Spotify's billion-dollar bet on podcasting has yet to pay off

Spotify was just starting to build its podcasting business when Ostroff joined, and it needed to find a splashy way to attract listeners.

Spotify Technology SA was just starting to build its podcasting business when Ostroff joined, and it needed to find a splashy way to attract listeners. Although she had no background in podcasting—or music, for that matter—her time in TV taught her how to talk to talent. Over the next four years, Ostroff spent more than US$1 billion on the business, licensing shows, buying production studios, and signing exclusive deals with celebrities, including the Obamas, Kim Kardashian, and Prince Harry and Meghan Markle.

Last year, Ostroff’s research and data team asked a question that many at Spotify already knew the answer to: Had any of this spending yielded a major new hit? The team produced a report that basically said no, according to five current and former employees who didn’t want to be named discussing internal business. Spotify evaluated how well shows did based on listenership, their traction on social media, and if they attracted new fans to the service, among other criteria. The team, the employees say, identified two groundbreaking hits—neither of which Spotify produced: Serial, the true crime drama that introduced many to the format (and is now owned by the New York Times), and The Joe Rogan Experience, a talk show from the former host of Fear Factor. (Rogan’s show is currently exclusive to Spotify.) A couple of dozen shows were classified as lesser hits.

The report frustrated people in Ostroff’s orbit, according to the employees, who described the findings to Bloomberg Businessweek. Sure, Spotify hadn’t produced a show that penetrated the culture as Serial had, but its studios are responsible for many popular podcasts. One of those studios, Parcast, is behind Call Her Daddy, a show hosted by Alex Cooper about relationships and sex that’s one of the 10 most popular podcasts in the US, according to Edison Research. Another, the Ringer, produces a network of beloved sports and pop culture shows led by Bill Simmons’s eponymous podcast. (I contribute to a Ringer podcast, The Town, about the business of Hollywood.) The frustration stemmed in part from the R&D team measuring podcasts against TV shows such as Lost that drew almost 20 million viewers a night in its heyday. Call Her Daddy has about 3 million listeners—known collectively as the Daddy Gang—according to the Los Angeles Times. (Ostroff declined to comment for this story.)