The Future of Audio
I wrote this for the Group Chat Newsletter - check the original post here.
As a fellow Kathy and avid listener of Group Chat, I, too was enamored with the creation and adoption of Clubhouse during the pandemic. The app was full of serendipity, new ideas and people, and any other criteria for venture capitalists to write nine-figure checks in this frothy market. However, as the pandemic subsides in the US, Clubhouse’s growth has slowed down dramatically, and only time will tell if they are successful in creating the next social audio platform.
Inspired by this topic, I went down a rabbit hole of all things audio and am amazed by the opportunities of how we create and consume audio content over the next decade. The next decade will be determined by how these companies find new ways to consume content and maximize their market growth and margins. Spotify will beat more prominent technology players over the next decade by focusing on content streaming, social communities, and decentralization to win the next era of audio.
The Fight for the Title of Streaming Champion
Spotify has been a massive success over the past decade-plus and has taken a piece of significant music streaming market share. With 356 monthly active users and 158 million premium subscribers, Spotify is in a prime position to take advantage of the next decade in audio, and their mission statement supports that assertion.
Our mission is to unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it. - Spotify
Spotify has nailed the software piece of the market - from making near-perfect personalized recommendations (Discover Weekly, Daily Mix, and Year in Review) to curated playlists with both editorial curation and the use of algorithms around genres and moods.
However, their next big challenge is ramping up podcasting efforts and getting their move into hardware and voice assistants correctly. A few weeks ago, Spotify launched a beta of Car Thing, a voice-activated car player that acts as your pseudo-Apple Car Play. While Spotify has advantages in the space, they need to find ways for people to spend more time listening (i.e., in the car) and triple down on original content to improve margins and cut out the middlemen of the old-school audio industry.
That now brings us to Apple. Apple and Spotify suffer from the fact that they each want what the other has. As Spotify gets the nod on software, Apple created the final killer hardware product in AirPods but can’t replicate the same magic when it comes to Apple Music (disclaimer: I am a big Spotify user). In addition, Apple Music has been building out its content, with 60 million songs available (vs. Spotify’s 50 million) and securing more exclusive content at a rapid clip. While Apple is an iconic company and will continue to “shit cash” as Anand says on the pod, they will be playing catch up to Spotify in content for a while and can’t see them converting loyal Spotify users at a rapid clip.
Creating New Online, Audio-only Spaces
Social audio is where Clubhouse comes into the fray of the conversation. Clubhouse discovered how to capture the magic of listening and connecting with influencers, fans, and friends all in one place. While I’m rooting for Clubhouse to succeed, some platforms can use these features to their advantage:
- Spotify: Their acquisition of Locker Room clarified that they focus on curating the best content around live events (similar to Clubhouse’s NFL partnership).
- Twitter: Cloned with Twitter Spaces and can integrate the “pulse of the Internet” into a real-time conversation.
- Facebook: This is where I think the future gets interesting with opportunity. Facebook could partner with Spotify (would not be the first time) to create virtual concerts and experiences via Oculus. It’s a perfect model of fixed/lower costs of concert tours and high ticket items.
Forging a Path to an Equitable Ecosystem for Creators to Finally Win
As the creator economy continues to become more mainstream, the biggest issue up until now is that creators would never get the chance to earn their share of the revenue rightfully. With social platforms bringing in billions of dollars of annual revenue, “only the top 3 percent of YouTubers can crack the U.S. poverty line with their video work,” according to Forbes.
Spotify is in the best position to take advantage of these trends. Earlier this year, they announced their Open Access Platform, which allows podcast creators to monetize their audience on Spotify, giving the creator the ownership of their audience. It’s a small first step, but I think shortly, creators will be able to write their smart contracts on the Ethereum blockchain, create their non-fungible tokens (NFT’s), and continue to build direct relationships with their audiences.
The 2020s have gotten off to a slower start because of the pandemic, but I am sure we will see innovation that will dwarf the past decade.