Spotify targets Apple with new podcast initiative

Spotify is tiptoeing into new businesses again.

The No. 1 paid music streaming service has agreed to promote podcasts in its app and via ads on buses. In return, the hosts of “Reply All,” “Pod Save America” and “The Bill Simmons Podcast” agreed to talk up Spotify on social media and during their shows, which cover topics ranging from internet subculture and politics to sports.

Spotify is testing whether to devote more resources to areas other than music. Podcasts are a fast-growing field currently dominated by Apple. By increasing the revenue it gets from other media, Spotify could reduce the huge share of sales that goes to record labels. Royalties accounted for more than 75 percent of Spotify’s costs last year and are based on the time users spend playing songs.

“The potential for Spotify is to introduce this caliber of storytelling to a much larger audience, who are already in a listening mindset,” said Matt Lieber, co-founder and president of Gimlet Media, which produces “Reply All.” “I see a growing effort to make podcasts more accessible on the platform. And they’re making progress.”

Spotify is experimenting in new media to increase the time customers spend with its app — and boost advertising sales. As of now, most consumers looking for music videos or podcasts leave Spotify for Apple and YouTube. In particular, the company wants to assess awareness of its service among avid podcast listeners and could expand the campaign to more providers later this year. Spotify confirmed the details of the effort, but declined to make an executive available for interview.

In a survey earlier this year, about 15 percent of Americans over age 12 had listened to a podcast in the past week, and about almost a quarter listened to at least one every month, a number that’s doubled since 2013, according to Edison Research. Ad revenue from podcasts is projected to grow 85 percent this year to $220 million.

Apple dominates the market, but its share has declined to about 55 percent from 70 percent, according to Nick Quah, author of the weekly newsletter Hot Pod. Music services SoundCloud Ltd. and Pandora Media have started hosting podcasts, as have TuneIn and iHeartMedia.

With more than 140 million users, including about 50 million paying subscribers, Spotify has an opportunity to steal share from Apple. The company has already commissioned original podcasts about music, and partnered with Gimlet Media on an podcast series about the late Chris Lighty, manager of rappers Busta Rhymes and 50 Cent. The episodes premiered on Spotify before becoming available on other services.

Spotify will fund a new batch of original podcasts in the coming months, according to people familiar with the matter who asked not to be identified discussing the private plans. The company has also created a tab for podcasts in its browse section.