Spotify’s Video & Podcast Push: Diversifying Revenue, Boosting Engagement & Facing New Risks

Executive Summary

Spotify Technology SA’s recent strategic moves—lowering the entry threshold for short‑form video creators, heavily investing in podcast monetisation, and enhancing tools for video podcasters—signal a deliberate shift toward a multi‑format content ecosystem. While these initiatives align with the broader industry pivot to diversified media consumption, they also introduce nuanced risks and opportunities that merit closer scrutiny.

Financial analysts at UBS have adjusted their price target downward, reflecting a more conservative stance on short‑term performance, yet the market remains bullish on Spotify’s long‑term trajectory. This article investigates whether the company’s expanded video and podcast strategies are merely surface tactics or part of a deeper transformation that could redefine its competitive positioning, regulatory exposure, and revenue streams.

1. Business Fundamentals

Spotify’s core financial health remains robust, but the shift toward video and podcasts introduces variable cost structures (e.g., royalties, content acquisition fees) that could erode current profit margins if not managed strategically.

2. Regulatory Landscape

2.1. Content Licensing

• Music: Existing global licensing agreements remain the primary cost driver. However, the introduction of short‑form video may trigger renegotiations for “public performance” rights, especially in jurisdictions where streaming services must pay a fee per user‑generated clip.
• Podcasts & Video: New content types could fall under different statutory frameworks. In the EU, the Audiovisual Media Services Directive (AVMSD) may apply, requiring content‑specific compliance checks (e.g., age‑restriction, advertising transparency).

2.2. Data Privacy

Spotify’s expansion into video exposes it to stricter video‑data privacy obligations. The European Union’s Data Governance Act and the United Kingdom’s Video Surveillance (Data) Regulations could necessitate enhanced user consent mechanisms and data protection protocols, potentially increasing compliance costs.

2.3. Antitrust Concerns

The platform’s dual role as a content provider and distributor raises antitrust scrutiny. By lowering entry barriers for creators, Spotify risks being seen as a gatekeeper that could influence which creators thrive, potentially drawing the attention of regulators such as the U.S. FTC or the UK Competition and Markets Authority.

3. Competitive Dynamics

Spotify’s strategic emphasis on creator-friendly policies aims to replicate the “platform effect” seen on TikTok and YouTube. Yet, unlike these platforms, Spotify’s existing brand identity is anchored in audio. Bridging the audio‑video divide will require sustained investment in recommendation algorithms that seamlessly surface video content to existing audio listeners.

4. Market Research & Trend Analysis

1. User Engagement Shift

• Data: Surveys indicate that 67 % of Gen Z users consume at least one video format daily, whereas only 45 % engage with podcasts.
• Implication: By integrating video, Spotify taps into a high‑engagement demographic that is less price‑sensitive for premium services.

2. Monetisation Landscape

• Podcast Ads: Average CPM for podcasts is ~USD 35, whereas for video content it averages ~USD 50-70 in the U.S.
• Opportunity: Spotify can leverage its existing advertiser relationships to cross‑sell video ad slots, potentially increasing revenue per user.

3. Creator Economics

• Finding: Creators on TikTok report a 25 % increase in average daily views after moving to a platform with higher monetisation rates.
• Risk: If Spotify’s monetisation tools do not deliver comparable financial incentives, creators may revert to more profitable platforms.

4. Technological Integration

• Recommendation: Investing in AI‑driven content curation will be critical to avoid the “content overload” that plagued early video experiments on audio‑centric platforms.

5. Risks & Opportunities

5.1 Risks

5.2 Opportunities

6. UBS Analysts’ Revised Target: A Closer Look

UBS lowered Spotify’s price target in light of the following factors:

• Revenue Projection Lag: The monetisation of video content is projected to take 12–18 months before reaching break‑even.
• Competitive Intensity: The entry of new video players may dilute Spotify’s market share in emerging segments.
• Cost Structure: Anticipated CapEx and creator incentives could elevate the cost of customer acquisition.

However, the analysts maintain a long‑term upside based on:

• First‑Mover Advantage in Video Podcasts: Few competitors offer integrated audio‑video podcast solutions.
• Strong Brand Loyalty: Premium subscribers are less price‑sensitive, allowing margin preservation.
• Ecosystem Synergies: Integration with existing music and podcast recommendation engines can accelerate content discovery.

7. Conclusion

Spotify’s strategic pivot toward short‑form video and enhanced podcast monetisation signals a bold attempt to diversify beyond its core music streaming dominance. While the company’s financial fundamentals remain solid, the success of this transformation hinges on navigating regulatory complexities, achieving cost efficiencies, and delivering compelling value to creators and advertisers alike. Investors and industry observers should monitor how quickly Spotify can scale its new content formats, maintain competitive advantage, and translate diversified revenue streams into sustainable long‑term growth.