In 2015, Apple Inc. (NASDAQ: AAPL) was the people’s choice for listening to podcasts. According to one study, the company had around two-thirds of the audience for podcasts, including more than 80% of the mobile audience.
According to a new report from eMarketer, this year Apple will lose its top position among U.S. podcast listeners to Spotify Technology Inc. (NYSE: SPOT). The change has been swift, with Apple, which took some 27.6 million listeners in 2020 to Spotify’s 19.9 million, gaining some to total an estimated 28 million listeners in 2021, while Spotify adds more than 8 million to reach an estimated 28.2 million. That’s listener growth of more than 41% in one year. Apple and Spotify account for about 48% of all 2021 listeners.
Spotify turned its attention to podcasts in 2019, when it committed $500 million to invest in the medium. The $300 million acquisition of Gimlet Media and podcast app Anchor got the ball rolling. Then the company signed comedian/podcaster Joe Rogan to a multiyear contract in May 2020 rumored to be worth more than $100 million. Presumably, Rogan’s audience of more than 8 million followed him.
As the following chart from eMarket shows, the gap widens over the following two years.
The top five podcast listening platforms are Apple, Spotify, Google, Stitcher and TuneIn, but Spotify’s focus on podcasts has driven the company to overtake Apple in audience numbers. The total podcast audience in 2021, according to eMarketer, is expected to reach 117.8 million, with Spotify and Apple combined accounting for about 48% of the total. More than half (54%) of all digital audio listeners will be listening to podcasts. By 2024, eMarketer expects the audience for podcasts to top 60% of digital audio users.
For Spotify, which offers a free tier for listeners, converting those listeners into subscribers is the company’s business model. For Apple, paid subscribers to its media apps like Apple Music and Apple TV+ is not a focus in the same way that iPhones and Macs are.
Peter Vahle, eMarketer’s forecasting analyst at Insider Intelligence, commented:
By putting podcasts and music in one place, Spotify quickly became the convenient one-stop-shop for everything digital audio. Apple was the de facto destination for podcasts for a long time, but in recent years, it has not kept up with Spotify’s pace of investment and innovation in podcast content and technology. Spotify’s investments have empowered podcast creators and advertisers through its proprietary hosting, creation, and monetization tools.
Last week, Spotify’s U.S. subsidiary offered $1.3 billion in convertible senior unsecured notes at a 0% interest rate and an initial exchange rate of about 1.94 shares of common stock per $1,000 of note principal beginning on December 15, 2025. That worked out to around $515 per Spotify share, when the shares were trading at $303.06. Essentially Spotify is betting that its share price will increase by about 37% over the next several years. Since its U.S. initial public offering in April 2018, Spotify’s stock price has risen by about 116%.