't compete with YouTube in video, Netflix can and will.
For The Ringer, which is, of course, owned by Spotify, this makes a lot of sense too. Why not hitch your wagon to the world's largest streaming service as a way to differentiate from everyone else just battling for eyeballs on YouTube? This is a greenfield on Netflix. Anything the service promotes will get millions and millions of views. The fact that founder Bill Simmons has maintained his connections to the premium video world with various docuseries, including for Netflix at times, can't hurt either. (And yes, there's the growing sports angle for Netflix.)
But will Netflix be able to lure others? Again, maybe if they upsell the notion of crossing into other premium video offerings. Or if Spotify and Netflix deepen the relationship... As I wrote back in July around the reports that Netflix and Spotify were discussing partnering on certain types of content:
Continuing to do more "traditional" television things like talent and award shows is obvious for Netflix, the conversations with Spotify are potentially more interesting if they also bring about a television/music bundle. That's not what this report says, but it seems like a logical extension of any partnership for the most popular streaming television and most popular streaming music platforms. After all, Apple and Amazon already have such TV/Music bundles internally...
Third parties have been bundling these two, but a formal bundle is probably just a matter of time, especially if they can collaborate on their fledgling ads businesses. A world which, yes, YouTube dominates.
One more thing: what on Earth is Apple doing here? The company that literally gave podcasting a name continues to fall further back in the market here. Perhaps the hiring of NPR's podcast chief (who was at Gimlet/Spotify before that) signals a change of strategy? Might we see video podcasts come to Apple TV+ – sorry, Apple TV – too? Or a 'Podcasts+' offering as part of the Apple One bundle? There's someone out there twisting in the wind if they want to do a proper premium offering...
M.G. Siegler
M.G. Siegler
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 It is interesting how OpenAI's Sora has jumped out to a quick lead in AI-focused video, even though YouTube just announced their own major push there. Perhaps it's another market they will with time and scale, or maybe it's something that doesn't work on YouTube because the community rejects it? ↩